Role of New "Farm Produce Trade and commerce Ordinance" and its benefit to Farmers & Economy

Role of New "Farm Produce Trade and Commerce Ordinance" and its Benefit to Farmers & Economy

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Part-3: Agriculture Marketing Reforms - MSP formula of Swaminathan Committee hurting Indian Farmers and Economy

MSP Forumula of Swaminathan Commission hurting Farmers, investments and exports

"Income formula must have to Productivity per unit area and Quality, not just Cost of Production"

By:

Vijay SARDANA

Advocate, Delhi High Court

& Techno-Legal Expert

Current pricing policy will lead to the following problems: 

1. Cost of Production of any organic crops and crop from zero budget agriculture is less than the cost of production of intensive agriculture, according to Swaminathan Committee formula, organic produce should get the lower price if  MSP is just 1.5 time of cost of production.  

2. If all will get the same price, where is the incentive to learn and invest in better quality and better technology?

3. If MSP is higher than international price, then under free trade agreement like SAARC treaty and ASEAN FTA, imports will be cheaper than what is produced and sold as per MSP in India. Who will buy crop of Indian farmers?

4. Majority farmers never get MSP for their crops, what purpose we are serving by incasing MSP every year. Who is benefiting from MSP revision?

The country need farmers:

At the outset let me clarify, farmers are the backbone of any economy and they need proper support to ensure national food security and respectable lifestyle for their families. Unfortunately, since independence, our policymakers make a lot of promises to farmers but very little was done to improve their livelihood for various reasons. Farmers, due to their large numbers, were always treated as vote bank, agriculture all decisions were based on political considerations, and they rarely led to the economic welfare of the farmers. Everyone exploited the farmers for their political and commercial gains and farmers were crushed at the bottom of the pyramid to keep urban voters happy.

Recent Announcements are also not promoting good agriculture practices:

According to Press Information Bureau, on June 1^st, 2020, the Cabinet Committee on Economic Affairs (CCEA) chaired by the Hon'ble Prime Minister Shri Narendra Modi has approved the increase in the Minimum Support Prices (MSPs) for all mandated Kharif crops for marketing season 2020-21.

Government has increased the MSP of Kharif crops for marketing season 2020-21, to ensure remunerative prices to the growers for their produce. The highest increase in MSP is proposed for nigerseed (Rs 755 per quintal) followed by sesamum (Rs 370 per quintal), urad (Rs 300 per quintal) and cotton (long staple) (Rs 275 per quintal). The differential remuneration is aimed at encouraging crop diversification.

MSP for all Kharif crops for marketing season 2020-21 will be as follows::

Sl. No	Crops	Projected Cost* KMS 2020-21 (n Rs./ quintal)	MSP for Kharif 2020-21 (n Rs./ quintal)	Increase in MSP (Absolute) (in Rs.)	Return over Cost (in %)
1	Paddy (Common)	1,245	1,868	53	50
2	Paddy (Grade A)^	-	1,888	53	-
3	Jowar (Hybrid)	1,746	2,620	70	50
4	Jowar (Maldandi)^	-	2,640	70	-
5	Bajra	1,175	2,150	150	83
6	Ragi	2,194	3,295	145	50
7	Maize	1,213	1,850	90	53
8	Tur (Arhar)	3,796	6,000	200	58
9	Moong	4,797	7,196	146	50
10	Urad	3,660	6,000	300	64
11	Groundnut	3,515	5,275	185	50
12	Sunflower Seed	3,921	5,885	235	50
13	Soybean (yellow)	2,587	3,880	170	50
14	Sesamum	4,570	6,855	370	50
15	Nigerseed	4,462	6,695	755	50
16	Cotton (Medium Staple)	3,676	5,515	260	50
17	Cotton (Long Staple)^	-	5,825	275	-

 ^Cost data are not separately compiled for Paddy (Grade A), Jowar (Maldandi) and Cotton (Long staple)

 The logic behind the increase in MSP is dangerous:

The increase in MSP for Kharif Crops for marketing season 2020-21 is in line with the Union Budget 2018-19 announcement of fixing the MSPs at a level of at least 1.5 times of the All-India weighted average Cost of Production (CoP), aiming at reasonably fair remuneration for the fanners. The expected returns to farmers over their cost of production are estimated to be highest in the case of Bajra (83%) followed by urad (64%), tur (58%) and maize (53%). For the rest of the crops, return to farmers over their cost of production is estimated to be at least 50%.

Let us do a critical analysis of the announcements made:

1.  This may be the only case in the world where inefficiency is rewarded. Higher the cost of production, higher is the margin and hence higher is the MSP. Whoever suggested this formula, in fact, discouraged the concept of efficiency and productivity.

2.  My question is, if with the application of new technologies, the cost of production goes down by 20%, MSP will go down. Is there any incentive among farmers to adopt efficient technologies?

3. Live Case Study: Let us understand the whole case of this announcement with just one example and the same logic one can build for other crops. For better understanding let me build all my arguments with one specific example called “Maize”.

So, what is the implication:

a. Cost of production of maize is Rs.12.13 per kg.

b. The revised MSP is Rs.18.50 per kg., last year MSP was Rs. 17.75 per kg.

c. The current Mandi price in the month of May 2020 of maize is around Rs. 11 to 12 per kg,

d. Before the coronavirus, the lockdown was Rs. 22 to 24 per kg.

e. Poultry farmers are the biggest buyer of the maize for feed use.

f. The international price of maize was around Rs. 13 per kg.

g. When prices started shooting beyond Rs. 18 per kg, they stared demanding import of maize to reduce the cost of production. It means, one side maize farmers was benefitting on the other side poultry farmers were suffering.

h. Now, the poultry sector is ruined during the lockdown, the maize prices crashed to Rs. 10 to 11 per kg and there are no buyers. Who will pay MSP for maize now?

i. Exports: Once India was exporting about 5 million tons a few years ago, today with incased MSP and higher cost of production, we are outpriced in maize and there is no demand from the world market. Hence no exports from India.

j. Now maize prices are low, alternate crops which go into feed production will also face price crash and farmers will face the crisis. Example millets, etc.

So, who benefitted from this MSP Formula?

> Only Middleman, They charge a commission on percentage basis. When MSP goes up, the commission goes up for middle man those who supply to FCI or any government department.

Time to Change:

The fundamental problem with this approach is more the cost production, higher is the MSP. This is a disaster not only for farmers but also for industrial use and export trade.

It is high time we should move away from MSP and work on a better option, which improves productivity and farmers income based on the market economy. The dependency on subsidy or direct cash transfer should be carefully calibrated to ensure food security and discourage surplus production.

In the next article I will discuss what should be alternate approach the MSP.

Pesticide Regulation Part-5 Ban or Not to ban Pesticides: How to address this issue?

Pesticide Regulations Part-5

(To read earlier parts, please search on this blog with 'pesticide')

Ban or Not to ban Pesticides: How to address this issue?

Why and How to review existing Pesticides?

By:

Vijay SARDANA

Advocate, Delhi High Court

Techno-legal Expert on Agribusiness 

& Consumer Products Industries

& 

Priyanka Sardana, Advocate, Supreme Court of India

& 

Aastha Sardana, Researcher on Legal Matters

For any responsible government food safety and food security are non-negotiable in governance agenda. NGOs and Newspapers frequently cover the issues related to pesticides and their negative impact on food safety and the environment. These articles do impact public opinion which builds pressure on policymakers and judiciary.

The recent prohibitory order on 27 pesticides created a serious debate in society. Let us address the same in a holistic manner. In this article, we will cover, what should be the role of legislation in such a situation. In the future article, we will discuss how to address public opinion against pesticide. Please feel free to contact in case, more inputs are required on how to address these issues.

Regulate or Ban the Pesticide:

Governments regulate pesticides for many reasons. The main objective of controlling any hazardous product or activity is to protect human health and the environment from risks associated with the product or activity:

This includes the protection of:

• Product application-related people
• The Consumers
• The public
• The crops
• The livestock
• The wildlife
• The water bodies
• Other natural resources

When it comes to pesticide, regulation should also consider:

• The effectiveness of pesticide products for their proposed use
• Ensuring a fair market for manufacturers, importers and distributors of pesticide products.

Purpose of Pesticide Management Legislation:

Legislation is one of the tools that governments use to achieve the above stated objectives, by regulating the:

• Manufacture,
• Importation,
• Transport,
• Storage,
• Sale,
• Use
• Disposal of pesticides
• Disposal of empty pesticides containers

Why Effective Management of Pesticide is important?

Pesticides can have a broad bearing on many aspects of human, animal and plant life. It is important that all regulations dealing with the following issues must work in close coordination:

• Specific pesticide legislation,
• Legislation on human and occupational health
• Legislation on Environmental protection,
• Legislation on Agricultural practices
• Legislation on International trade

All these issues will tend to affect pesticides in overall regulatory framework’

What should be considered while regulation pesticides?

All countries and societies are at a different stage of development. It will be useful to factor in the ground realities before finalizing the legislation.

The good practices emphasize that governments when regulating pesticides, should take full account of the following factors such as:

• Local Needs
• Social and Economic Conditions
• Levels of Literacy among users
• Climatic Conditions
• The Availability & Affordability of Appropriate Application Equipment
• Personal Protective Equipment
• Monitoring of pesticide use in the local context

Any review of pesticide legislation should thus start with a review of this broader regulatory framework.

Government has the right to review the existing pesticides:

With time and with the overall advancement in the sector existing national pesticide legislation may have become outdated with respect:

• Objectives, priorities and needs may change
• Institutional responsibilities may change,
• Changes in the regulatory and institutional framework
• Information about hazards and risks may change 
• Due to new needs and issues arising in the country
• Applicable international or regional standards.
• Regional collaboration and harmonization may be introduced or new trade requirements may become important, for instance, when non-compliance would affect export of agricultural produce.
• Countries may wish to harmonize their pesticide legislation with non-binding international guidelines for ease of doing business or to promote exports

Why inconsistency occurs in pesticide laws?

Inconsistencies within the regulatory framework for the control of pesticides often result in controversies. Various stakeholders develop their own understanding of the provided terminology. The major reason for inconsistencies in the legislation and their understanding are due to:

• Varying definitions of pesticides and related terms,
• Overlapping mandates for different agencies with pesticide management responsibilities and
• Conflicting provisions regarding allowed pesticide use.
• Different laws or regulations may use the same terminology in a different context
• Different laws or regulations developed without the necessary coordination or on an ad-hoc basis to deal with specific problems in specific contexts.

Why conflicts are increasing in Pesticide Management domain?

There are many reasons leading to increasing conflicts:

• Clash of commercial interest between various stakeholders
• The power struggle between various departments due to contradictory provisions in different pieces of legislation that may grant the same or overlapping powers to different ministries, departments or agencies.
• Duplicative administration of some tasks or gaps in coverage.
• For Example: Any pesticide falls in the domain of agriculture, health, chemicals, trade, manufacturing, pollution, environment, labour, etc. It may be unclear to the user or even governments themselves which system is responsible for the regulation which aspect of the pesticide.

What is the way forward?

In modern world reforms, it is expected governments to optimize the integration of responsibilities of various ministries and departments regarding regulatory control of pesticides.

In the ease of doing business era preferably through one pesticide law that applies to all pesticides may be a better option, which can be framed in consultation with all relevant stakeholders.

Besides redesigning the pesticide legislation, there also may be a need to strengthen some provisions of other pieces of legislation by making them specifically applicable to pesticides.

Reviewing and revising pesticide legislation should also advance an overall objective to develop unified legislation covering all aspects of pesticides.

What modern pesticide management regulation should cover while updating pesticide legislation?

• The main reasons for updating pesticide legislation should be based on the need of the society in the country.
• Law should ensure consistency in the overall regulatory framework with effective connections between pesticide legislation and other relevant legislation with minimal contradiction or overlap.
• Law should clarify any issues related to responsibilities, authority or mandate of the institutions involved.
• In the fast-changing world, the law should incorporate provisions to address new requirements stemming from recent developments or updated priorities.
• Governments must consider and facilitate multidisciplinary approaches to pesticide management;
• Today, as part of many global treaties, it is our moral obligation to comply with requirements of international agreements and recommendations.
• In the end, the purpose of any legislation is the welfare of the people and law should facilitate the harmonization of the requirements with trading partners and the countries within the region.
• Ease of doing business will also promote investment and will create an overall welfare of society.

New Pesticide Management Bill'2020 is an opportunity, let it address this issue to avoid any controversy in future.

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Disclaimer: This article is for general information. For any specific techno-legal discussion, you may contact the authors.