End of License-Permit Raj and Inspector Raj

On a surface view, the exit of the ruling Bharatiya Janata Party’s oldest ally, the Akali Dal, from the government on September 17, 2020, ostensibly over the passing of legislation delivering long-demanded agricultural reforms, does not bode well. 

Politicians and other stalwarts who have long maintained a stranglehold over agricultural cooperatives will see serious erosion of their clout.

One unmentioned reason for the anger could be the move, on September 16, 2020, to bring all cooperative banks under the direct supervision of the Reserve Bank of India (RBI), via the Banking Regulation (Amendment) Bill, 2020 that replaced the ordinance of June 26, 2020. This will mean tighter supervision of the 1,482 urban and 58 multi-state cooperative banks where depositors have saved Rs. 4.84 lakh crore. The same day, the Union cabinet approved Rs 15,000-crore fund for animal husbandry as part of Atmanirbhar Bharat Abhiyan stimulus package, and a scheme for interest subvention of two per cent to ‘shishu’ loan category borrowers for one year under Pradhan Mantri Mudra Yojana.

States derive considerable income from Mandi fees, and they may be within their rights to discuss ways to supplement their incomes. But denying farmers the freedom from exploitation that the new legislations offer would be unjust.

Politicians and other stalwarts who have long maintained a stranglehold over agricultural cooperatives will see serious erosion of their clout. Simultaneously, a veritable army of “farmer” politicians and urban elite farmers with agricultural income disproportionate to plot size and national average yields per crop will lose the legal loophole under which they were taxed at the godly sum of zero. Interestingly, these farm incomes are all mandi-certified, and the mandis were controlled by political appointees. Now, we are being asked to believe that farmers want to be controlled by the hitherto exploitative mandis and their middlemen.

To be fair, States derive considerable income from Mandi fees, and they may be within their rights to discuss ways to supplement their incomes. But denying farmers the freedom from exploitation that the new legislations offer would be unjust.

The demand for ‘one nation one market’ and barrier-free trade for agricultural produce outside notified grain markets is not new, and did not begin with the BJP. Indeed, it is the Congress party, with the legacy of the pre-independence Champaran and Kheda struggles that claimed to be the champion of farmers’ rights. Decades of “planning” and regulations, however, saw the rise of farmer leaders like Choudhary Charan Singh and others, who slowly eroded the Congress behemoth.

This did not stop the Congress from posing as the saviour of the farmers, and as recently as its 2019 election manifesto, the party promised to repudiate the obstructionist Agricultural Produce Marketing Committees Act and Essential Commodities Act 1955. Now that this has been done, the opposition is inexplicable.

The demand that farmers should get minimum support price (MSP) for their crops, advocated strongly by Bharatiya Krishak Samaj President Dr. Krishan Bir Chaudhary, has been accepted, and addresses a gnawing fear of small and marginal farmers. It bears stating that while it is one thing for farmers to chaff at restrictions that have curbed their incomes for decades, they may initially feel lost in the open market; existing farmers associations will have to step up.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020 allows sale and marketing of produce outside the notified Agricultural Produce Market Committee (APMC) mandis.

The three impugned Bills were promulgated as Ordinances on June 5, and had to be converted into law, or lapse.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020 allows sale and marketing of produce outside the notified Agricultural Produce Market Committee (APMC) mandis. State governments cannot collect market fee, cess or levy for trade outside the APMC markets; inter-state trade barriers are nixed and provisions made for electronic trading of agricultural produce. For the first time, no license is needed to trade in farm produce; anyone with a PAN card can buy directly from the farmers. Once farmers all over the country negotiate this new freedom, it is inconceivable that they will wish to share their gains with the arhatiyas (commission agents) who have always been perceived as exploitative.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 regulates contractual farming rules and state APMC acts. Farmers are free to enter into contracts with a corporate entity at a mutually agreed price. This system exists in Tamil Nadu and Madhya Pradesh, and States can share experiences and ensure that farmers are not exploited. The experience with a potato chip company is a good yardstick to judge the benefits of any deal: either farmers increase their incomes, or don’t. 

The Essential Commodities (Amendment) Act, 2020 provides for deregulation of production, storage, movement and distribution of food commodities and removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. Its impact will be far-reaching and its actual operation will determine the benefits to farmers and consumers alike.

The inefficient relics of the socialist era and multilevel rent-seeking are over, and State-level APMC laws are already being changed to complement this change.

Certainly, the arhatiyas will lose business because the Centre will ask the State governments to provide farmers access to loans and keep usurious moneylenders at bay. Debts to private moneylenders led to a number of farmer suicides in a prominent State some year ago; in fact, Narendra Modi went specially to meet the farmers there during the run-up to the Lok Sabha polls in 2014.

As of now, the new laws aim to end the license-permit raj and inspector raj in the agriculture sector. The inefficient relics of the socialist era and multilevel rent-seeking are over, and State-level APMC laws are already being changed to complement this change. The new system must be allowed to function and fear of glitches cannot be allowed to paralyze much-needed reforms.