Recently, the government with an intention to transform the agricultural sector introduced the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (Trade and Commerce Act) , Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (Contract Farming Act) and has made necessary amendments to the Essential Commodities (Amendment) Act, 2020 (ECA).
Moreover, nationwide protests have been staged by the farmers since they are agitated by the changes put forth by the Acts. With this background, this article aims to analyze whether the changes contemplated under the said Acts are against the farmer community in India.
Upholding the independence of farmers
The Trade and Commerce Act seeks to execute agreements between the farmers and the buyers before the production of farm produce. Further, it makes the farmers independent of the state government-controlled markets known as Agricultural Produce Market Committees (APMC) in order to ensure a better price for their produce.
Additionally, the Act has formulated a system in which the farmers and traders can sell their purchase outside the market places meant for food and agricultural commodities called ‘mandis’. This is in line with the Competition Commission of India’s Annual Report of 2009-10 which stated that there is a need to remove the competitive bottlenecks prevalent in the APMC laws and the pricing policy of agriculture for the greater good of farmers.
It is pertinent to understand that the APMC framework had given rise to cartelization by the APMC agents, thereby facilitating opaqueness in the price fixation mechanism. This resulted in the payment of multiple taxes and cess which invariably increased the costs of farming. Thus, the Act will ensure that such anti-competitive and exploitative practices of APMC agents are curbed.
Further, the Act not only encourages intra-state but also inter-state trade activities of farmers, thereby reducing the cost of transportation. It also provides for electronic trading by farmers for the sale and purchase of the farmers produce online (FPO) wherein the farmers can trade directly i.e., sell their produce online without any intermediaries.
This empowers farmers to sell their produce at the best price and they also have access to more consumers through the FPO. The proposed framework under this Act not only eliminates middlemen but also frees the farmers from the barriers which were present under the previous regime.
Moreover, the Act has abolished market fees which was charged by the state government if the farmers sold their produce outside the APMC market. Overall, these reforms can play an active role in fostering the economic interests of farmers at all times.
Encouraging free trade
The Contract Farming Act provides for the farmers to enter into agreements with companies, retailers, agri-firms, etc under which they can produce a crop for an agreed price.
Therefore, any volatility in the market will not affect the prices that the farmers are entitled to under the contracts. There have been various apprehensions that this Act contemplates the removal of minimum support prices (MSP) for farmers.
However, in response to this, the Cabinet Committee on Economic Affairs has increased the MSPs for six rabi crops, thereby proving such allegations to be baseless. This will ensure that the farmers will earn more than the cost of production incurred by them. In case of disputes with respect to the contracts, the farmers can approach sub-divisional magistrates who are empowered to resolve the disputes within 30 days which is not the case with the civil courts.
Another welcome change under the Act is the linking of the contracts with credit or insurance scheme of Central or State Governments. This enables farmers to mitigate risks and will remove their dependency on local moneylenders for loans.
Moreover, the Act has implemented the recommendations of the Swaminathan Commission Report (report) which mandates that the MSP must be determined by adding 50 percent profits to the cost of cultivation.
Another suggestion of the report which stated that the farmers must be allowed to sell their produce outside the mandis established by APMCs in order to facilitate free trade for farmers has made its way into the Act as well.
Furthermore, due to the Contract Farming Act, the farm produce under contract farming does not fall under the purview of the State Acts related to farming anymore. Moreover, the sponsors are not only prohibited from acquiring the ownership of the produce but they are also precluded from making any permanent modifications to the lands of the farmers.
Alongside this, the farming agreements entered into by farmers are required to be registered under a registration authority as ruminated by the Act.
Changes in the Essential Commodities Amendment Act, 2020
The Essential Commodities Amendment Act, 2020 has provisions to omit commodities such as cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities.
It seeks to do away with the fears of private investors of excessive regulatory interference in their business operations. The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector.
It will help increase investments in cold storages and modernization of food supply chain. However, the fact that agriculture is a seasonal activity and it requires storage for ‘rainy days’ of farmers, has been totally missed.
While the three Acts are welcome changes for the agricultural sector, the authors contend that there are certain drawbacks which needs to be revisited by the government.
Firstly, the farmers are susceptible to prolonged litigation if the private companies do not perform the terms of the contract.
In such a scenario, the farmers will be unable to challenge the deep pockets of huge corporates who can bear the costs of prolonged litigation. Secondly, farmers due to their minimal bargaining power might end up becoming scape-goats to whatever price is offered by the private-sector companies.
Lastly, due to the de-regularization of the agricultural sector, there will be a shift of power from the state to the centre, thereby rendering the state powerless in case of any violations by the private sector. In light of these drawbacks, the authors contend that the government must tweak these reforms to be in line with other farmer-friendly provisions of the Acts.
The authors contend that the Acts must be discussed in detail and a comprehensive explanation must be provided to the farmers to assure them of the benefits and the protection extended to them under the Acts.
The Acts are a proactive step towards modern farming since they have given the farmers access to the internet. This will empower the farmers to expand the markets on which they can sell their produce.
Hence, they should vest their faith in the Prime Minister, Narendra Modi’s promise of the farming Acts being a watershed moment for Indian agriculture and the opposition should rise above partisan politics for the cause of upliftment of farmers in India.
(The authors are final-year students at the School of Law, Christ (Deemed to be) University)