In Punjab, farmers angry with system of commission agents find hope in AAP’s manifesto

In 2014, Sukhdev Singh, a farmer in Mansa in the Malwa region of southern Punjab, approached a local commission agent, or arthi, in the local market to borrow money so that he could cultivate his two-acre plot of land. He took a loan of Rs 40,000 from the agent, who handed him the money on the spot after taking Singh’s thumb impressions on a few sheets of blank paper.

Singh said that he was also asked to hand over the passbook to his bank account along with four signed blank cheques as part of the loan agreement.

There was another stipulation. In this area, any farmer who takes a loan from an agent is contracted to sell his produce only through that agent, who then earns a commission from the purchaser. Thus, a few months later, Singh took his produce to the agent, and his crop was sold.

Singh then deposited the cheque he received into his bank account. But when the farmer approached his agent to get his documents back, Singh learnt that the agent had already withdrawn the money using the blank signed cheques in his possession.

When confronted, the agent refused to part with the entire sum. Instead, he offered to fund the farmer’s next round of cultivation to sustain his business.

“It took months to recover the money,” said the farmer, who took the help of farmers’ unions to do so. Some of these unions held a rally in Bhatinda on Tuesday, highlighting key demands of the community.

Singh’s was no isolated case. Across the southern districts of Mansa and Bhatinda in Punjab, stories of exploitation by commission agents are becoming more common. Once a trusted form of non-institutional credit, the arthiya system has played its part in the debt crisis that farmers face in Punjab, which has seen thousands of suicides by farmers in the last few years.

The commission agents have a vice-like grip on the life of farmers, some of whom completely depend on them for cultivation. Given their political connections, the agents have also become extremely powerful, so much so that parties hardly speak out against them.

The arthiya system

The commission agent has been part of Punjab’s agriculture system for decades. Many of them are third or fourth generation agents. There are an estimated 21,000 commission agents in the Punjab, and each handles about 300 farmers every day in the harvest seasons.

The agents, registered with the market board, act as middlemen between farmers and purchasers. They set up shops in the local grain markets. When farmers bring in their produce, in case the purchaser is a non-governmental entity, the agents conduct an auction, and sell it to the highest bidder.

Usually, depending on the crop, the agent charges a commission ranging between 2% and 3% on the sale. This is recovered from the purchaser. However, in some cases, the farmer has to bear the cost of labour used to load and unload his produce in the market.

Till 2013, when the government came out with minor reforms on procurement, the procedure was even more skewed towards the agent in case the procurer was a state agency like the Food Corporation of India. At that time, the agent would raise a bill based on the day’s procurement and the Food Corporation of India would issue him with a bulk cheque. The agent would then divide the money received among farmers.

However, now, in such cases, the cheques are issued directly to the farmer. This is why agents insist that farmers hand them signed blank cheques as it enables them to withdraw the money owed to them if the farmer breaks the contract.

The arthiyas slowly became moneylenders as well. For the farmer, this was a workable arrangement as the process to obtain credit was swift and involved lesser paperwork as compared with institutional credit. After the crop was sold, the agent deducted the loan amount and interest, and returned the balance to the farmer.

However, over the last few years, allegations of exploitation have become common. These include accusations that agents were charging interest rates as high as 25% and were illegally holding back money that belonged to farmers.

Unscrupulous agents

Take the case of Baldev Singh, a farmer from Bhatinda. Singh is currently fighting a case of recovery filed by his agent in the district court a few years ago.

The farmer said that he sold his produce through an agent in the Bhucho Mandi grain market in Bhatinda. The agent allegedly gave him about Rs 1 lakh in cash obtained through the sale and took a few signatures. But later, to Baldev Singh’s shock, the agent asked him to repay the money. When the farmer argued that he had not taken a loan, and the cash given to him was from the sale of his produce, he was mocked and an account book that he had signed was shown as proof of the loan.

That the system is exploitative is evident when one reviews the documents filed by the agent in the recovery suit.

The account books have been maintained in a coded language called landas. According to lawyer NK Jeet, who does unpaid work for farmers in the area, there are multiple versions of this language. It is not taught in schools and it is primarily used by traders to hide what is being written in account books from their customers. Agents and moneylenders translate it arbitrarily and claim whatever they want to once they obtain farmers’ signatures, Jeet said. In this case, the farmer’s own money was allegedly converted into a loan.

Arthiyas have a substantial grip on agricultural credit. Official estimates state at least 35% of all such credit comes through agents. The agents double up as fertiliser and pesticide dealers, and force farmers to opt for brands whose manufacturers pay agents a commission. Some of them also run grocery shops and provide essentials to the farmer on credit. Thus, agents play a significant role in the lives of farmers.

Political clout

Farmers who attended a rally in Bhatinda on Tuesday said that both the Congress and the Shiromani Akali Dal back commission agents and their associations. Many agents are active in politics and switch loyalties based on the party at the helm in Punjab. In fact, Congress chief ministerial candidate Amarinder Singh has declared that the arthiya system will not be abolished.

As this Economic and Political Weekly article pointed out, the Akali Dal government, after tremendous pressure from farmers, decided to reform the Agriculture Produce Market Committees in 2013 to help farmers bypass middlemen and directly sell to the purchaser. However, these reforms were never operationalised as the government did not amend the Agriculture Produce Market Committees Act in order to allow this to happen.

Instead, the government chose to enact a Contract Farming Act in 2013 to clip the wings of commission agents. However, this law did not usher in any significant changes. Though it helped private purchasers, like supermarkets, to buy produce from farmers directly, it did nothing to reform the Agricultural Produce Market Committees, which is the system that the bulk of farmers access.

AAP’s promise

Significantly, at least on paper, the Aam Aadmi Party, which is contesting the upcoming Punjab Assembly elections for the first time, has recognised this deep-rooted problem. Its agriculture manifesto promises an immediate change to the Agricultural Produce Market Committees law. Its leaders have also assured farmers that commission agents who illegally lend money at high interest rates and harass farmers will be prosecuted if AAP comes to power. Many of these agents are not registered, a legal requirement under the Moneylenders Act.

“We hope AAP will act on its promises,” said Harpreet Singh, a farmer from Sangrur. Singh added that when the cotton crop failed in 2015, farmers were charged a huge amount of interest by agents due to the delay in repayment. This was one of the main reasons that drove suicides, he alleged.

But farmers also recognise the role of commission agents in providing easy credit. For example, in the months following demonetisation, agents helped many farmers out by extending credit through cheques.

Thus while farmers want the exploitation to end, they hope that the next state government will ensure better and quicker access to institutional credit before cracking down on arthiyas.