June 6, 2023

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Business The Solution

BL Special: What is essential about the Commodities Act?

Unseasonal rains in September and October affected Tur production in Latur and other districts of Marathwada by at least 20 per cent and farmers were expecting a better rate for the produce. However, many were not even able to get the minimum support price ₹6,300 per quintal this season, all due to the stock limit imposed on all pulses under the Essential Commodities Act, 1955 and the import by the government.

The government last week announced that the retail prices of pulses were substantially stabilized in the past five months, from June 2021. Prices of Gram, Tur, Urad, and Moong have either declined or remained stable in comparison with last year, according to the Ministry of Consumer Affairs, Food, and Public Distribution.

The Consumer Price Index (CPI) inflation for pulses has also seen a consistent decline during the last five months, from 10.01 per cent in June to 5.42 per cent in October. The pulses inflation rate was 18.34 per cent in October 2020. Stability in the retail prices of pulses has been achieved on account of pre-emptive and proactive measures taken by the government such as taking import of Tur, Urad, and Moong, according to the Ministry.

“But these pre-emptive and protective measures incur heavy costs to farmers. Every time there is the possibility of farmers getting a higher price for the produce, the government goes for imports, and prices in the market collapse. We don’t have any other option than to sell our produce at a lower price as we don’t have the capacity to store the produce,” said farmer Maruti Waghmare from Latur – one of the biggest Tur markets in Maharashtra.

“ Even when we have a bumper harvest, we face a similar situation. We all bring produce to the market at the same time. Neither we nor traders have storage capacity beyond a limit and we sell the produce at a price where even production cost is not recovered. This is happening for the years,” he added.

The Act and the impact

The new farm law on the Essential Commodities Act had proposed to remove cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities. The move was aimed to remove fears of private investors of excessive regulatory interference in their business operations.

“The freedom to produce, hold, move, distribute and supply will lead to the harnessing economies of scale and attract private sector/foreign direct investment into agriculture sector,” the government had announced while introducing farm laws. According to the government, while India has become surplus in most agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing, and export as the entrepreneurial spirit gets dampened due to the Essential Commodities Act.

“The Act has incurred maximum losses to onion farmers. Why the government should intervene in prices? If consumers cannot afford high price onion they can stop using onion in cooking till prices come down,” said Suyog Suryavanshi from Nashik.

Suryavanshi also said that many onion growers are also grape cultivators in Nashik. You go to a pizza or a burger shop only when you can afford it and the government doesn’t intervene in prices and take efforts to bring down prices, is an argument Nashik onion farmers are making. They added that the government imposed a stock limit on traders and farmers, but does not intervene when farmers have to sell onion at ₹1 kg.

The new farm laws were expected to drive up investment in the modernization of the food supply chain to help farmers and consumers, while bringing in price stability and creating a competitive market environment and also prevent wastage of agri-produce that happens due to lack of storage facilities.

“You won’t understand the trauma a farmer face when he has to dump his produce on the roadside or destroy the standing crop in fields after price crash,” said a group of farmers in Lasur station. Tomato farmers here dumped huge piles of tomatoes along the roadside in September after prices crashed to ₹2-3 per kg in the wholesale market.

What next?

The opponents of farm laws feared that corporates might reap benefits by hoarding essential commodities, building stocking facilities, and manipulating prices. Abolishing the Act would adversely impact the public distribution system, the opposition claimed.

Farmers in Ambajogai in the Beed district say that a stock facility is essential to avoid post-harvest waste and price crashes during the bumper crop. “ The government must invest or allow the private players to invest. Somebody has to do that and create a value chain. Who will do that is the question, ” said farmer Vishnu Shinde.

Farmers like Vishnu have a valid concern. The government and opposition are worried about the high prices of essential commodities and the public distribution system. But what if farmers stop farming and they themselves depend on the public distribution system? Who will produce to cater to the system?

The latest National Sample Survey (NSS 2018-19) has set the alarm bells ringing. The NSS data shows that 37 per cent of the income of agricultural households came from crop production and cultivation compared to 48 per cent in 2012-13. More farmers are now daily wage workers in cities and farming households are now also earning more from animal farming, non-farm business, and leasing out of the land.

(This is the third of the five-part series on repeal of farm laws)