When you buy or sell stocks on the trading platform, you do not pay any brokerage charges. There is a security transaction tax of 0.1 percent and a stamp free of 0.015 percent. This is a non-existent fee. Now compare this with the government selling wheat and simple rice in a regulated market in Punjab. The buyer has to pay the minimum support price, which exceeds the market price. On this, they have to pay 3 percent rural development fee, 3 percent market cess and 2.5 percent commission agent fee. It all adds up to 8.5 percent. So farmers should welcome a law that allows agricultural products to trade without paying such high fees?
Farmers of Punjab and Haryana have been protesting against the law of the central government, fighting the bitter cold and Covid-19 on the borders of Delhi for almost 50 days. Why should they object to something that benefits them? The reason is that the government buys wheat and rice almost entirely in Punjab and Haryana through Food Corporation of India (FCI) or state agencies. (Private traders do not because they can buy wheat and rice at low rates in other states). They pay it; Farmers do not. This fee is added to the country’s food subsidy bill and is a burden on the taxpayers of the country.
Whose farmers are afraid
Farmers fear that FCI will take advantage of the new law to buy wheat and rice from outside the mandis to avoid high tariffs. This will deprive the mandis of revenue and they will disappear with time. Large companies like the Adani Group, which already provide storage and logistic facilities to FCI, will step in here. They will charge very little for their services, which will cause the commission agents of the states to go out of business. Commission agents pay money to farmers as moneylenders; They provide them loans not only for growing crops but also for meeting wedding expenses and other activities.
Companies are unlikely to do so. Another fear is that the central government will reduce the procurement of wheat and rice to the levels required for distribution in the form of ration. Currently, there are additional purchases that are wasted or sold in the international market at a loss. (Mandis can reduce their charges and fees by about 1.5 percent.
What is the root of trouble
This will change the business as they will have space and facilities for bulk production of produce. But doing so will harm those who will benefit from receiving these charges. Less funds will be available for the maintenance of roads connecting villages to mandis. The state government can include them in the budget itself, but the Punjab government is giving subsidy of free electricity to the fields with a quarter of the revenue, and this is a burden on its finances).
What is the option of wheat and rice
In Punjab, Haryana and western Uttar Pradesh, farmers will need to think outside of rice and wheat. But there is no such option as remuneration. Intensive research has led to the development of wheat and rice plants which are responsible for fertilizer and water and produce many grains. They have also been made resilient to pests and pathogens. Maize is another crop that is high yielding and resilient like rice and wheat, but it is used more for dairy animals, fish, pigs and poultry. Indians do not consume meat in the quantities that they consume in West and East Asia for cultural reasons and also because many consumers cannot afford it. But the consumption of maize increases with prosperity because people consume more protein than grains. India is the world’s second largest importer of edible oil.
Every year (outside 2020, due to epidemic-induced disruption), it imports about 15 million tonnes of cooking oil. Palm oil is the most efficient source of edible oil, which is about four tonnes per hectare. Presently the yield of mustard is around 400 kg per hectare. The Solvent Extractors Association, a group of cooking oil producers, says high mustard cultivation can help cut import bills. In 2017, it launched Mission Mustard to promote mustard in the country. It wanted 25 per cent of the land in Punjab and Haryana to be given as an incentive to purchase maize in the kharif (rainy) season and mustard in the Rabi or winter season at the support price. But the support prices in India are above market prices.
In 2018, the government decided that the support price would be 50 percent above the payment cost of production. This is fine as long as they are less than or equal to the import price. If they are higher, production becomes ineffective, and unbalanced internationally, as has happened with Indian wheat and sugar. To reduce costs, productivity must increase. This can be done by breeding high-yielding varieties or by making them resilient to pests and pathogens so as to protect the yield from damage.
Yields are lower than western countries
Agricultural exporting nations of the world are relying on biotechnology or genetic engineering technology (GM) to achieve this. But for political reasons, India has not turned to GM and gene-editing technologies. Therefore, whether it is rapeseed-mustard, soybean or maize, the average yield of India is much lower than in the West. India should adopt ecosystem approach. The three Central Legislations reform is a small effort. They are still unable to take things very far.