Farmers & the Central Government are at loggerheads over the recently enacted Farm Laws that supposedly radically transform the Agricultural landscape in the country by establishing a new “Trade Area” regime which will run parallelly to the “Market Area” under the APMC (Agricultural Produce Market Committee) regime run by the State Governments. The Government insists that these laws are meant to free the farmers from the clutches of the archaic APMC Mandis whereas the farmers believe that these laws will legalize their exploitation by private players as there is no mention of the Minimum Support Price in the legislations.
Much before the present Government took charge of running the Country and aimed to give it a new direction, Indian policymakers were accused of suffering from the twin evils of policy paralysis and economic reforms inertia that dragged the Indian economy down the corridors of slowdown in growth. So much so that the last few years of UPA 2 drew major flak from not just from the media houses but the captains of the industry as well for failing to deliver on its economic agenda and putting the much-needed economic reforms in cold storage. The political opponents of UPA 2 missed no opportunity to target it for its lackluster handling of the economy and in the process causing a severe damage to the image of India as a preferred investment destination.
It was primarily against this backdrop of poor economic performance that its counterpart NDA successfully managed to stitch together a majority in the Lower House of Parliament by portraying itself as a panacea to all the ills that plaque the economy and promising to restore India’s economic performance to its former glory by ushering in a new era of reforms that meets the needs and expectations of an aspiring Indian who was yearning for opportunities.
Not even in their wildest dreams could the present Government have imagined that the very plank of economic reforms on which they fought and won the elections with an astounding majority will now end up being an albatross around their neck.
What’s The Fuss All About?
As part of its economic agenda to kick in long pending reforms and take the Indian economy to the promised land, the Union Government recently passed two new farm laws namely Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 & Farmers’ Produce Trade and Commerce(Promotion And Facilitation) 2020 (hereinafter referred to as Farm Laws), which some critics say is a creative interpretation of Entry 33 of the Concurrent List of the 7th Schedule of the Constitution and falls squarely in the domain of the States. Along with enacting these two new laws, an existing legislation (Essential Commodities Act, 1955) was also amended.
The stated intention of these legislative actions was to free the Agrarian economy from the clutches of the decaying & decades old framework of “Mandis” established under the respective State Agricultural Produce Marketing Acts (hereinafter referred to as APMC). These Mandis were set-up to protect the gullible and innocent farmers from being exploited by unscrupulous private traders.
Pro-Farmer or Pro-Corporate?
Depending on who one asks, one would get to hear to very contrasting opinions about these Mandis.
If we go by the proponents of the Mandi framework, it has been a boon for the farmers of the country giving them a safe and reliable setup for selling their produce. The farmers need not worry about finding a buyer for their produce or about striking a reasonable bargain with the buyer. All these activities are handled and managed by the Mandi intermediaries (like Arhtiyas) who charge a certain percentage of commission for the marketing services they provide to the farmers. Some farmers organisations on the other hand argue that Mandi regime enables to sell their produce at Minimum Support Price to the Government while there is no such provision in the new farm laws passed by the Government.
As per the critics of the APMC Model, the very Mandis set up to further the interests of these farmers now seem to have turned into a forum that exploits them instead.
The management of these APMC Mandis is infamous for being headed by individuals that are close to one political party or another which cares precious little about the interests of farmers and more about strengthening its own political influence and filling its own coffers. Thus, turning into a den of corruption inefficiency and mismanagement. Add to it a bunch of intermediaries in the Mandi regime each of whom charges a certain commission for providing “services” to the farmers to help them sell their produce. In the process, the farmer who is the cultivator of the crop doesn’t get the fair remuneration that he deserves to get and is forced to accept whatever comes his way through these intermediaries as the APMC Act prohibits him from taking his produce out of the Mandi for selling it. Thus, as per the scheme of things under the APMC model the farmer must rely extensively on the Mandi intermediaries to sell his produce. Thus, even if the farmer finds a buyer for his produce outside the Mandi, he is not allowed to sell it to him. There are various other such ills that plague the Mandi regime defeating the very purpose for which they were set up.
Farm Laws enacted by the Union Government are thus said to be the big bang reform that act as a remedy against the flaws of the Mandi system without disturbing or interfering with it. The laws create a parallel system under which a “Trade Area” is created in which anyone with a PAN Card can buy a farmer’s produce and is mandated to make the payment to the farmer on the same day or within 3 days. No state can levy any fees/charges on any commerce conducted in the Trade Area.
This is historic in many ways as it transforms the way in which a farmer sells his produce and eliminates the current set of intermediaries that benefit at the cost of the farmer. Some states have very few Mandis which it made very difficult for the small farmers to incur the transportation cost to reach the Mandi. As a result, the small farmers are forced to sell their produce at whatever price they can get without the protection or recognition from any of the existing laws. Leaving the small farmers at the mercy of the private traders that can take advantage of their inability to reach the mandi and thus extract a price that is not favorable to the farmer. The farmer doesn’t have any recourse available to such exploitation as the farmer is not supposed to sell his produce outside the Mandi.
The Trade Area created under the new Farm Laws corrects this major flaw by allowing the Farmers to sell their produce to anyone even outside the Mandi and regulating this transaction through
The farmers can now directly sell their produce to any person (including an association of persons) without being required to take their produce to the Mandis. The farmers are thus free to choose if they want to sell their produce in the Mandis or outside the Mandi.
End of MSP Regime?
One cannot help but wonder that why then are the thousands of farmers on the street protesting against the very legislation are that is aimed to liberalize the way they sell their produce? The answer lies in the gulf of trust deficit that lies between the Farmers & the Government.
The Farm Laws make no mention of the Minimum Support Price (MSP) which the Government currently prescribes as the mandatory minimum floor price for procuring the produce from farmers under the Mandi regime. The MSP is thus a guarantee to the farmers for getting a fair remuneration. Farmers, particularly in Punjab & Haryana, benefit greatly from the MSP procurement of Wheat & Rice. Equally concerning for farmers is the fact that they do not have the option to approach the Court in case of any dispute with the Private Traders and instead required to approach the Sub-Divisional Magistrate for any such dispute resolution.
It is this absence of mention of the MSP and bar to jurisdiction of Civil Courts in the Farm Laws that has become the major bone of contention. The Farmers are insisting that the Government amend the Farm Laws and include both these aspects so that they are not exploited by the private players.
The jury is still out on whether the Government will budge from its stand and address the concerns of the protesting farmers.
Indian Farmers have been for years made to suffer the inefficiencies and corruption of APMC mandis. We are all too familiar with the images of farmers spilling their produce on the road out of frustration because they will not get the price, they should from the mandis. Ironically, the very same mechanism also leads to a situation where influential traders hoard essential commodities which leads to the prices of Vegetables skyrocketing with no benefit accruing to the farmer who produced it.
However, that doesn’t mean we end up going to the other extreme end of the spectrum and leave our farmers at the mercy of the private sector for whom nothing is more important than their bottom-line and profitability.
Mandis must either evolve or perish. The Farm Laws are a welcome step but the imperfections like lack of guarantee of MSP must be fixed to assuage the fear of farmers. If implemented and accepted wholeheartedly by farmers, the Farm Laws can be a game changer for the Indian Agriculture Sector. If not, we are looking at a stillborn legislation with very few takers.
1) What Is The Legislative Action Taken By The Government That Seems To Have Upset Farmers?
The Union Government recently passed two new farm laws namely Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 & Farmers’ Produce Trade and Commerce (Promotion And Facilitation) 2020. It has further amended an existing legislation namely Essential Commodities Act, 1955.
2) What Was The Government’s Intention And Objective Behind Passing These New Laws?
The Union Government is of the view that the current State regulations pertaining to selling farm produce are restrictive and prohibitive in nature. These regulations prohibit a farmer from selling his produce outside the notified Market Area as per the respective State APMC Act. Thus, the Union Government felt the need to pass a legislation that allows farmers to sell their produce freely without any prohibition or restriction even outside the notified Market Area of States.
3) But Isn’t Agriculture And Related Activities A Domain Of The States To Legislate As Per The State List Of 7th Schedule Of The Constitution?
The Union Government has relied on Entry 33 in the Concurrent List of the 7th Schedule of the Constitution to enact these laws. The State Governments are contesting such an interpretation of Entry 33 and the jury is still out on whether the Union Government has encroached upon the domain of the States.
4) Why Then Are The Farmers Upset And Protesting Against These Laws Meant For Their Welfare?
The new laws passed by the Union Government make no mention of Minimum Support Price (MSP). This is the price mandated by the Union Government to ensure no procurement from farmers happens below this rate. This ensures that farmers get a fair remuneration for their produce. The farmers are thus demanding that the new laws be amended to include MSP as the base price for procurement by private players.
1) Bare Act – Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
2) Bare Act – The Farmers Produce Trade and commerce (Promotion and Facilitation) Act, 2020
3) Bare Act – The Essential Commodities Act, 1955