If the farm reforms enacted by the Centre were a step forward, then the bills passed in the Punjab assembly this week to negate them amount to taking two steps backwards. They allow the state government to levy a fee on corporate traders and electronic trading/ transaction platforms which operate outside state regulated APMC mandis. If these levies are significantly high, it could force out not just future traders but even existing private ones. This would end up hurting farmers who have diversified out of paddy and wheat into other crops for reasons like higher returns, lower input costs or reduced water consumption.
In short, Punjab’s loss in crop diversity and agri trade could spell gains for other states. Pressing hard on all populist buttons, the legislation also mandates that the proceeds from the fee go towards a fund for the welfare of small and marginal farmers. The burden of such fees will in all likelihood be borne by the farmer and consumer while there is no certainty of such funds reaching small farmers after accounting for governmental expenditure and wastage. Instead of this circuitous route, Punjab would be better off not levying the fee in the first place.
A strong political point has been made by making sale at MSPs legally binding, but this applies to only two crops – paddy and wheat. In Punjab almost the entire output of these two crops is procured by government agencies at mandis, leaving little for private trade. The irony implicit in this is that rice and wheat farmers have to be protected from state agencies, not private players. With little benefit to farmers, it is clear that the MSP protection ploy is targeted at the Centre, though it has never spoken about MSP dismantling.