A Letter To Committee On Farm Laws
M.M. Thimmaiah, a founder trustee of the Coorg Public School, Gonikoppal, Kodagu, and a leading coffee planter and activist who champions the cause of farmers, has submitted a memorandum to the Committee appointed by the Supreme Court, supporting the three controversial farm laws enacted by the Modi government. The memorandum is reproduced below:
To,
Respected members of Committee on Farm Laws appointed by The Honourable Supreme Court of India
Respected Sirs,
I, M M Thimmaiah, a farmer and plantation owner living in Kodagu district, Karnataka, wish to place before you my considered views on the three farm laws enacted by the government of India. I am 68 years of age and have been living in this village for the last 36 years and am engaged in cultivation of crops such as coffee, pepper, paddy, arecanut and fruits such as orange, bananas and sapota.
I am a member of several farmers’ organisations such as Codagu Planters Association, Karnataka Planters Association, Kodagu Growers Federation and two Farmer Produce Companies (FPO). I have served as Chairman of Codagu Planters Association and in the managing committee of Karnataka Planters Association. The views expressed herein are based on my long personal experience as a farmer and careful observation of the working of our rural economy.
A couple of months back I had an opportunity to present my views to the farmers of our district over All India Radio. These views received overwhelming positive responses from hundreds of farmers and therefore may be taken as the general opinion of the farmers of Kodagu (Coorg) district.
I wholeheartedly welcome all the three farm laws enacted by the Parliament of India, which will provide us better market access, improve the bargaining power of farmers, reduce price volatility and enhance price realization of farmers for reasons set forth in the following paragraphs. In fact, from several years, both Codagu Planters Association and Karnataka Planters Association have been appealing to the government of Karnataka to relax/amend the state APMC Act to provide for free market in agro- produce such as pepper, arecanut and fruits because of the restrictive provisions by the Act and the resultant hardship faced by growers.
Our firm faith in the efficacy of free market reform is based on our experience of the last 26 years with coffee, where we moved from a fully government-controlled system to a free market during the years 1992-94. Facts regarding the transformation of coffee market and its benefits to coffee growers are attached in an annexed note.
1. APMC Act: The APMC Acts enacted by various State governments during the 50’s and 60’s of the last century was a paternalistic legislation intended to protect the farmers in a situation where most of them were illiterate, had no access to market information and were not familiar with the metric system of weights and measures. As years passed, the system was corrupted and started working against the interests of the farmers for the following reasons:
I. Cartelisation: The Mandi traders formed cartels and quoted uniform low prices for the produce, which the farmers had to accept as other traders were not allowed to buy directly from farmers. An unholy nexus developed between the Mandi officials, elected members and traders, who worked closely with each other, while the farmers who visited the Mandi a few times in a year became outsiders. Farmers who tried to sell their produce outside the Mandis were forced to pay APMC cess and were threatened with confiscation of stocks.
II. Irrational Logistics: There is roughly one APMC Mandi for every taluk in the country, with a distance of 60 to 100 kms between them. while farmers living within that taluk have to transport their bulky produce to the Mandis, traders from surrounding towns and villages will have to go the Mandis to buy the produce and carry it back for sale to retail customers. This creates irrational logistics resulting in unnecessary costs and deterioration in quality of the produce.
III. Loss of bargaining power: The APMC system compels the farmer to carry his produce to the Mandi at great expense and request the traders to buy it. It is a situation in which the farmer will have almost zero bargaining power as it will be impractical to take back the produce which may be perishable or involve high transport cost. The farmer is therefore compelled to take whatever price he is offered.
IV. Obsolete model: The APMC model is totally outdated in the new rural India in which most farmers (or their children) are now educated, have instant access to market information through mobile phones, can afford a weighing scale and prefer to sell their produce at the farm gate on their own terms. Correspondingly traders at the village level are also able to buy farm produce at the farm gate due to improvement of village roads, availability of small goods vehicles (which have replaced the bullock cart) and improved banking/digital payment facilities, through which they are able to pay the farmer at the time of lifting the produce.
V. The new rural model: In many parts of rural India where APMC yards either do not exist or in case of crops which do not come under the purview of the APMC Act, we see a system where enterprising village traders approach the farmers, look at the sample of the produce and make an offer to buy the produce on a “Cash and Carry” basis at the prevailing market price of the day. This scenario which has already emerged in large parts of rural India, will eventually create millions of rural entrepreneurs, who will act as a bridge between farmers and large food processers and consumers. The most far-reaching transformation from the new APMC Act will be that instead of farmers carrying their produce to the traders in the Mandis, the traders will come to the farm gate and buy the produce at competitive rates.
VI. The corporate bogey: It has also been our experience that as feared by some of the protesting farmers, large corporates, food companies or commodity traders/exporters have not been able to monopolise trade or dominate the markets in Agri-produce outside the purview of APMC Act.
This is perhaps because of the sheer number of small farmers spread all over the countryside, the unpredictability of the quantity and quality of produce of each season, the complexity of trade practices in different regions and the preference of farmers for cash sales. This point will be substantiated in the Case Study of Coffee Trade after Liberalisation presented in the subsequent part of this memorandum.
All the points mentioned earlier can be illustrated by the example of the arecanut trade in Kodagu during the ongoing harvest season. Freed of APMC controls, farmers have been able to sell harvested raw arecanut in a price range of ₹45 to ₹50 per kg this year at the farm gate. The comparable prices received at APMC yards during last 3-4 years ranged between ₹25 to ₹40.
2. Essential Commodities Act (ECA): The ECA under which stock limits are enforced on buyers and traders of major agricultural crops acts to the detriment of farmers. The demand for food and agricultural raw materials extends uniformly throughout the year while their supply is seasonal.
This asymmetry between supply and demand creates a situation in which soon after harvest when farmers want to sell their produce to meet their need for cash, prices collapse, as there are not enough buyers with deep pockets. Farmers do not have the capacity to hold their crops and sell it during off season. Even government agencies cannot procure all the agricultural produce valued at 16% of GDP.
Small local traders have limited resources and can buy only a small part of the produce. Large corporates cannot enter the market and buy large quantities because of the stock limits under the EC Act. All these factors lead to price collapse during the harvest season and sharp rise in prices for the consumer during the off season because of low stocks in the supply chain.
Large corporates welcome: In this scenario of seasonal price volatility the entry of large corporates with ample resources will be a blessing for farmers. The presence of buyers with vast financial resources will support the market during periods of plenty.
The corporates also have the capacity to carry the stocks and supply the market as required thereby balancing supply and demand. There will always be adequate supply in the pipeline preventing scarcity and price volatility.
An assured free market brought about by the new farm laws will also encourage corporates to invest in large scale food processing, storage and logistics infrastructure for the long-term benefit of farmers.
This scenario is not hypothetical but has been witnessed in case of coffee industry after liberalisation. Farmers should actually welcome corporate investment instead of viewing it as a threat.
3. Contract Farming Law: In normal course, a contract between a farmer with no legal background and a large corporate with access to advanced legal brains will be an unequal exchange.
The new Contract Farming Act precisely addresses this asymmetry by providing legal safeguards to protect the interests of farmers along with a simple and affordable dispute resolution mechanism.
In fact, some of the clauses of the Act, such as compensation for non-performance and protection for land ownership are tilted in favour of the farmer.
It should also be noted that contract farming is;
(a) Suitable for only some segments of farming; mainly for perishable crops, and
(b) It is completely optional for the farmer.
There is no element of compulsion requiring any farmer to enter into an agreement with a corporate or other buyer of his produce.
Conclusion: With the adoption of the new farm laws, farmers in India will have multiple options to sell their produce in a competitive market consisting of:
(a) Reformed APMC’s linked to the national market through the ENAM network,
(b) Farmers Co-operatives and FPO’s who will directly purchase, process and market the farm produce as is already happening in case of milk, sugarcane and some horticultural crops and,
(c) Open market in which large corporates and small village traders will operate in an efficient supply chain linking the farmers to the consumers.
For the reasons stated above, I am of the considered opinion that the new farm laws are not anti-farmer in any way and instead their implementation is absolutely essential for improving the lives of farmers in India.
These laws will facilitate flow of capital and modern technology into agriculture, bring about competition and transparency in Agri markets, improve the bargaining power of farmers leading to better price realisation and higher incomes.
It will also help in building improved logistics, storage and processing facilities and reduce the gap between what the consumer pays and what the farmer earns. The new farm laws should never be repealed.
I have added as an annexure to this appeal, a small note on coffee trade, which has undergone a transition from full state control to a free market and its impact on coffee growers, as it is relevant to the present debate.
I am willing to appear before the Committee, if necessary, to elaborate/substantiate any of the points aforesaid, along with relevant data.
Signed: M M Thimmaiah
7th February, 2021
Email: thimmaiahmm@gmail.com
