FARM ACT ANALYSIS

 

            These days there are a lot of controversies in social media regarding the recently passed farm bills (now Acts). Many people have come forward to support or oppose this. It’s obvious that most of them don’t know the provisions of these Acts. They are sharing this just because their favorite celebrities or favorite meme pages posted about it. Let’s discuss about the new Agri-acts; namely ­-The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; and the Essential Commodities (Amendment) Act.

Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:-

          The summary of this act is that this will create a new ecosystem in which the farmer can sell his produce outside the physical premises of the notified Mandis and thereby promoting barrier free electronic trading. But, this new system will not affect the existing Mandi system under various state APMC Acts. Here, both farmers and traders will enjoy the freedom of choice relating to sell & purchase. According to the govt. this act will facilitate remunerative price to the farmers through competitive alternative trading channels and will encourage efficient, transparent, barrier free intra-state & inter-state trade and commerce. Moreover, it will promote the concept of ‘One Nation, One Market’.

Need of the act:

·       Previously, the mandis were established under APMC acts to protect the farmers’ interest, which were later turned into local monopolies and were used as a medium of exploitation. The farmers were tortured by the arahatiyas, middlemen, mandi tax, different cess, fees etc. By this, not only the farmers suffered but also the price of the produce got increased when reached to the consumer. But, from this high price farmers did not get much benefit. Arahatiyas, middlemen and state govt. got benefitted from this long value chain and taxes. Producer’s share in consumer rupee was usually low. Farmers also didn’t get much benefit from the MSP. MSP was introduced to protect the farmers from distress sale, it was not for profitable agriculture. As per the report of 70th round of NSSO, only 6% of our farmers were selling their produce in MSP. So increase in MSP was not the sole solution.  But as per the new system, rest 94% farmers can also be benefitted. The new legislation will also decrease the monopoly of the mandis by increasing the competition. There will be more freedom of choice for farmers due to more number of buyers. The increased competition among the buyers will result in better price discovery reducing the market cost. The Act also states that no market fees/cess shall be levied on any farmer or trader. Ultimately, this will reduce the price of the produce for the consumer (as long value chain will be shortened and will be free from various taxes). Hence, it is a win-win situation for farmers as well as the consumers.

·         There will be more transparency in this system. According to this legislation, any merchant having a PAN number is eligible for the trade. There will be no political influence of the traders (associated with the local ruling party) unlike in the mandis. The new system will also facilitate a framework for electronic trading, which will also increase the transparency. 

·         Many opposition parties, including the main opposition party Congress opposed the bill in parliament. Paradoxically, Congress party promised in the manifesto to repeal the APMC Act and make trade barrier free. The Congress manifesto for 2019 general election states, “Congress will repeal the Agricultural Produce Market Committees Act and make trade in agricultural – including exports and inter-state trade – free from all restrictions”. (Congress manifesto for Lok Sabha election 2019, under the heading ‘agriculture’ entry no. 11, page no. 17). It had also promised in Punjab Assembly election to modify the existing act so that farmers could be benefitted from inter-state & international trade.

Criticism:-

·         Unconstitutional act- ‘Agriculture’ & ‘markets’ are state subjects (entry no. 14 & 28 respectively in the state list, under 7th schedule of the constitution). That’s why critics argue that laws in these matter by the Centre is an attack to the federalism. But in response Centre argued that ‘Trade and commerce in food items’ is in the concurrent list (entry no. 33). Moreover, parliament can make laws on a matter in the state list in national interest (article 249 of the constitution). So, there is no unconstitutionality in the act. If Lal Bahadur Sastri ji had thought that agriculture was a state subject that’s why his govt. had nothing to do with this, then we could not have witnessed the green revolution. 

·         Critics say that their will be an end in MSP in the new legislation. But this allegation is baseless. There is no such provisions in the Act to end MSP. Prime minister as well as the union agriculture minister have categorically assured that “MSP was, MSP is, MSP will be“ #MSPHaiAurRahega. Again critics argue that, the govt. may end MSP in future. The govt. has also assured that MSP will be continued in future. If still, in worst case scenario, govt. stops MSP in future, then the state govt. can formulate a legislation in this regard & will continue to buy in MSP.

·         End of APMC Acts- There is again a misconception that the new act will repeal the existing state APMC acts. But, there is no such provision in the bill. The new act will create an additional ecosystem outside the mandis, but it doesn’t override the existing state APMC Acts.  But, the Govt. needs to take steps to strengthen & extend the APMC mandis .

There is also a fear that the produce may be sold in a price below MSP in the trade area (outside the mandis), which is unfounded. If there will be low price for the produce in the trade area, then the farmer can sell his produce inside the Mandi in MSP as per the existing system. Further, any state can form a legislation that prices paid to the farmers in trade area will not be below MSP. 

 

 

 

The Farmers (Empowerment & Protection) Agreement on Price Assurance and Farm Services Act, 2020:-

                  The main point of this act is that now our farmers will be able to enter into direct agreement with companies, agro-based industries, wholesale traders, exporters, etc. Superficially it seems to be only a pro-corporate measure. Let’s go into details. According to this legislation, after agreement between the producer & company/traders, the buyer will provide required techniques & advisory, farm machinery & implements and other necessary inputs. Again, the buyer will have to take full or partial responsibility for crop risk but the farmer remains the owner of the crop during production period. Here, the farmer is also eligible for taking loans. Farmer is also free to withdraw from the agreement at any time without any penalty. 

Need of the Act:-

                     Most of our farmers are small and marginal. Due to their small land holdings & less resource, they have less chance for adoption of quality inputs, advanced technology, leading to their low income. This new legislation enables the farmers to make linkage with the market. As per the agreement, the buyer will provide technical assistance, equipment & will take responsibility of crop risk. Obviously question arises why corporates will make agreement with a small or marginal farmer? That’s why govt. has started a programme for the formation of 10,000 new FPOs (Farmer Producer Organizations). From the linkage between FPOs and traders/corporate/companies thousands of S&M farmers could get the pre-fixed value of the produce. The organization of large no. of farmers will also increase their bargaining power. Sahyadri Farmers Producer Company Ltd. is an example of successful FPO. With these reforms, we can now expect formation of  many ‘Sahyadris’ all over the country. These reforms will also encourage the private parties to invest in storage, processing, value addition of agri-produce. The private investment will not only boost the infrastructure but also create employment.

 

Criticism:-

·         Critics argue that, by this legislation, govt. wants farmers to sell their lands to corporates. But this allegation is baseless. Farmers land is totally prohibited from sale, lease or mortgage and is protected from any recovery.

·         There is also an allegation that farmers will be destroyed by getting into contract with big companies. First of all, contract farming is not a new thing. Many states have their own contract farming laws from first several decades. There are many successful example of farmers producing cash crops in collaboration with corporates. Here, according to this legislation the farmers will get pre-fixed price from the buyer while they are free to withdraw from the agreement at any time without any penalty. Govt. has also stated “effective dispute resolution mechanism has been provided with clear timelines”. But, in this issue the govt. need to be more serious. Because, if there will be any dispute between farmers and big corporates, it will be easy for the companies to win legal battle. So, govt. should be careful that this doesn’t harm the interest of the farmers.

 

Essential Commodities (Amendment) Act, 2020:-

              This act is an amendment of the Essential Commodities Act, 1955. Summary of this act is that crops like onion & potato along with food grains, oil seeds & pulses have been excluded from the list of essential commodities, except in extraordinary situations like war, famine, extraordinary price rise & natural calamity. Superficially it also seems to be an anti-consumer move. Let’s discuss in details.

                  The original Essential Commodities Act was enacted by the Nehru govt. in 1955 as per the requirement of the then condition of the country. At that time we were deficit in food grain production. The USA was giving us some food grains as per the PL480 contract, which was of course a matter of great humiliation. So, in that shortage period to stop the hoarding of the commodities the then govt. formulated this legislation. But situation has changed now. We have developed much in production aspect. We are no longer a ‘Ship to mouth’ nation. With green revolution and various other measures, we are now surplus in different agri-produce. Now the problem is not shortage of food grains but the storage, processing & value addition of the produce. Hence, a law enacted in the period of Nehruvian socialism, to tackle the deficit situation is not relevant in 21st century having surplus production. So amendment to this Act is the need of the hour. The economic survey report 201920 says that excessive govt. intervention affects the free trade and commerce of agri-produce. In the LPG era, license raj & inspector raj could not be allowed more. Withdrawal of stock limit will encourage the private parties to buy more which will be beneficial to the farmers. They will invest more in storage go downs, cold storages, processing plants, which will not only benefit the farmers but also create farm jobs. But we are thinking that this will increase black marketing and hoarding. For this threat, to control the inflation, the amendment says that the above mentioned commodities will be considered as essential during extraordinary situations.

              Many opposition parties, including Congress party, opposed this bill in the parliament terming it as anti-public. Again, the Congress party deviated from its manifesto. The Congress manifesto for 2019 general election states, “The Essential Commodities Act, 1955 belongs to the age of controls. Congress promises to replace the Act by an enabling law that can be invoked only in case of emergencies.” (Congress Manifesto for Lok Sabha Election 2019, under the heading ‘Agriculture’ entry no. 21, page no. 18)   

 

WHY PROTEST?

·         First of all, some people oppose this due to their political obligations. No need to discuss about them.

·         Some others oppose this due to ignorance. They are not aware of the facts, views of the experts and become victim of false information spread online.

·         Some state govt. are opposing this because in the new system if farmers will sell their produce in trade area (outside APMC mandis), then they will have to bear loss of revenue. For example- it is estimated that Punjab govt. may loose 1700 crore rupees which are collected as Mandi tax, different fees, cess etc.  in this type of cases Central govt. should give compensation to these states, at least for initial few years.

·         Some state governments also oppose as the traders associated with their parties will suffer after adoption of this new transparent system where any merchant having a PAN number can trade. There will be no effect of political patronage on trading.

·         Of course not all protests are political. Farmers are also opposing. The main reason of their protest is ‘fear’ that there will be an end of MSP, Corporates will take their land, etc. (discussed earlier under the heading ‘criticism’). Opposition is creating misconception & misguiding them. Govt. must clarify farmers doubt & make them conscious about the provisions of the Act. If there is problem related to farmers’ interest, then the govt. must solve them with first priority.

 

 

CONCLUSION :-

                   This blog is written after analyzing the views of the experts and collecting data from authentic sources. The term ‘experts’ include people from the govt., nonpolitical experts and anti-govt. people also. As usual people from the govt. (like union ministers) and govt. organizations (ICAR) gave strong logic in favor of the laws. Dr. Arabind Panagariya (Economist, Ex-VC NITI Aayog, professor Columbia university) tweeted, “one new law frees the farmers to sell his produce where he wants, whom he wants; another frees him to sell produce to processors and exports at an assured price; and a third creates greater certainty of prices & storage of produce”. Renowned agri-economist Ashok Gulati supported these reforms stating this as farmers freedom to sell. IAS officer Ashok Khemka tweeted,” Fear that prices in trade areas may rule below MSP is unfounded”. Dr Ramesh Chand (Agri economist, member NITI Aayog & 15th Finance commission) tweeted,"A historical day for Indian #agriculture as #LokSabha passed 2 farming bills. This will lay foundation for changing destiny of #farmers towards prosperity and #India on path to become global power in agriculture" Dr. Subramanyam Swami (Havard Ph.D. in Economics), one of the biggest critic of this govt's economic policy, has also supported these reforms & said, “This is the first major economic reform by the Modi govt.”. These provisions were also recommended by several committees in the past, including Swaminathan Committee. At last, after analyzing the legislations in details, different views, facts; we may call these reforms as a 91 moment for Indian agriculture.