On 15th May, Finance Minister Sitharaman announced a “Rupees 1,50,000 crore package” and various policy changes in the name of helping agricultural growth. Prime Minister Modi claimed that it would boost the incomes of peasants. A close examination of these measures shows that they do not address the dire need of peasants for immediate relief at this time. On the contrary, the financial package and the policy reforms are both aimed at expanding the space for capitalist companies to increase their loot of the peasants.
Agricultural incomes in the rabi season have fallen drastically due to lack of availability of labourers, lack of transport during the lockdown and extremely low prices offered for farm produce. Many farmers have even dumped their produce rather than spend money on transporting it to the market. They are badly in need of immediate cash support, without which they cannot buy the inputs they need for the kharif crop or repay the loans they have taken.
The only component of cash transfer in the financial package is the Rs. 2000 each to about 8 crore farmers under the PM-Kisan scheme, which had been announced at the end of March. About 7.5 crore peasants are reported to have received this on 10th April. This meagre amount is only a small fraction of the huge losses they have suffered.
The package announced on 14th May had included Rs. 2,50,000 crore for new loans to be extended through Kisan Credit Cards, without collateral for loans up to Rs. 1.6 lakhs, targeted at 2.5 crore farmers. It is doubtful whether farmers will be in a position to take such loans, given the past loans which they have been unable to repay. During the years 2016-17, 2017-18 and 2018-19, the amount of agricultural loans which could not be repaid to banks increased by about Rs. 60,000 crore. This is the result of peasants and even many capitalist farmers having to sell their produce at prices which were lower than the cost of production.
Waiver of outstanding bank loans is one of the most immediate demands for which farmers from all over the country have been repeatedly agitating in recent times. The Central Government has refused to fulfil this demand. This stands in stark contrast to more than Rs. 5,50,000 crore of bank loans owed by capitalist companies that have been waived during the past five years, including Rs. 68,000 crore owed by the biggest 50 “wilful defaulters”.
The major part of the package announced on 15th May consists of loans to finance investments by private companies interested in purchasing and marketing agricultural products. The largest component is a fund of Rs. 1,00,000 crore to be managed by the National Bank for Agriculture & Rural Development (NABARD), from which loans will be advanced to private companies to make investments in cold storage facilities, food processing and other “farm gate” infrastructure. Another special fund of Rs. 10,000 crore is being created to support branding and marketing of food products.
The policy reforms announced on 15th May are aimed at encouraging private companies to further expand their role in purchasing agricultural produce directly from the farmers. A central law is proposed to be enacted, overriding existing state level laws, allowing private companies to freely purchase, store and transport any amount of agricultural produce without having to go through the state-level Agricultural Produce Marketing Committees (APMCs). The Essential Commodities Act is to be amended to exclude rice, wheat, pulses, oilseeds, onion and potato. It means that private companies can now hoard any amount of these commodities so as to maximise their profits.
The advocates of this policy reform claim that being able to sell their produce to any private trader or capitalist company of their choice will lead to a big boost in agricultural incomes. In truth, the real beneficiaries of this policy reform are the capitalist trading companies.
In the present system, the majority of small and medium-scale peasant farmers are at the mercy of private traders and middlemen who play a dominant role in the state regulated markets, in collaboration with corrupt APMC members and government officials. The new system being proposed will permit big capitalist trading companies to offer a better price and purchase agricultural products from anywhere in the country. Instead of being looted by the present set of traders, peasants will end up being at the mercy of even bigger monopoly trading companies.
One of the persistent demands of farmers from all over the country is for the State to guarantee procurement of their produce at a price which is at least 50% higher than their cost of production. Allowing big capitalist companies to directly buy from the peasants does not address this demand. On the contrary, it will only aggravate the problem of peasants being unable to receive remunerative prices.
Monopoly capitalist companies are driven by their pursuit of maximum profits and not by any commitment to guarantee remunerative prices to the producers. They maximise their profits by selling seeds, fertilizer, pesticides and other inputs at high prices, and by purchasing agricultural products at as low a price as possible.
Capitalist monopoly houses who have entered the sphere of agricultural products procurement in recent years include the Tatas, Aditya Birla, Reliance, Big Bazaar, ITC, ADM Agro and the Mahindras. Trading companies owned by these monopoly houses initially offer attractive prices to peasants. Once they have gained a controlling share of the market, they use their power to drive down the procurement price.
The proposed policy reforms also include the creation of a countrywide legal framework for contract farming. Recent experience of potato growers in Gujarat with the American multinational Pepsico has shown how contract farming benefits such big capitalist companies at the expense of the peasants (see Box on Gujarat Experience). Far from boosting the incomes of peasants, contract farming is bound to push peasants deeper into poverty and indebtedness.
Gujarat Experience with Contract Farming
In 2019, the multinational company PepsiCo filed a civil suit against four farmers of Sabarkantha district, Gujarat, in an Ahmedabad court. The company accused the farmers of “illegally dealing” in the company’s “registered variety” of potato plants, whose produce is used in its ‘Lays’ chips product. It further demanded damages of Rs 1.05 crore from each farmer! According to PepsiCo, the farmers who were growing the particular variety of potatoes were ‘infringing upon the right’ of the company ‘under the Protection of Plant Varieties and Farmers’ Rights Act, 2001.
To gather evidence against the farmers, PepsiCo hired a detective agency which went to the farmers posing as buyers offering higher prices, bought the potatoes and sent the samples to the company laboratory.
This is an example of the kind of control that big corporations can exercise under contract farming.