The distinct nature of agriculture in Punjab
For two months, thousands of farmers, mostly from Punjab, sat on dharna on the roads on the Delhi border, braving the chill. The question is often raised why mainly farmers from Punjab were on the war path, demanding repeal of the three laws dealing with reform of the agricultural markets. The answer to this question lies in the distinct nature of agriculture in Punjab.
The land distribution pattern in Punjab is significantly different from the rest of India. The average size of holding is much larger in Punjab at 3.5 hectares against the Indian average of 1.08 hectare. Only one-third of holdings are below two hectares in Punjab with a share of about 10% in land holdings. On the other hand, medium and large holdings constitute one-third of holdings but operate about two-thirds of the area. Against this, 86.07% of holdings in India are below two hectares with a share of 46.94% in the area. As a result, the marketable surplus is much higher in Punjab, as compared to other states. The Punjab farmer mainly produces for the market, whereas in most of the other parts of the country, agriculture remains subsistence oriented.
The cropping pattern in the state is dominated by wheat and paddy, which account for 39.4% and 44.7% of the gross cropped area in the state. Only 16% area is under other crops. As a result, the Punjab farmer is the biggest beneficiary of the public procurement system. Nearly 89% of paddy and 95% of wheat produced in the state is marketed, all of which is procured by the government or other agencies.
The gross value of procurement of the two crops in Punjab in 2018-19 was Rs 6,17,44.24 crore, which comes to Rs 5,65,055 per farmer. Thus, their stake in continuing with the present marketing regime is quite understandable.
Punjab contributed 37.8% of paddy and 35.46% of wheat to the central pool in India in 2018-19. Haryana was another major contributor to the national pool contributing 27.3% of paddy and 24.5% of wheat procured in the country. Thus, PDS is heavily dependent on the production of paddy and wheat in Punjab. Punjab acts like a bulwark of the food security system in the country. Punjab has the best rural infrastructure among Indian states in terms of roads and markets.
One has also to understand the special role that the arhtiyas (commission agents) play in agricultural marketing in Punjab. The arhtiya facilitates the transaction between a farmer and actual buyer. In addition, he extends credit without collateral both for investment and consumption purposes. Often, he supplies agricultural inputs like seeds, fertilisers, pesticides etc. It is estimated that arhtiyas provide 36% of total loans to the farmers in Punjab. They recover their loans from the proceeds from the produce sold. According to many scholars, the interlocking of the credit, input and output markets by the arhtiyas in the state makes the system of marketing noncompetitive. However, the commission agents perform an important function in providing credit to farmers and facilitating marketing of their produce.
Arhtiyas are paid 2.5% of the value of the total procurement by agencies for crops such as wheat and paddy. Their gross commission on sale of these two crops amounted to Rs 1,236 crore in 2018-19. Punjab has 47,000 registered arhtiyas. They wield considerable political clout. They have high stakes in the continuation of the present APMC (agriculture produce market committee) system and are supporting farmers’ agitation through funds and logistic support. But it would be inappropriate to label the farmers’ agitation solely due to machinations of the commission agents.
The prosperity of the Punjab farmer is dependent on the present system of APMC and procurement, which assures a ready market and remunerative price for their produce. They fear that their economic well-being will be threatened if the system is changed and thrown to the mercy of private traders with gradual withdrawal of procurement and MSP (minimum support price) regime.
Views are personal