A question that naturally troubles us is, why should Food Corporation of India hold millions of tons of rice and wheat at huge cost, when it can import it in case of emergency? Should it not limit the stocks to be held to meet any food emergency, and leave procurement for public distribution, to the respective states?
It is opined that, if the pressure on the government’s revenue mounts, it would impact other welfare schemes that benefit the underprivileged. Then, the government also provides subsidies to farmers on fertilisers and agricultural implements, amounting to about Rs. 100,000 cr. To take care of the emerging situation, the government then may have to reduce subsidies, or increase the cost of electricity, water and health facilities.
There is a general belief that MSPs reward inefficiency. For example, a farmer producing 10 tons of paddy on his one hectare farm, gets same MSP as another, who has produced 15 tons on one hectare. It is then asked:
–What is the incentive for the farmer who has put in extra effort to grow more?
–Why should both the farmers get the same MSP?
–Shouldn’t the farmers be rewarded, more for productivity, than just production of an agricultural produce?
–What about rewarding a farmer who uses less amount of water or fertiliser or pesticides?
It is suggested, instead of providing MSP, Centre should look at ensuring, that farmers get the required infrastructure to transport their produce to sell it at their place of choice.
The objective of the new laws is to open up the procurement structure and grant farmers and traders, freedom of choice to sell and buy agricultural produce outside the existing APMC mandis. The farmers demand legal backing to MSP, as they fear that MSP will not be enforced, once private mandis come up.
On the International Trade front, if it is decided to mandate MSP, the country may lose export markets, face disrupted domestic supply chain, unmanageable surpluses and an unaffordable subsidy burden.
Mandatory MSP will force private traders to buy at MSP. The international market will then stop importing from us because of higher crop prices. Private traders may also prefer importing the produce, instead of buying from the farmers, as prices in the international market would be lower.
On WTO front, the government, it is opined, should stick to the three new farm laws, as access to parallel and competitive markets would help farmers realise better prices.
WTO treats the system of subsidising agri-inputs and purchasing at MSP as actionable subsidies under Agreement on Agriculture. However, Direct Benefit to farmers to farmers is non-actionable. Direct transfers are not subject to any cap and can be given without any limit.
Instead of MSP, subsidy can be given directly to farmers using DBT, letting them buy from wherever they choose to at market prices.
MSPs have incentivised food grains over other crops, shifting land away from crops, such as pulses and oilseeds, necessitating costly imports.
The way out
A question is asked, should we continue with MSP in the face of various inefficiencies? As an answer, Centre has come up with a solution through farm income support.
Minimum Support Price is a form of market intervention to insure producers against sharp fall in farm prices. In spite of the assurance given by the government, the leaders of the Farmers’ Unions have been adamant, demanding grant of legal status to MSP. It is felt, all their efforts are directed towards discrediting the government of the day, rather than serving the interests of the farming community, which are likely to take the farmers on the path to self-destruction.
Finally, in view of the fear expressed of exploitation of farmers by corporates under the new farm laws, it is interesting to look at the provisions under the Contract Act & whether these are applicable to the proposed contracts between the farmers & the corporates, and whether the contract Act protects the right of the farmer in case of an alleged exploitation by a corporate.
The drafters of the Indian Contract Act had presciently anticipated that there might be numerous situations in which the big corporates would have disproportionate bargaining power and would endeavour to obtain unfair bargains from the weaker sections of the public. Accordingly, the Indian Contract Act, 1872, by virtue of Section 19A gives an option to the weaker party in the contract to set aside the contract at his will, if his consent was induced by undue influence at the time of making that contract. A consent is considered to be induced by undue influence if one of the parties to the contract is in a position to dominate the will of the other, and uses that position to obtain an unfair advantage over the other.
The Supreme Court of India has held that, disparity in the economic strength of the contracting parties results in unequal bargaining power, and thus can lead to the abuse of the weaker party by the stronger party. It is obvious, in a contract entered between a farmer and a corporate, a corporate per se is a stronger party and the farmer per se is a weaker party.
This clause thus perfectly applies to situations where a stronger party buys a crop from a weaker party at a price below the Minimum Support Price, as, selling his crop below the MSP to a corporate per se shows that the farmer had no alternative available at the time of making the contract. Thus, the consent of the farmer would be considered as consent induced under undue influence.
Thus, the absence of a law mandating MSP does not mean, that corporates would be able to take advantage of the distressed farmers, as, under the powers granted under the Indian Contract Act & the Constitution, Courts are said to be duty-bound to protect the farmers’ right to sell their crops at favourable prices.
Views expressed above are the author’s own.
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