Critical Analysis of Farm Bills 2020

India happens to be an agrarian economy with approximately 60 percent of the population involved in agriculture and the related sectors and thus, decisions pertaining to agriculture or its marketing needs to be taken with caution. The Parliament has recently passed three farm bills to promote, facilitate, and empower the farmers and to make significant changes in the agricultural marketing system. The farmers in the nation feel quite perturbed regarding the same owing to their apprehensions regarding the breakdown of the current system of product marketing and the Minimum Support Price system.

This article aims to explain three recent farm bills that have ignited a nationwide protest by the farmers and analyzing if the bills are beneficial or detrimental to the farmers. The article also talks about the key provisions and constitutionality of these bills.

Introduction

On September 22, 2020, Rajya Sabha (Upper House) passed 3 bills pertaining to reform in the agriculture sector which would eradicate the current Agriculture Produce Marketing Committee (APMC) and invalidate the APMC Act. The bills that were passed in the Parliament include:

  1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
  2. Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
  3. Essential Commodities (Amendment) Bill, 2020.

The last bill mentioned above was passed in the absence of opposition members in the Upper House on 22nd September. This resulted in the resignation of Smt. Harsimrat Kaur Badal who held the office of Cabinet Minister of Food Processing Industries and widespread protests in Punjab and other parts of the country. On 27th Sept, these bills received the assent of the President.

Overview of the Bills

Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

This bill seeks to permit the sale of agricultural produces outside the markets (mandis) regulated by the Agricultural Produce Marketing Committees (APMCs) constituted by different state legislations. It seeks to eliminate restrictions that many states have imposed through different laws to mandate agricultural trade only through APMCs with the aim of protecting farmers from exploitation and to ensure fair prices for the produces. As per the statement of objects and reasons of the bill, the framework governing APMC laws in the States hindered the freedom of choice of the farmers in marketing and also in the inflow of investment in the development of alternative markets and marketing infrastructure.

Clause 2(m) of the Bill considers “(a) farm gates, (b) factory premises, (c) warehouses, (d) silos, (e) cold storage or (f) any other structures or places from where the trade of farmer’s produce may be undertaken in the territory of India as ‘trade area’. It excludes physical boundaries of principal market yards, sub-market yards, and market sub-yards managed and run by the market committees formed under each State APMC Act and private market yards, private market sub-yards, direct marketing collection centres, and private farmer-consumer market yards managed by persons holding licenses or any warehouses, silos, cold-storages or other structures notified as markets or deemed markets”[1] that were recognised in the State APMC Acts.

The Bill licenses electronic trading of scheduled farmers’ produce in the predetermined exchange zone and organizations, association firms, enrolled social orders (having PAN), farmer-producer association and agricultural cooperative societies have been enabled to build up and work in an electronic exchanging and trading platform according to Clause 3 of the Bill. Through Clause 6, the Bill forbids the collection of any market fee or cess under the State APMC Acts as for such exchange outside the APMC market yards. Clause 14 of the Bill overrides the inconsistent provisions of the State APMC Acts and is regarded as a key provision. Overall, an attempt to centralize and homogenize agricultural trade has been made through this particular Bill.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

The Preamble of the Bill provides for a national framework on farming agreements that empowers farmers to engage with agri-business firms, processors, wholesalers, exporters, or large retailers for farm services and trade of future agricultural produce at a mutually accorded ‘remunerative price’. Clause 3 of the Bill mentions that a farmer may become a part of a written agreement in regard to any agricultural produce.

The Bill mandates a ‘registration authority’ to facilitate e-registry and for registration of farming agreements. It additionally makes room for an alternate dispute resolution mechanism through conciliation for agreement-related issues. The jurisdiction of civil courts over such disputes have been barred, and they are to be resolved through the resolution mechanism provided by the Bill.

The Bill gives that a farming agreement may be combined with an insurance or credit instrument under any scheme of the Central Government or the State government or any financer to guarantee hazard alleviation and flow of credit to the farmer or finance or both. The Bill further curbs the acquisition of ownership rights or making indelible revamp on farmers’ property or premises. Clause 8 expresses that no farming agreement must be undertaken for any transfer which would include sale, lease, or mortgage of the land or premises of the farmer.[2]

According to Minister of Home Affairs, Shri Amit Shah, this bill will enable the farmers to go for contract cultivation with agricultural trade firms, wholesalers, large retailers, and exporters. The arrangement of market linkages at the sowing stage itself will protect them from production and price oddities.[3]

Essential Commodities (Amendment) Bill

This specific bill aims to regulate the conditions on which the government can thrust a stock limit on the farm products. The Bill necessitates that the burden of any stock limit on farm produce must rest on price rise alone Also, the Bill states that the powers of ECA to regulate the supply of certain food items can be exercised only under uncommon conditions like war, famine, unprecedented price rise or any natural disaster of great severity.

Otherwise, the government has the power to regulate the economic activities regarding such food items  ‘for obtaining their equitable allocation and acquiring them at fair prices’. With the amendment becoming a law, this power over the said food items can be exercised only under specified ‘extraordinary circumstances’.[4]

The APMC System

An Agriculture Produce Marketing Committee is a marketing board set up by a State government in India to safeguard the rights of the farmers and to make certain that they are protected from abuse and oppression of huge retailers.

Agriculture, falls under the purview of the State, as per the VIIth Schedule of the Constitution of India. Regarding the trade of agricultural commodities, intra-state trade falls under the State list as well, but inter-state trade and commerce fall under the Union List. Since the States have been given the responsibility of making laws related to the agricultural sector, different states have different APMC Acts and the marketing committees are set up as per the law prevalent in that particular state. Under these APMC Acts, States are topographically partitioned into marketplaces which are administered by market boards, and any products in that sector will be brought to a market committee for trade/sale. This is relevant for ‘notified agricultural products’ which varies from state to state and it, by and large, includes the essential grains, vegetables, and other horticultural produce. Notified products are intended to be brought to the market committee and traded in presence of the producer-farmer.

In this Market Committee (famously called Mandi) there are commission- brokers (called arhatiyas) who hold a license and are apportioned a shop in the market. The producer and purchaser have an option to go to any of the agents in this market, depending on individual relations with them. Ordinarily, farmers pick agents from their village and are impacted by age-old relations of money lending. There are plenty of commission-agents in a specific APMC managing in the same harvest, which brings about steady price discovery and alterations for that specific yield. Simultaneously, purchasers who might be proprietors of rice mills, flour mills, cotton ginning factories and so forth., come to procure these items. They make their offers and if these offers are reasonable, they shall give the best returns to the farmers.”[5]

In 2003, to effect a necessary change in the horticulture market, the then government delivered the 2003 Model APMC Act that opened new market avenues like private discount markets, direct purchase, and contract-farming as per the recommendations suggested by an Inter-Ministerial Task Force. Howbeit, only16 states amended their APMC Acts and accommodated direct marketing, contract farming, and inception of markets in the private/cooperative sectors with the motive of augmenting competition. Barely six states had notified the amended standards and rules according to a report in 2013.[6]

Farmers’ Demands

  • The mandi framework stays unblemished and their advances would be cleared. The bills had been contended by the farmers to destroy the dominance of the mandis however it is rather presenting an extra market channel running parallelly with the current system to ensure free trade. The new legislation is not concerned with the MSP system but is merely intended to provide freedom of choice for sale and purchase of produces outside the mandis, as clarified by Agriculture Minister Narendra Singh Tomar.
  • Later in line with the 2006 Swaminathan report by The National Commission on Farmers law should be promulgated for MSP to be at least 50% more than the weighted average cost of production also, if the MSP is not paid, it must be corrected through penalties. A law ought to be set up that will ensure installments from the purchasers through mediators.
  • They want the government to assuage their apprehensions regarding the APMC systems and deregulation of food items that, in their opinion, would lead to large corporate entities exploiting small and marginal farmers.”

Benefits of the new farm bills

  • “The farmers will move towards a freer and more flexible system.
  • Selling products outside the physical territory of the mandis will be an additional marketing channel for the farmers.
  • The new bill has not brought any major drastic changes, only a parallel system working with the existing system. Farmers would now be able to sell their produce to the whole world, but via the e- NAM system.
  • The amendment to the Essential Commodities Act which is one of the three bills under protest removes the fear of the farmers that traders who buy from farmers would be punished for holding stocks that are deemed excess and inflicting losses for the farmers.
  • The bills ensure that farmers or producers are given the same attention as production is and the farmer gets the stipulated price for crops so that farming thrives in a fair environment.
  • Prime minister Narendra Modi assured on September 20th, that the “system of MSP will remain” and “government procurement will continue” and hence, the farmers will be remunerated adequately for their produce.
  • In the existing APMC system, it is mandatory for farmers to go through a trader (via Mandis) to sell their products to consumers and companies and they receive Minimum Selling Prices for their produce. It was this very framework that had impacted the ascent to a cartel driven by traders and uncompetitive market sectors because of which the sons of the soil are paid MSP (an extremely low cost) for their produces..”[7] The new system aims to eliminate this practice and intends brings in a competitive market system which would benefit the farmers and fetch them fair remuneration.
  • “Farmer’s will have equal say in setting crop price. They will have the freedom of withdrawing from the contract at any given time without being penalized for the same.
  • 10,000 Farmer-Producer Organisations (FPOs) across the country will enable small farmers to deal with corporates.”[8]

Detriments of the Bills

  • “The Farm Bills hampers the hegemony of APMC mandis, thereby allowing sale and purchase of crops outside these state government-regulated market yards or mandis.
  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill does not give any statutory backing to MSP (Minimum Support Price). The farmers are looking forward to a comprehensive legal system in their favour but the said Bill does not explicitly mention MSP or Procurement.
  • The only crop where MSP payment has some statutory implementation is sugarcane for which FRP (Fair and Remunerative Price) is determined. This is due to its pricing being governed by the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act
  • The new bills are placing farmers and traders at the mercy of civil servants, rather than of the courts.”[9]
  • The Bills were passed as Ordinances which were rejected by the Punjab legislature and were later replaced as Bills in the parliament. The Bills were then, reportedly pushed through the House without taking up the five resolutions moved by the opposition MPs and two separate motions demanding the reference of the agriculture marketing related bills to select or standing committee of Parliament.
  • “In the States of Punjab and Haryana, the epicenter of protests, the market fee, rural development fee, and arhatiya’s commission are 3%, 3%, and 2.5%; and 2%, 2%, and 2.5% respectively. These are huge wellsprings of state income — with states not allowed to collect market expense/cess outside APMC zones under the new laws, Punjab and Haryana could lose an expected Rs 3,500 crore and Rs 1,600 crore respectively, every year”[10] while this may prove to be a major fountainhead of income for the Central government.

Constitutionality of the bills

Agriculture falls under the purview of the States if the division of entries in the VIIth Schedule is viewed in the strict sense and the same was contended by the protesting states. This viewpoint is negated by Articles 248 and 249 of the Indian Constitution which speaks about the residuary powers and power of Parliament to legislate concerning a matter in the State List in the national interest. The Parliament is empowered to make laws pertaining to any matter enumerated in the State list, keeping national interest in mind. Further, Entry 33 of the Concurrent List weakens the power of the State government in making laws on agriculture. It was through this Entry that the Essential Commodities Act was passed earlier in the Parliament. Thus, the bills appear to be in-line with the Constitutional provisions.

Conclusion

The three Bills would become laws shortly and are likely to prove beneficial to the farmers and agricultural sector in the country. The three Bills would eliminate the APMC system which was detrimental to the farmers and bring in a system that is freer and fairer. It will open up the markets for the farmers and enable them to sell their products without depending on the middlemen. It provides for a hassle-free dispute resolution mechanism and also ensures risk mitigation and free flow of credit. Indian agricultural sector can look forward to brighter days provided the air of misunderstanding among the farmers and MPs are cleared.

References


[1] Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 Cl. 2(m).

[2]https://www.livelaw.in/know-the-law/explained-the-3-farmers-bills-and-the-controversies-surrounding-them-163375.

[3] Amit Shah, Landmark Bills Free The Farmer, TOI, September 24, 2020, at 8.

[4] supra note at 1.

[5] https://www.insightsonindia.com/2014/11/20/agriculture-marketing-apmc-act-related-issues/.

[6] https://factly.in/explainer-what-are-apmcs/

[7] https://blog.finology.in/recent-updates/farm-bill-2020-pros-and-cons.

[8] Vishwa Mohan, Why are Modi govt’s ‘farmer-friendly’ laws facing protests?, TOI, September 24, 2020, at 6.

[9] supra note at 7.

[10]https://indianexpress.com/article/explained/an-expert-explains-farm-acts-and-federalism-6622769/; https://indianexpress.com/article/explained/in-three-ordinances-the-provisions-that-bother-protesting-farmers-6598905/

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