The Government of India passed three ordinances in June 2020. They were – The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020; The Farmers (Empowerment and Protection) Agreement; and the Essential Commodities (Amendment) Ordinance, 2020. Now in the monsoon session of Parliament, these ordinances are being made into laws.
What brought the issue to the fore was the resignation of Union Minister for Food Processing Industries, Harsimrat Kaur Badal of the Shiromani Akali Dal, a party that has been a long time BJP-ally in Punjab and is part of the National Democratic Alliance (NDA), which runs the Union Government. She resigned from the government in solidarity with the farmers who are protesting against these bills whom they term as anti-farmer and anti-poor. The opposition to the bills is particularly severe in Punjab and Haryana where the farmers are planning further ‘hartals’ (strikes) and ‘rail-roko’ (blocking railways) protests. Why are the farmers opposing these bills?
The government says the farmers are being misled by the opposition and this legislation will emancipate them from the clutches of the ‘dalals’ (middlemen) and provide access to huge and more profitable markets, which will enable them to grow and prosper. The slogan given by the Government of India to popularise these bills is “one nation – one market”. The farmers are naturally circumspect of the intentions of the Government, which has gained notoriety for the unmitigated disasters of its grandiose schemes like demonetisation, GST, Make in India, Digital India and the way it is presently dealing with the COVID-19 pandemic.
ISSUES WITH AGRI-REFORM BILLS
The agricultural market or ‘mandi’ has been the focus of successive governments, as that is the nucleus from where agri-reforms will have to be rolled out to make maximum impact. As it is a state subject, the Centre could not do much except prod and push. However, the present NDA government, which is not exactly known to be a fervent practitioner of federalism, came up with three back-to-back ordinances (as Parliament could not be convened because of the pandemic) in an ambitious bid to push through ‘big-bang’ reforms in the agriculture sector.
The government was obviously under tremendous pressure from market forces (read corporates and multinationals) for opening up the agricultural markets/’mandis’. These food/agribusinesses can then have direct access (and later control) over the produce and which in turn will soon make them “market makers”. In other words, opening the ‘mandis’ will give them the ability to control their procurement price, push down their cost of raw material and thus protect their bottom line. These multinational companies (like Nestle, PepsiCo, Kraft Heinz, etc.) are currently inhibited by the traditional APMC (Agricultural Produce Marketing Committee) based market structure wherein the farmer is guaranteed a certain MSP (Minimum Support Price) in the local mandi. The MSP is of course supported by the Centre and the state governments too get a piece of the pie in the form of “mandi tax”. The farmer is thus incentivised to sell his produce to the APMC markets and there was no scope for the food company to make deals with the farmers in the form of what is known as “contract farming”. As a case study, Bihar dismantled the APMC in 2006 and data shows that not even 1% of targeted procurement of wheat happened at MSP. This shows that opening the market does not necessarily benefit the farmer.
THE PROBLEM WITH CONTRACT FARMING
According to the Food and Agriculture Organisation of the United Nations (FAO), contract farming involves agricultural production being carried out based on an agreement between the buyer and farm producers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date. More commonly, however, contracts outline conditions for the production of farm products and their delivery to the buyer’s premises. The farmer undertakes to supply agreed quantities of a crop or livestock product, based on the quality standards and delivery requirements of the purchaser. In return, the buyer, usually a company, agrees to buy the product, often at a price that is established in advance. (For a better understanding one may go through – http://www.fao.org/in-action/contract-farming/faq/en/)
As with any contract, the buyer may fail to purchase at the agreed price or may unjustly downgrade/ down-rate the quality of the produce to lower his cost price. This will hurt the small farmer who cannot resort to expensive litigation and dispute resolution. This kind of a contract, which is essentially a futures contract (in financial language) simply means that there is legal agreement to buy or sell a particular commodity at a predetermined price at a specified time in the future.
The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 (now tabled as a bill) is meant to facilitate the agriculture sector with these futures contracts between the small (landholding) farmer and multinational corporations.
One aspect of this new agri-law is: “The agreement may provide for mutually agreed terms and conditions for supply, quality, standards and price of farming produce as well as terms related to supply of farm services. These terms and conditions may be subjected to monitoring and certification during the process of cultivation or rearing, or at the time of delivery. The farming agreement may be linked with insurance or credit instruments under schemes of central and state governments or any financial service provider. This will ensure risk mitigation and credit flow to farmers or sponsors or both.” (Source: prsindia.org)
One can understand how the noose will slowly be tightened around the Indian farmer. First, the contract will be a legally binding agreement and encourage him to go for interest-based loans and insurance schemes for producing more and more for the company. It is an absolute no-brainer to understand who shall be in a win-win situation once this bill becomes law in India and who will be the eventual loser in the end.
ETHICS AND MORALITY IN BUSINESS AND EVEN FARMING
The Prophet ﷺ expressly prohibited the sale of goods before obtaining their possession. He has warned Muslims against indulging in forward transactions, which means selling goods before obtaining their possession. “Whoever buys cereals shall not tell them until he has obtained their possession,” says the Prophet ﷺ. According to Ibn ‘Abbas, what applies to cereals also applies to other categories of goods.
On another occasion, the Prophet ﷺ has said: “Bargain not about that which is not with you.” It is indeed a sad state of affairs that the world ignores the nature of financial transactions from the point of view of ethics and morality. Only the monetary utility (apparently visible in the short run) of the transaction is considered. Its long-term harm and the grave injustice it may be perpetuating is given short shrift. We can now understand why such transactions were prohibited by Islam. Not only do they exacerbate income equality, but they also induce exploitation, hoarding, price manipulation and pose grave threats to food security.
The diabolical outcome that these innocuous- looking bills, tabled with the sweet label of “one nation-one market”, will bring about has been best summed by a rustic farmer from Punjab. His comments were echoed by Harsimrat Kaur when asked by a TV channel about what the farmers fear about these laws. Kaur, quoting the farmer, said: “Jio came in, they gave free phones. When everyone bought those phones and got dependent on these phones, the competition was wiped out and Jio jacked up their rates. This is exactly what the corporates are going to do.”
The only difference will be; this time the rates will be tanked. The Indian farmer has been taken for a ride in the name of free markets and emancipation. The people of India must stand up for farmers’ rights and protect him from the clutches of forces out to perpetuate exploitation and profiteering.