27 March

FARM BILLS, 2020: AN ANALYSIS

Posted by Surana

in SSIA

Introduction

The Indian Parliament during its monsoon session culminating on 23 September passed three highly contentious bills, currently awaiting the President’s signoff, amidst uproar from opposition party leaders and farmers groups. These bills were intended to replace ordinances promulgated on 5th June 2020

The three bills introduced were:

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

The passage of these Bills, has led to a huge uproar in the country. While, those supporting the Farm Bills are arguing that this is a historic change which would open up the farm sector to private entities, eliminate middlemen and give farmers rights over their own produce, those who stand against it argue that this in effect would lead to colonisation of farmers and would leave them at the mercy of corporate entities. We through this article, attempt to analyse the changes brought about by the three Farm Bills and discuss the pros and cons of the move.

Key Changes Introduced by the Three Farm Bills

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

The goal of the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 is to “provide for the creation of an ecosystem where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels”. The key changes brought about by this Bill are:

Trade of Produce Outside Mandis: An APMC is a is a marketing board established by a state government in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels. However, through the new Bill, this goal is achieved by allowing buyers the freedom to buy produce outside APMC Markets unhindered, allowing them to buy produce sans license or APMC fees to be paid. It aims to allow free trade by increasing availability of buyers, thus boosting competition, but this might not particularly be enough by itself.
The Bill additionally prohibits the state governments and APMCs from levying any market fee, cess, or any other charge on the trade of scheduled farmers’ produce outside the APMC notified markets.
Another significant change is that farmers can now trade their produce in an `outside trade area’. This includes any place of production, collection and aggregation of farmers’ produce including farm gates, factories, warehouses etc. This would save the farmers substantial transportation costs.
Electronic Trading:The Bill provides for setting up of electronic trading platforms to facilitate direct and online buying and selling of farmers’ produce, resulting in physical delivery of the produce. Companies, partnership firms or societies that have the qualifying PAN card under the Income Tax Act are allowed to institute and control these platforms, alongside Farmers’ Produce Organisations and agricultural cooperative societies.

The Farmers (Empowerment And Protection ) Agreement of Price AssuranceAnd Farm Services Bill, 2020.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 seeks to “provide for a national framework on farming agreements that protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner and for matters connected therewith or incidental thereto.” This Bill attempts to shift the burden of responsibility of the market from the farmer to the sponsor. The risk of market unpredictability is attributed to be caused by smallholding sizes [and the resultant risk of fragmentation] alongside ground level instability caused by weather volatility, production insecurity and the finicky nature of the market itself. Consequently, this legislation transfers this risk to the sponsor, ostensibly reducing cost of marketing and improving the income that the farmers will earn. Some of the key changes introduced under this Bill are:

Farming Agreement: The Bill mandates that the farmer and a buyer enter into a farming agreement prior to the growing of any produce. The minimum tenure of such an agreement would be one crop cycle and the maximum duration would be five years, unless the production cycle is more than five years.
Fixation of Prices: The Bill requires that the prices of farming produce are mutually agreed in the agreement itself. If the price is subject to variation then a guaranteed price should be mentioned. If any additional amount above the guaranteed price is to be paid, then a clear reference for the same, also needs to be included in the agreement. The Bill also requires that the procedure by which the price is arrived at should also be contractually specified.
Dispute Settlement Mechanism: The Bill has structured a dispute settlement process which mandates a conciliation-based settlement. The farming agreement itself should mention that the disputes shall be referred to a conciliation board for dispute settlement in the first instance. If the matters remain unresolved then after 30 days of such reference the parties may approach the Sub-Divisional Magistrate for resolution. Parties would have a right to appeal to an appellate authority against the decision of the Magistrate. No action can be taken against the agricultural land of the farmer for the recovery of any dues.

The Essential Commodities (Amendment) Bill, 2020

The Essential Commodities (Amendment) Bill, 2020 has de-regulatedearlier characterised essential commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

Farming produce under a farming agreement, seen through the previous two Bills, will be exempted from all state Acts aimed at regulating sale and purchase of farming produce. Such produce will also be exempted from any stock limit obligations applicable under the Essential Commodities Act, 1955, or any other law.

What the Essential Commodities Act amendment aims to do is drive up the investment in cold storages and modernization of the food supply chain. The issue of surplus in agriculture has led to a discussion on the storage of perishable commodities, and the idea behind the legislation is to simultaneously create a competitive market environment and prevent wastage of produce. This also attempts to assuage the fears of private investors with regard to regulatory interference in business operations, in order to attract private sector and foreign direct investment.

The Bill issues for the regulation of food items like cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances, like war, famine, unprecedented or extraordinary price rise and natural calamity. Furthermore, the imposition of any stock limit on agricultural produce is therefore based on the price rise of the produce, wherein the limit can only be imposed if there is a 100% increase in retail price of horticultural produce or a 50% increase in the retail price of non-perishable agricultural food items.

ANALYSIS OF THE FARM BILLS, 2020

There is a huge uproar in the country over the passage of the aforementioned Farm Bills. While these Bills are a forward-looking piece of legislation which aim at freeing farmers from the shackles of middlemen, its detractors argue that these would just drive the farmers from the clutches of middlemen to the clutches of corporate entities. We shall now discuss, the pros and cons of the Farm Bills and assess whether they are actually good for the farmers or they have pain-points which may become dangerous for farmers in the future.

Key concerns with the Farm Bills are as follows:

APMCs:

APMCs provide space for farmers for collective bargaining on price and non-price issues (grading, weighing, moisture measurement etc.), allowing for price intelligence to be gleaned. The Bill does not particularly get rid of the APMC market[1]s, but instead creates a parallel market where the farmer can sell his produce without paying a market fee. The opponents of the Farm Bills argue that this would lead to a gradual phasing out of the APMC market yards. Moreover, no levying of market fee would also lead to loss in revenue for the states.

Minimum Support Price (MSP)

A Minimum Support Price or MSP is the ground level price notified by the government. If the farmers’ produce remains unsold in the market, the government buys this produce at the MSP. This ensures that the farmers are getting at least a basic price. The opponents of Farm Bills argue that MSP should be statutorily provided as now the farmers would directly deal with corporate entities. It is argued that farmers do not have the same level of resources as corporate entities and hence have unequal bargaining power. In the absence of a statutorily guaranteed MSP, the farmers may be exploited by big corporate giants and may be forced to sell their produce at lower prices.

Contrary to the above, the proponents of the Farm Bills have supported their passage and have argued that the following benefits would accrue to the farmers:

Elimination of middlemen and farmers’ getting the right to directly sell their produce is a welcome change. This would dispense off with `agency fee’ for middlemen and would put more money into the hands of the farmers.
Farmers can now sell their produce at the farm gates, this prevents the cost of transportation.
The Farm Bills give an option to the farmers to either sell through APMC or sell on their own through electronic trading or approaching the buyers on their own. The Bills in no way undermine the APMC but just widen the choices available to the farmers.
Farming Agreements with a pre-agreed, mutually decided price with clear dispute settlement mechanisms and a guaranteed minimum price, would ensure that the famers are standing at par with the buyers.
The Bills also mandate that the agricultural land of the farmers would not be sold for recovery and this is a significant farmer-friendly change.

Conclusion

The Bills though, do not mention a MSP in their text, yet they have not done away with a MSP. The MSP remains. Similarly, the APMCs and the mandis operated by them would also remain. Much of the protests are centred around the argument that the Farm Bills and the changes brought about therein, may lead to phasing out of APMCs and MSP and then the farmers would be left without any recourse. This is an execution problem and not a problem with the law. The Farm Bills, are progressive laws which seek to put more power in the hands of the farmers. What needs to be seen is that whether the farm bills would be implemented in such a way that they pave the way for corporate interests to take over or would they actually be successful in fulfilling their intent of freeing farmers from the shackles of middlemen. Only time will tell. Till then, let us hope that proper implantation practices are put in place, so as to prevent the benefits from being diluted.\

REFERENCES:

FARM BILLS, 2020: AN ANALYSIS

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