The Farm Acts

Kerala: Cooperatives against corporates

Print edition : October 23, 2020

At a Civil Supplies Corporation (Supplyco) outlet in Kerala. The State depends on its effective public distribution system through ration shops and market intervention through a “second line of PDS” such as this to ensure food security. Photo: H. Vibhu

Kerala may not be impacted by the new farm laws as much as certain other States, but it will have to face several challenges once those laws are implemented. So the State has devised a decentralised model of alternative initiatives.

An important change in the agriculture sector in Kerala in the past five decades has been the rapid shift from cultivation of food crops to non-food crops and conversion of farmlands for non-agricultural use. Food crops such as rice, tapioca and pulses account for only about 10 per cent of the total cropped area, and cash crops such as cashew, rubber, pepper, cardamom, coconut, tea and coffee account for nearly 62 per cent. Rice, the major food crop of the State, is grown only in 7.7 per cent of the cropped area.

Kerala is a food deficit, consumer State, which imports most of its requirement of food and other articles. It depends on its effective public distribution system (PDS) through ration shops and market intervention through a “second line of PDS”, the outlets of the State Civil Supplies Corporation (Supplyco), to ensure food security and control prices of 13 essential commodities by procuring them from other States and distributing them at subsidised prices.

The State, therefore, never had the need for the kind of Agriculture Produce Market Committee (APMC) mandis (markets) that were established in the major food producing States because the cash crops, which alone Kerala produced in surplus, already had their own separate government-regulated commodity marketing systems, such as Tea Board, Rubber Board, and Spices Board.

Said R. Ramakumar, member of the State Planning Board and an economist at the Tata Institute of Social Sciences, Mumbai: “In the 1960s, when other States passed APMC Acts, Kerala did not, because it already had the markets that it required for the crops that it produced in surplus. Only paddy and vegetables were outside the purview, which the State anyway was importing from other States. So Kerala never felt the need for large mandis and marketing systems based on them and that is why the State never passed an APMC law.”

But, until now, there has been no regulation or a law against the entry of corporates or, for that matter, contract farming, in Kerala. “In truth, the situation that the Central government now envisages through these new laws had already been existing in Kerala for the past 50 years. There is no hurdle as of today for any private company or person who wants to invest in the farm sector in Kerala. It is another issue that hardly anybody is coming forward to invest in the State. They may come if we achieve a surplus in, say, vegetables. But there is no hurdle, and yet, no one has come to invest in the State either,” Ramakumar said.

Observers say that Kerala is not going to be impacted by the three new farm laws “as much as States such as Punjab and Haryana”, but would still have to face several challenges once those laws are implemented.

K.N. Harilal, also a member of the Planning Board, said that as an effective intervention to help farmers find a good price for paddy, Supplyco has been procuring it by giving a high subsidy over the minimum support price (MSP) announced by the Central government. The absence of effective procurement by the State earlier had led to the exploitation of paddy farmers by private traders and mill owners. Even after Supplyco began procuring paddy from the major rice-producing districts, incidents of traders collectively staying away from the procurement process and trying to force a fall in prices have occurred. This is an indication of what could go wrong if the concept of MSP withers away as a result of the new laws.

Facilitating parallel operations

According to Sreedhar Radhakrishnan, steering board member of the Alliance for Sustainable and Holistic Agriculture (ASHA), a network of organisations and individuals committed to the cause of “food, farmers and freedom”, the regulated commodity markets for cash crops in Kerala are in one sense equivalent to the APMC marketing system (though they are not the same) and may be impacted in the long term by the new laws, the nature of which cannot be predicted now. “Suppose a big agency from another country comes here to buy spices and sets up shop in Idukki near the Spices Board auction centre, nobody can challenge it. The Central government has legalised the process of parallel operations. We do not know whether it will happen, but the facilitation for it has been done,” he said.

Agriculture Minister Sunil Kumar told Frontline that with the Centre giving several indications earlier of the imminent introduction of such laws, Kerala had been moulding strategies to cope with their outcome, even as it was planning to approach the Supreme Court against them. “We have devised a decentralised model of alternative initiatives, utilising the services of local bodies, the strong networks of cooperative societies and women SHGs [self-help groups] under Kudumbashree and the like to try and achieve self-sufficiency in food production and to improve marketing, processing and value addition of farm produce, with a special focus on paddy and vegetable cultivation. Our rallying slogan is ‘Cooperatives against Corporates’, and we are modelling our response based on it to protect our farmers,” he said.

Agriculture cooperatives

Sunil Kumar further said: “Kerala has over 1,600 powerful primary agriculture cooperative societies whose principal mandate is the welfare of the agriculture sector. However, in Kerala, these cooperatives had so far been concentrating on providing banking facilities, gold loans, etc., and have not involved themselves much in agriculture production, value addition or marketing. What we have planned now is to include cooperative institutions in all such areas. All local bodies will also be involved in trying to help farmers increase production and find a basic price and markets for their crops.”

One of the programmes, Subhiksha Keralam, for instance, aims at solving the food scarcity in the State by encouraging cultivation of crops in nearly 25,000 hectares of fallow land as a decentralised initiative taken up by local bodies, agriculture cooperatives, SHGs and collectives of volunteers.

The State has announced that it will fix a “basic price” for 16 perishable crops in Kerala, which would be 20 per cent more than the production cost and has decided to start procurement on its basis from November 1 through outlets run by government agencies such as Horticorp, the Vegetable and Fruit Promotion Council Kerala (VFPCK) and selected marketing outlets of the Agriculture and Cooperation departments, which have now been declared as “procurement centres”.

As a result of such decentralised initiatives, group farms, organic vegetable gardens, farmer producer organisations, farmer enterprises for value addition of agro-products, common facility centres such as Agro Parks, village markets (one in each panchayat), product-specific companies by cooperatives, agricultural knowledge centres, agro service centres, volunteer ‘Karshaka Karma Senas’, procurement centres, rice mills, value addition centres and so onare sprouting all over the State.

Kerala, however, will need to continue to buy the majority of its requirement of rice from outside the State, Sreedhar Radhakrishnan points out. “But the Central government seems to be wanting to move out of procurement, perhaps in stages. That it has now allowed decentralised procurement of rice and wheat by States is an indication of that. Gradually, then, Kerala may be forced to depend on the open market more and more for its requirements and this could have an impact on its PDS. If the State is forced to enter into competitive market and buy rice for its needs, it may naturally try to procure rice at the lowest price. Kerala’s farmers will then lose out because, the cultivation cost being high, they can only sell their rice at a higher price than what a farmer in a neighbouring State may be willing to offer. So these new laws will challenge the agriculture marketing sector in a big way and the results, at the end of the day, may not be good,” he said.

Since 2007, several retail chains such as Reliance have entered the Kerala market and signed contracts with farmers for supply of farm products at a predetermined price. The retail companies have started collection centres in many parts. According to Ramakumar, there are instances of contract farming where companies elsewhere in India and abroad have entered into agreements with local farmers for growing crops such as vanilla, safed musli (a medicinal crop), organic ginger, organic pepper, organic turmeric and oleoresin. There are a lot of controversies and quarrels too happening, for instance, of a company breaking contracts or refusing to pay the agreed prices and so on.

He pointed out the significant case of a company going back on its agreement with a woman farmer in Kerala (M/s Nandan Biomatrix Ltd vs Ambika Devi) that went up to the Supreme Court. As per an agreement signed in 2008, Ambika Devi, a small farmer from Kozhikode, agreed to cultivate and supply safed musli to Nandan Biomatrix at Rs.1,000 a kg. But the company refused to pay the agreed price at the time of delivery. Ambika Devi approached the Kerala State Consumer Disputes Redressal Commission under the Consumer Protection Act, 1986, which ruled in her favour. The company had argued that it was a commercial contract and would not come under the Consumer Protection Act and subsequently went to the Supreme Court with it.

Said Ramakumar: “The judgment in the case was delivered only in March 2020. The apex court upheld the farmer’s argument and declared that a farmer signing a contract farming agreement should be considered a contract farmer. It is a significant ruling that accepts a farmer engaging in such a contract as a ‘consumer’, but the new Central law do not take this into consideration.”

But is contract farming happening in Kerala on such a large scale that it is a cause for concern in the new context? “We have no way of knowing it because there is no system of registration. There is no system or regulation in the area of contract farming in India. A lot of farmers are being exploited because of lack of regulations in this area and are forced to accept whatever price they get eventually, despite such contracts,” said Ramakumar.

Commodity markets

How are the new laws going to affect the trade in cash crops, where Kerala has the regulated commodity markets? Said Ramakumar: “It is unlikely that Kerala will come to face a big crisis there, because anybody can trade at the auction centres run by say, the Spices Board, by getting a licence. Theoretically it is possible for a corporate entity to start a parallel auction centre, but I do not think the economics of starting a separate establishment allows that kind of a new system. The transaction and administrative costs of setting up a parallel establishment would be extremely high. That is why, in the post-APMC reform States such as Maharashtra even, we don’t find any private market. The reason is that the transaction and administrative costs are a big entry barrier. As of now the auction centres run by the commodity boards are well established.”

There are doubts whether, despite the flurry of activities and promotional campaigns, the new decentralised initiatives in the agriculture sector in Kerala are well-founded and capable of being an effective check on the problems that could arise because of the change in the Central government’s policies favouring the corporates.

Lack of good marketing system

The major drawback still in Kerala, according to Ramakumar, is the lack of a good marketing system. “The system we have now is a very fragmented one. The State is yet to have a strategic marketing plan. Large swathes of fallow land are opened for cultivation by a variety of groups, and Kerala is aiming to double vegetable cultivation as part of the Subhiksha programme. It is a good thing. But it must be based on an overall supply chain plan. The State is yet to think of what will happen when all the harvest reaches the market. Nobody can be confident that all that can be sold at the local level itself and there will be some surplus everywhere,” he said.

Sreedhar Radhakrishnan feels that Kerala has created a system that is a good alternative to what is now being proposed by the Central government. “I strongly feel that this model is a good alternative mechanism. It is an excellent approach that Kerala should pursue. And I would say that it has also reached a certain level of consolidation. For instance, certain villages which have excelled in vegetable production are being brought together as clusters and all that. But they need to be more focussed, because it also requires a lot of technology, such as good cold storage facility and secure transport to additional markets. It is not enough if they are left loose-ended like they are now. As of now, when the support mechanisms are withdrawn, many of those initiatives would collapse. The effective policy intervention would be to see which are the areas that rose up and started producing adequately and invest in them. That is the farm strategy Kerala should be following. I feel that it is important to have such focus.”

A keen observer of Kerala’s agriculture sector, Sreedhar Radhakrishnan also says that when it is as yet unclear what lay ahead for the country as a result of the changes in the Central policies, when new big players are being ushered into the agriculture sector, “Kerala should have the vision to see that what it has invested in right now is only a campaign, that initial enthusiasm alone is not enough, that its programmes need to be more focussed and have a sustainability aspect, a continuity aspect and an auditing aspect inbuilt into them.”

“I have a feeling that in such things we are distracted by a pat on our backs. The State’s success will lie on the extent to which it can control the supply chain. Where do we fail? We fail in product grading, monitoring, standardising; we fail in packaging, we fail in a lot of these new age processes. We still have an apathy to all this. And that will make the corporates happy. Because they are going to do the whole thing for us now. It is not the failure of the farmers but the failure of the bureaucracy and the government. This is why, all over India, corporates find themselves a free field,” he said.

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