Indian Agricultural Acts of 2020: Talking points
Updated: Jun 27, 2021
Image Source: Shrinidhi Datar
I would like to begin by pointing out that the aim of this blog is not to give an opinion on the topic in question. The primary aim is to give the readers as many facts as possible for them to understand the ground reality. The new Farm Bills of 2020 have sparked a heated discourse between the different actors in play - right from government spokespersons and farmers to the common people. Opinions are being formulated in the press and social media. The primary question is whether these laws are going to make things easier or more difficult for the farming industry. In this article, our focus will mainly be on decoding the laws and understanding the controversy. Agriculture is the biggest contributor to the Indian economy. It is a source of income for more than 50% of the Indian population. It constitutes 17-18% of the national GDP (figures as of 2018). With such a high dependency on agriculture, it is vital that the farmers, farmland owners and workers employed in this sector are protected due to the uncertain nature of the occupation and given all the necessary support to yield maximum results. In September 2020, three Indian agricultural acts were approved in both houses of Parliament. These acts include:
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020: This act is intended to expand the areas in which farmers can trade. Ministry of Law and Justice (2020) says that it allows inter-state and intra-state trading, including trading on online platforms. Further, it states that state governments cannot levy any sort of market fee or cess on the farmer, traders, or e-trading platforms for produce that is traded outside the designated areas. Basically, it allows farmers to trade without having to go to the government designated trading areas, specifically the Agriculture Produce Market Committee (APMC) market yards or mandis. The APMC is a committee made by the state government to ensure that farmers get a regulated market in which they can trade their produce for a fair price. Farmers are protected in the APMC since they are not forced to sell for a loss or under any pressure. Under the new act, farmers will be able to trade anywhere and enter into trading agreements with anyone including large-scale retailers and companies, and not be bound to the APMC markets. According to the Business Standard (2020), this act means that farmers can now enter ‘written time-bound agreements’ with any one of their choice. The agreements will include the price of the produce traded and the quality and standards which are to be met, by the involved parties.
Farmers (Empowerment and Protection) Agreement on the Price Assurance and Farm Services Act, 2020: Ministry of Law and Justice (2020), says that this act provides a national framework for the farming agreements. This allows farmers to engage in transactions and trade their produce with anyone of their choice for a mutually agreed price and time for fair remuneration of the produce and farm services. The standards, quality of produce and all other legalities are to be mentioned beforehand. In essence it places risk of market fluctuation on the sponsors (the parties who will be paying the farmers based off the contracts) rather than the farmers. According to the Ministry of Law and Justice (2020),the rates at the APMC market yards are to be used as reference points for drawing up the contracts so that there are no disputes on pricing; there will be protection for the farmers for any contract they enter. Rishikesh (2020) from Latestlaws.com, further explains that the contracts will be made to protect the farmers so that they are not cheated. The government has instituted a dispute resolution mechanism for the same. Ministry of Law and Justice (2020), states that the Sub-Divisional Magistrate will be approached for any contractual disputes. The Sub-Divisional Magistrate will then appoint a Conciliation Board for dispute resolution. The act further states that there will be equal representation of those disputing the contract on the Conciliation Board. These members will be recommended by the parties and if any party fails to do so, the Sub-Divisional Magistrate will appoint whoever they deem fit to represent that party. Any dispute on the resolutions of the board can be escalated to higher appellate authority.
Essential Commodities (Amendment) Act, 2020: According to the government release, this is an amendment to the original act introduced in 1955. The original act was issued to control the supply and distribution of essential commodities to ensure continuous supply and avoid unnecessary hoarding. In the release of the amendment, it is said that the supply of foodstuffs including cereals, pulses, potatoes, onions, edible oilseeds and oil will now only be regulated under extenuating circumstances such as war, famine, extraordinary price rise and natural calamity of grave nature (Ministry of Law and Justice, 2020). Earlier, capping of the prices of commodities at all times discouraged private sector investments as competitive prices could not be introduced for the essential commodities. Now, the cap on prices of the aforementioned items will only be in certain circumstances and in the case of steep price rises (PRS India, 2021). This will enable competitive prices for the produce which is intended to benefit the private investor and farmer.
Starting with MSP (Minimum Support Price) and APMC; they are important aspects of the agricultural sector. I attempt to give you an insight into the government’s perspective. The MSP on the basic cereal crops in the APMCs and the risk free environment the APMC provides makes the markets very conducive for the farmers. Since farmers are now allowed to trade outside the APMC market/mandis, they can trade their produce in places where there are shortages of certain commodities. This means more independence to the farmers. These acts are intended to empower smaller farmers, who cannot afford the market fees of the APMC markets, find it difficult to access the APMC markets or help the consumers who cannot gain access to any kind of market. According to the Agriculture minister, Narendra Singh Tomar, the MSP mechanism will remain the way it is, there will be no changes to it (Sharma, 2020). Also, these acts will not encroach upon the pre-existing APMC acts of their respective states. The Government has made a clear stand by pointing out that these acts are intended to give more freedom and independence to farmers. According to the Financial Express (2020), it aims to improve the private sector investment and FDI without making the investors worry about too many regulations. The provisions of these acts look to give farmers the capital and infrastructure to improve, bring stability to the prices of commodities, create a conducive market for farmers to thrive in and reduce the wastage of farm produce. The Government maintains that opening up the agricultural market to FDI and private investment will only help improve the condition of agriculture in the country and provide better tools and equipment to farmers.
On the other hand, these acts have been met with heavy criticism from the farmers, traders and APMC agents. According to reports and interviews from our source, Shrinidhi Datar, who is a volunteer doctor at the frontline of the protests, farmers are of the opinion that instead of coming up with new acts, the existing mandi system (market yards under the APMC) needs to be improved. They are ineffective and apart from a few states do not really achieve their intended purpose of providing a safe and secure environment where farmers can trade. The farmers in Punjab and Haryana have flourishing mandi systems. They do not want the government to intervene in that market. So much so, that farmers from adjacent states come to the markets in Punjab and Haryana because of the better rates. On further understanding the situation, he reports that the mandi system has been ineffective or it is collapsing in other states because of interference by state policies . Land reforms, pricing of seeds and agricultural raw materials, unavailability of water due to regional disparity are some of the reasons why agricultural developments have hindered. This in turn has a knock on effect on the functioning of APMCs. One could argue that if the APMC system will remain unchanged, and entering into trading agreements/trading outside APMCs is voluntary, then why the protests? Dr. Datar explains, privatization is likely to lead to initial benefits like assured income and increased prices. With increased competition from private companies, the APMCs will slowly die out. The farmers will then be left with no choice but to trade with private organizations or set out on their own. Farmers can choose to be independent and sell their produce from anywhere they want, but the traders getting the same freedom will hinder the trading activities of farmers. In such an atmosphere, trading agreements are likely to soon become the only viable option for survival. No one is willing to allow such a leeway to major companies and large-scale traders. A source who wishes to remain anonymous has claimed that the agreements with large scale retailers or even private companies is uncharted territory for farmers. Despite having a conflict resolution system against maleficence arising due to not sticking to the contract, farmers are not really convinced. Private companies have the power and means to wriggle their way out of contracts that do not seem profitable to them. Thus, farmers are concerned that they will end up high and dry and will have to work at the mercy of the contracts with the private companies. In this regard, Dr. Datar also conveyed that the farmers are extremely worried about losing their self-sufficiency if they enter into such agreements. For e.g, not being able to grow what is desired and having to grow what is demanded in the contract could be one such foreseeable hindrance due to the seasonal nature of farming.
The Times of India (2020), reports that a few states have repealed these acts, namely Punjab, Chhattisgarh, Rajasthan, Kerala and Delhi.States have voiced their dissent about the Centre bypassing the APMC through these acts. Since the APMCs are controlled by the state, all revenue generated from here goes to the state. Hence, the states will have reduced revenue from APMCs. They will be still functioning but their business will be redirected due to the expanded trading grounds.
Despite having multiple rounds of conversation with the Central Government there seems to be no resolution in this situation. Despite intervention from the Supreme Court, there is still a long way to go to find any sort of middle ground for the government and the farming community. The farmers are not too happy about the exhaustive rounds of negotiations. They are protesting so that they can protect their livelihoods. Recently, the Supreme Court called for a stay order on these acts and ruled for formation of a committee to address the grievances.
In an effort to summarize, there is a need for communication between the farming community and the government with regards to such laws. The government stands firm by their decisions and reasoning for these new laws. The Government maintains that this is the way forward for the agricultural industry. The farmers on the other hand do not wish to have their independence taken away from them and have their livelihoods privatized for profit guzzling companies, traders and retailers. The protests have garnered a lot of support from across the world. It is necessary to have better inputs on formulating such policies. There should be a committee set up for any kind of law making process pertaining to the agriculture industry. It should be made up of the Agriculture Ministry, prominent experts of the agricultural field and heads of various farming organisations. This would allow the government to get a handle on the various perspectives surrounding the issues that different farmers face across regions and thus take the necessary steps in the formulation of new laws or amendments to the existing ones. This panel facilitates a transparent law making process and allows a lot of back and forth of ideas and important points of concern. The current discourse between the government and the farming community must have fruitful conclusions where both parties can walk away with what is best for them. The farmers vehement protests and the government’s lack of dispute resolution has become a cause for concern. Pushing the Indian agriculture to competitive markets and prosperity is important, but that cannot happen at the cost of alienating farmers or taking away their independence. The unity shown by the farmers in their opposition to these acts deserves serious second-thought on the government’s part. The government needs to act decisively and justly to protect the backbone of the economy in such trying times.
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About the author:
Nakul Mohod has an MA in International Relations from City, University of London and a BA in Political Science from Fergusson College, Pune. He is an intern with ASAR since January 2021.