FARM BILLS: REVOLUTIONARY REFORMS OR ANTI FARMERS?

FARM BILLS: REVOLUTIONARY REFORMS OR ANTI FARMERS?

This Article is written by Dev Agarwal, a 2nd year law student from Heritage Law College.

 

INTRODUCTION

On 27th September 2020, the President of India, Ramnath Kovind gave assent to the two farm bills and an amendment to the Essential Commodities Act, 1955. The farm bills had already sparked a massive debate in the country when it was first introduced in the Lok Sabha on 14th September 2020. The Union Government introduced three Ordinances on June 5, 2020:

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020
  • The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020
  • The Essential Commodities (Amendment) Ordinance, 2020

The two legislations which are namely, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 replaced the first two Ordinances, while the third Ordinance was replaced by The Essential Commodities (Amendment) Act, 2020.

All the Acts collectively seek to:

  • Allow the free trade of farmers’ produce outside the markets notified by the State Governments and
  • Define a framework for contract farming.

In other words, all three  Farm Acts aim to liberalize the agricultural sector and allow private players to directly buy the produce from farmers and not from Agriculture Produce Marketing Committee (APMC).

 

BACKGROUND

Agricultural Markets are regulated by Agriculture Produce Marketing Committee, the APMCs regulate the trade of farmers’ produce by providing licenses, levy market fees or any other charges on such trade, and provide necessary infrastructure within their markets to facilitate the trade.

The Standing Committee on Agriculture in 2018-19 observed that the APMCs need reforms urgently and the APMCs laws are not properly implemented in various states. The Committee also submitted that the number of traders under APMCs is less and this can lead to cartelization and reduction in competition. The traders along with commission agents and other functionaries are often seen forming associations, making it tough for any other individual to enter the market yards.

The Central Government released a Model APMC Act, 2017 and Model Contract Farming Act, 2018 which allowed restricted free trade of the produce, promoted competition and promoted farming under pre-agreed contracts, it also aimed to be the “guidelines” for every state and the states were required to make necessary changes in the respective legislation of their state. On 2018-19, the Standing Committee on Agriculture also pointed out that the states have not done proper changes according to the Model Acts. The Central Government then constituted another Committee in 2019 which had Chief Ministers of seven states in it. The main aim of this Committee was to ensure that appropriate changes are done as per the Model Acts and to reach a consensus for the amendment of the Essential Commodities Act, 1955 and allow the private sector in agriculture.

 

SOME FEATURES OF THE ACTS

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 empowers the farmers to sell their produce both in intra-state and inter-state. Earlier the farmer had to sell their produce to a particular APMC mandi which was assigned by the State Government. However, after the enactment of this particular legislation, a farmer can sell the produce to other states and as well as to other mandis apart from that particular mandi assigned to collect the produce of that particular farmer.

The Act also provides for establishment of an electronic platform for trading and transaction, whereby any individual can buy or sell the produce through electronic devices and the internet. Such a platform for electronic trading and transaction can be set up by companies, partnership firms, or registered societies, having Permanent Account Number (PAN) under the Income Tax Act, 1961 and a farmer producer organisation or an agricultural cooperative society.

The Act also abolishes any kind of market fees, cess etc. levied on traders, farmers and electronic trading platforms for the trade of farmers’ produce. This is also one of the main reasons of various political parties protesting since this Bill aims to remove a source of receipt of the respective State Governments.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 allows the concept of contract farming, under this, any private player apart from the government can enter into an agreement with a particular farmer to produce a particular type of crop. This produce would be bought by that private player at a particular price as agreed to in the contract between the two parties, this system does not replace the concept of Minimum Support Price (MSP) but this co-exists with MSP. Under the system of MSP, a farmer is guaranteed a particular amount of money for which he would receive on his produce from the government.

The Farm Bill also states that the price of farming produce should be mentioned in the agreement.  For prices which are subjected to any sort of variation, a guaranteed amount for the produce and a clear reference for any additional amount above the guaranteed price must be specified in the contract.  Further, the process of price determination must be mentioned in the agreement, clearly ensuring that both the parties to contract have a win-win situation.

 

CONTRACT FARMING – A BLESSING OR A BANE

The major allegation which is put against the Farm Bills is that the new Bills aim to remove the system of Minimum Support Price. Minimum Support Price (MSP) is a price flooring which is done by the government for the welfare of farmers and to assure that farmers get something from their produce. It is alleged that the Farm Bills destroys this concept, which is however not true as even the Union Minister for Agriculture, Narendra Singh Tomar has clarified this in the Parliament that the new concept of contract farming only complements with the existing system of MSP. On the contrary, it is a proven thing that the concept of contract farming has helped farmers a lot rather than making them dependent on big companies and private houses. One such example includes ITC’s e-choupal.

ITC’s e-choupal benefits both the company as well as the farmer as ITC’s e-choupal is cost effective for the company and provides better price to the farmers for their produce. E-choupal enables ITC to buy the commodities directly from the farmer, removing the intermediaries and reducing the costs. This is the reason behind the success story of ITC’s Aashirvaad Atta. Not only ITC has gained from its e-choupal but more than 160 other companies have also gained from this network. Further ITC has even used this e-choupal to sell its products in the rural areas through this network, thus helping itself by increasing its sales and helping the rural population by increasing their standard of living.

 

CONCLUSION

The problem lies in the mentality of most of the Indians who view privatization as something evil, forgetting the fact that if not privatization, most of the industries would have been killed by now. We have seen the 1991 Reforms and how effective it was in reviving India’s debt-ridden economy and the basis of that economic reform was Liberalization and Privatization along with Globalization.  While, it is true that in India most of the farmers are marginalized farmers and small farmers, who are dependent on Government’s support, it is also true that the rich farmers, however, how small percentage are very instrumental in Nation’s agricultural produce, and this Act provides them with newer opportunities to ensure that the Agricultural sector, which is the backbone of Indian economy boosts up.

 

REFERENCES

  1. Farm bill protests: All you need to know in 10 points, INDIA TODAY https://www.indiatoday.in/india/story/farm-bill-protests-all-you-need-to-know-in-10-points-temp-1726160-2020-09-28
  2. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020
  3. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020
  4. The Essential Commodities (Amendment) Ordinance, 2020
  5. Why Many Farmers And Some Parties Oppose The New Farm Laws: 10 Points, NDTV https://www.ndtv.com/india-news/farm-bills-explainer-why-many-farmers-and-some-parties-oppose-the-new-farm-laws-10-points-2298946
  6. July 25, 2012, Writankar Mukherjee, ITC’s e-choupal boosting company’s FMCG business, The Economic Times https://economictimes.indiatimes.com/industry/cons-products/fmcg/itcs-e-choupal-boosting-companys-fmcg-business/articleshow/15134732.cms?from=mdr