Farm-Laws 2020 in the Perspective of Agricultural Price Policy

The lop-sided production with an unwarranted surplus in wheat and rice and deficit in oilseeds and pulses may be largely attributed to biased agricultural price policy (APP). Wheat and rice are regularly purchased at minimum support price (MSP) by Food Corporation of India (FCI) without any cap whereas NAFED purchases a maximum of 25 quintals per farmer and not more than 25 per cent of pulses and oilseeds production in the year concerned. FCI is also reimbursing taxes and arhatia commission in wheat and rice procuring states, while states purchasing pulses and oilseeds have to forego all taxes. Since the 1970s, Punjab and Haryana have been the main beneficiaries of MSP and some big farmer-cum-traders in Punjab have formed strong Farm-Unions (FUs) to bargain for the waiving of quality norms, waivers of loans, and declaring farmers’ deaths as suicides. Now, these unions are spearheading the agitation against the three farm laws of 2020. The paper attempts to link these farm-laws with the issues thrown up by the APP. Besides regional bias, the other negative outcome of procurement at MSP is non-participation of stockiest and processors in purchases at the time of harvest. It is due to the known stocks of NAFED and FCI, from where they purchase at prices below MSP. Government of India is losing on both counts by purchasing at a higher price and selling at a lower price than the market. Perhaps, Government of India may have introduced the laws as Ordinances before passing them as Acts to reduce purchases from the kharif of 2020 itself. The easing of stock limits under ECA, bringing in the concept of ‘trade area without any tax" and non-mention of MSP as a reference price may be linked to this problem of APP. But after the protest by the Punjab dominated FUs, most of the apprehensions have been addressed, except for legalising the MSP.