As with Punjab, Rajasthan farm Bills just about politics

By: |
November 2, 2020 1:52 PM

Not allowing below-MSP sales would put a huge financial burden on Rajasthan, so its new Bill steers clear of this

Expenditure by defence ministry, which has a large outlay of Rs 4.71 lakh crore for FY21, saw 11% y-o-y decline in spending in H1FY21 at Rs 2.33 lakh crore. The roads ministry also reported expenditure decline of 11% on year at Rs 45,929 crore in H1FY21.

Given the Congress high command’s opposition to the new farm laws introduced by the central government, it is not surprising states that are ruled by the party such as Punjab and Rajasthan have come up with their own laws to negate the central statutes. So while the central law sought to end the domination of APMC-registered mandis, the state laws seek to perpetuate them; in the case of Rajasthan, the state can notify the cesses/fee that can be charged on even produce sold on electronic platforms, not just in physical mandis. In the case of Rajasthan, almost untrammelled power has been given to the authorities to book traders for ‘harassment’ of farmers – apart from a Rs 5 lakh fine, a jail term of 3-7 years is prescribed – which is defined as a trader not accepting delivery on terms agreed upon; it looks reasonable, but the scope for interpretation of the terms agreed upon is immense since there aren’t always detailed agreements signed by the two parties. If the state isn’t careful, it can end up freezing all private trade which is worrying since, unlike Punjab, there is little central procurement in Rajasthan.

More interesting, the laws in both states, while seemingly adhering to the Congress demand that all produce be bought – by government or private traders – at the MSP, keep the burden on the state to the minimum. In the case of Punjab, the state’s laws state that no purchase of wheat or paddy shall be allowed if the price is lower than the MSP; while most of the wheat and rice is bought by the centre anyway at the MSP, no such stipulation is made for any other crop. If this was done, since the centre is not purchasing other crops, this would have required the state to make purchases at the MSP! Rajasthan has two Bills, one for contract farming and the other for non-contract farming. The one on non-contract farming has no minimum-MSP-based purchase, and not surprising since most produce in the state sells at below MSP. In the case of jowar, for instance, prices on the last trading day of October were 51% below the MSP, 35% in the case of bajra, 22% for maize, 10% for groundnut; it was only for urad and soyabean that mandi prices were higher than the MSP (14% and 8% respectively.

Rajasthan’s contract farming law brings in the MSP angle by defining ‘harassment’ as purchases below MSP. Indeed, it contemplates putting even more strict stocking limits than those proposed by the ill-advised central law on essential commodities. While the central law envisages imposing this when retail prices rise by 100% for horticultural produce over the preceding 12-60 months, Rajasthan contemplates imposing such limits – for contract farming only – when prices rise by more than 25% of the maximum price in the preceding two years. The two provisions will probably ensure there is no contract farming in the state since, while contract farming is meant to provide certainty to both the buyer and the seller, in this case, the buyer faces all manner of uncertainty apart from the threat of legal action.

In a nutshell, the Rajasthan laws make it clear that farmer interests are the last thing on the government’s mind; else it would have introduced MSP-purchases for all produce even at the cost of the state exchequer. As a thought experiment – in reality, the centre is committed to open-ended MSP-based procurement in Punjab and Haryana – if the centre was to reduce its purchases of wheat and rice in Punjab, it would be interesting to see how the state will enforce its new laws on the private sector; as private purchase would plummet, the farmers would then start protesting against the state government.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1UP’s ordinance against so-called ‘love jihad’ is prone to misuse, can become a tool of harassment
2Long-term impact of agricultural reforms: Rs 80,000-1,00,000 crore private investment, lakhs of jobs possible
3Need new laws for real-time tax dispute resolution