Bihar’s failing PACS system shows what could happen after the farm laws

16 January 2021
A farmer harvests his wheat crop in the Naubatpur area of Patna, on 18 April 2020. Ever since agricultural deregulation, in 2006, Bihar’s food grain procurement system has had major lacunae that often led to farmers making distress sales at very low prices.
Parwaz Khan / Hindustan Times
A farmer harvests his wheat crop in the Naubatpur area of Patna, on 18 April 2020. Ever since agricultural deregulation, in 2006, Bihar’s food grain procurement system has had major lacunae that often led to farmers making distress sales at very low prices.
Parwaz Khan / Hindustan Times

In 2006, the Bihar government deregulated the agricultural sector, and largely removed government oversight over food grain procurement. Previously a majority of food grain procurement happened through the Agricultural Produce Market Committee, a marketing board run by the state government that would organise mandis—wholesale markets—where farmers could directly sell their produce to the Food Corporation of India or the State Farming Corporation at the established minimum support price. The MSP is a price guaranteed by the government to protect farmers from market fluctuations. In 2006, Bihar replaced this system with Primary Agriculture Credit Societies, panchayat level societies that would serve as a middleman in food grain procurement. PACS buy food grain from farmers and sell it to the FCI, SFCs or to private wholesalers. The three recent farms laws, share a similar procurement framework with Bihar after 2006, in the fact that the state does not bear the onus of buying excess grain directly from farmers at the MSP. After the passing of these laws, several leaders of the Bharatiya Janata Party said that Bihar’s experiment with PACS gave farmers economic freedom and increased their revenues. Accounts from Bihar bely this claim. Several farmers and presidents of PACS I spoke to from Bihar told me that wheat and paddy farmers were now getting far lower incomes than they did under the APMC system, due to the involvement of private mills, the inability of government agencies to pay their bills on time and poor planning by state agencies.

During the recent protests against the farm laws, BJP leaders have frequently cited Bihar’s agricultural deregulation as a success story that must be emulated across the country. On 13 December 2019, the BJP organised the Kisan Chaupal Samellan—farmers’ conference—at the Bhaktiarpur locality of Patna in Bihar, to assure farmers that the three new laws would not negatively affect them. The Krishijagran—an agriculture focussed regional magazine—quoted Sanjay Jaiswal, the state’s BJP chief. “Those misleading the farmers are trying to use the shoulders of farmers for their own political agendas,” he said, during the conference.  Further, the magazine also quoted Ravi Shankar Prasad, the union law minister. He assured farmers that “the MSP and therefore the mandi system will continue under the new laws,” and that the new laws, “aim at improving the economic conditions of farmers by providing them direct benefits of their agro products sale without the involvement of middlemen.” Both speakers said that Bihar’s agricultural track record following the 2006 abrogation of the APMC’s proved this. The Deccan Herald quoted Prasad as saying, “The laws give the farmers opportunity to sell their produce either in mandi or in PACS or outside the realm of mandi, PACS or Vyapar Mandal … I just want to ask whether or not farmers be given such freedom or opportunity.”

Contrary to Prasad and Jaiswal’s faith in the PACS, farmers and PACS’ presidents in the state told me that the system had several major lacunae and often led to farmers making distress sales at very low prices. In contrast to the “freedom” Prasad claimed the system gave, farmers often felt like their prices increasingly depended on government machinery that was slow, corrupt and often forced them to sell their produce far below the state’s MSP. The new system also has new middlemen including millers, local merchants and PACS presidents, some of whom are viewed by farmers as being corrupt.

Under the APMC system, farmers could apply for space at a local mandi, for a nominal fee, where they could sell produce to government agencies such as the FCI and the SFC, or directly to wholesalers. These mandis were run by the state government and managed by a market committee some of whom were elected locally and others who were nominated by the state government. Buyers had to be registered at the APMC mandi which meant that the government could strictly enforce MSP. Applying for space at a mandi did not require any documentation, which helped many farmers who often did not have registered land deeds or those who had unofficially leased land. The APMC also had space for storage and drying paddy and wheat that had collected moisture, which ensured that farmers could delay selling their produce and assure a good price. Several farmers I spoke to told me that at mandis they were largely paid on the same day they sold their produce.

The PACS system created 8,463 societies in the state at the panchayat level which would buy grain from farmers, send it to a private mill, then sell it to wholesalers or state agencies. The management of these societies are elected from their members. Land and identity documents are required to register at a PACS, which often means that marginal farmers or those who take unofficial leases on land are excluded from the system. Each PACS also lacks its own funds and depends on money from sales to the SFC, which means farmers are not paid until the SFC credits the PACS account, which is often only after the start of the next cropping season. Due to complexity of the system and irregularities in its chain, many farmers are unable to sell their produce at PACS. This entire process forces farmers to make distress sales at prices far below MSP to buy the seeds, fertiliser and pesticide needed for their next crop. PACS presidents also told me that the meagre income the PACS makes is often lost to private mills which charge high processing fees. Some mills also try to cheat in the amount of grain which is returned, and this creates long legal battles for the PACS that further delay payments to farmers. PACS are also supposed to distribute fertilisers and seeds to their members though most farmers I spoke to said this only rarely happened in practice. In other states where PACS are active, fertiliser and seeds are often provided by them. The PACS is also supposed raise awareness about newer farming techniques by hiring experts, though farmers told me this too never happened in Bihar.

Akhilesh Pandey is a journalist based in Delhi.

Keywords: farm laws 2020 Bihar agriculture