Corporates vs Commission Agents: India's farmers really have no choice

The first of a two-part series finds out why farmers in Punjab are spooked by the new legislation

It’s early morning at the Adani wheat silo at Dabra village in Moga district of Punjab and a group of elderly farmers are getting ready for another day of protest after sitting through the night outside the mammoth complex. A community kitchen in the adjoining paddy fields is busy preparing meals as the night watchers outside the two lakh metric tonne wheat silo wait for reinforcements to arrive for the demonstration to continue through the day and night. Elsewhere in the state Reliance operated retail chains, private road tolls and other Adani run wheat silos have become sites of demonstrations by farmers demanding the abolition of The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act pushed through Parliament by the Modi government.
 
In many ways the Adani silo at Jabra which commenced operations in 2007 is what the Modi government’s bill seeks to establish across India. And to the protesting farmers, this is a symbol of everything that will go wrong in their lives in the times to come.
 
The Adani silo, the largest in India, was designated as a notified government purchasing point (mandi) in 2008 by the Prakash Badal government. It has another wheat silo of similar capacity at Kaithal in Haryana and much smaller capacities at six locations in Madhya Pradesh. In effect, farmers could get their produce directly to Adani’s silos without going to the mandis. Adani would weigh and take the farmers wheat. The Food Corporation of India (FCI) which pays crores of rupees in rent to Adani for running the silo through a 30-year concession agreement would pay the farmers directly in three days. The logic behind turning Adani’s silo into government notified mandi was primarily two- fold: save the farmer and the government the 2.5 per cent cut of commission agents at mandis and quicken the process of sale of the farmers wheat stock. The government’s new bill designates all such silos, warehouses and any place of collection and aggregation of farm produce as ‘trade areas’. Any farmer or company is free to sell and buy in these trade areas across the country.  Has this model, the first of its kind in India, worked for farmers in the 13 years of its existence?
 
A few kilometers drive through lush paddy fields from the Adani silo lies the village of Daroli Bhai. Laib Singh, a farmer in his 70s, like many others have been depositing their wheat at the Adani silo for years. “We benefit more by taking wheat to the Adani silo. Here my produce is weighed five to seven quintals more as compared to government mandis. They don’t reject wheat for frivolous reasons like in mandis. At today’s rates that would be Rs 15,000 more for my produce. In the initial years they paid us Rs 20 more than the minimum support price (MSP). But those incentives have been gone for many years” said Laib Singh.
 
“It takes around three hours to give my wheat at Adani. In mandis it would take almost three days before the wheat was taken by commission agents. Here they clean and sort the wheat themselves. In mandis there is also the risk of theft of my stock that lies in the open for a few days. Here our trolleys can line up outside their gates and they take it in a few hours. But off late, the waiting times have increased and they have also increasingly started rejecting wheat” said Gurmail Singh, an elderly farmer in the village.
 
An FCI official at the Moga base depot explained that Adani’s silos saves the government a few crores of rupees on three counts – daily wages to labour, transport costs from mandi to warehouses and purchase of gunny bags to store and transport the wheat. The silos had negligible wastage of wheat as opposed to its own warehouses.
 
As morning turns to noon, back at the protest site at the Adani silo, crowds swell up. This argument is summarily dismissed by the agitating farmers who have gathered under the banner of the Bhartiya Kisan Union Ekta Ugraha (BKU). “Big corporates will set up such silos and warehouses and offer attractive prices for one or two years. Once farmers start selling to them and government disappears from the market, they will artificially depress prices. Isn’t this what Reliance Jio did? Offer free phones and data. Capture the market and then start charging more. Farmers will become slaves of big corporates” said Buta Singh, 72, one the farmers who protested overnight at the Adani silo.
 
Gurnam Singh another elderly farmer said, “The new bill will finish off mandis and reduce government procurement. There is no law that guarantees MSP to farmers. The government gives us guarantee for only rice and wheat. This year we got Rs 700 for maize. The MSP for maize was Rs 1850 per quintal. The government has also removed all food grains and other things from the essential commodity list by amending the Essential Commodities Act. Big companies building huge storage facilities will start hoarding grains. Presently, government guarantees that no farmer will be left with unsold wheat and rice at mandis. If companies hoard grains at their silos then they will turn us away from their gates. Who will we sell to then?”
 
The Indian government has an ambitious plan to develop such silos which allow massive storage of wheat on a fraction of the land required for warehouses. While there are no silos that match Adani’s capacity at Moga and Kaithal, there are several hundred private ones spread across the country. The government has approved 10 million tonnes of silo storage capacity to be built across the country in the coming years. Ten of the 62 silos will be in Punjab while others will be located in Haryana, West Bengal, Rajasthan and Bihar. Almost all of these have capacities of 50,000 metric tonnes. They are primarily designed to store wheat but pilot projects are underway to design them to store rice.
 
In addition to Adani, Prem Vatsa’s Fairfax group has emerged as a big player in this business. National Collateral Management Service (NCMS) whose majority shareholder is Fairfax has bagged atleast 15 such contracts across the country including three in Punjab and an equal number in neighbouring Haryana. Fairfax’s contracts entail building atleast 8 lakh metric tonnes of silo storage in the country. Adani presently has 8.75 lakh metric tonnes of silo storage capacity and is building 4 lakh metric tonnes at places like Kannauj in Uttar Pradesh and Darbhanga and Samastipur in Bihar. The new law effectively turns all these silos and thousands of private warehouses across the country into trade areas where farmers can sell and anyone can go buy any produce completely bypassing the mandi.
 
“Farmers are so happy with the efficient and transparent functioning of silos that they do not need to be lured with any incentive. Their response is so overwhelming that they have come to silos year after year for the last 12 years. Silos have become their way of life. Once a farmer comes to the silos, he will not go to any other mandi even if he has to wait for some time. Adani Agri Logistics is the pioneer in this field. Currently, we are handling close to one million tons food grains. We have plans to double the capacity in the coming years” said Puneet Mehndiratta, vice-president at the company. 
 
Many farmers Business Standard spoke to in Sangrur, Ludhiana and Moga districts of the state expressed another fear about the new law. The law states that any dispute between the farmer and the corporate or trader purchasing from them can be settled only through the sub divisional magistrate (SDM) who has been given the powers of a civil court. Rajbir Singh, a farmer from Sangrur said, “Big corporations run the government. What can a lowly SDM do before a big corporate? Now even if the government delays payments, we know that the money will come. A farmer can’t do anything if corporations refuse or delay payments. The law will turn us into slaves.”