The Three New Farms Act 2020

An Objective Analysis

The Three New Farms Act 2020
The Three New Farms Act 2020

About these farm bills :-

On 27th Sept., 2020 the President of India gave his assent to the three farms bills, those were proposed and passed by both the houses of Parliament. The name of these three new farms act are – the Farmer’s Produce Trade and Commerce (Promotion and facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and the Essential Commodities (Amendment) Act, 2020, combinedly known as ‘New Farms Act 2020’.

EXCERPT

On 27th Sept., 2020 the President of India gave his assent to the three farms bills, those were proposed and passed by both the houses of Parliament. The name of these new farms act are – the Farmer’s Produce Trade and Commerce (Promotion and facilitation) Act, 2020, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and the Essential Commodities (Amendment) Act, 2020. This article looks into these New Farms Act 2020, passed by the Union Government of India from the point of different stake holders and tries to go for an objective understanding of the reality.

Initially, these three new farms act 2020, were introduced as Ordinances in the month of June, 2020 and then drafted as bills to produce in front of Parliament. Subsequently these bills became acts, despite huge opposition from many corners of the country. The hotspot of resistance to these bills are states like Punjab, Haryana and some parts of Madhya Pradesh and Chattishgarh. Various farm organisations like- Kishan Sabha and political parties showed their discontent on the passage of these bills. Every stake holder has their own grievances and issues regarding the new bills.
But Govt. of India has a different point of view from the opposing parties. The govt. has envisaged that the new bills will bring revolutionary changes in the Indian agricultural sector by providing them freedom to sell agricultural produce to any one and any where and also enable them with proper bargaining power through contract farming.

Govt. has told that the aim of the three new bills are as follows: 

i) The Farmer’s Produce Trade and Commerce (Promotion and facilitation) Act will permit sale of agriculture produce outside the mandis regulated by APMC of State Govt.
ii) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act will provide legal support to contract farming.
iii) The Essential Commodities (Amendment) Act will deregulate the production, supply and storage of food items like- cereals, pulses, potatoes, onions, edible oil seeds etc.

Understanding the text of the new bills:

The first bill i.e. the Farmer’s Produce Trade and Commerce (Promotion and facilitation) Act will reduce the inter-state barriers for farmers to sell their agricultural produce. It allows trading outside premises of Agricultural Produce Market Committee(APMC) Markers such as farm gates, factory premises, ware houses, silos and cold storages. Earlier I would be done only APMC Mandis. So it will smoothen the inter-state and intra-state trade. The private players like big retailers corporates are free to enter into the agricultural sector an do the business deals with farmers directly. So it will create a competitive environment where farmers have choice to whom they sell and at which price. It will boost farmer’s income through open market system.
The second bill i.e. the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act promote contract farming although this system is not new but the bill will provide a national level frame work for it. So new farmers can sign a deal with private companies, exporters, retailers, processing industries to sell their farm produce at a mutually agreed price before harvesting.
The third bill i.e. the Essential Commodities (Amendment) Act pull out cereals, pulses, potatoes, onions, edible oil seeds etc. from the list of essential commodities.so it remove the cap on string limits of these items and give more freedom to the processing units and other private sector. But government can regulate in extra ordinary situation such as natural calamity, high inflation in price, famine and war, etc.
So overall these three bills are intended to promote both the producers (the farmers) and the buyer (the private sector) in order to go for a holistic developments.
As we know govt. facilitate farmers with Minimum Support Price (MSP) and system of APMC Mandis. So the big question is that what do the three bills have to say on MSP and APMC. So the answer is these bills have not ended MSP for farm produce. The APMC will not stop functioning and will continue as before. But it should be noted that govt. has not strongly mentioned about MSP throughout the bills which may create a suspense in the mind of Indian farmers.

 

Also See: Agriculture in Indian Economy

 

Why are the bills are so controversial

The bills are brought into act in the time of pandemic when whole country is suffering from a invisible enemy. As the bills have many direct impact on farmer, economy, centre-state relation, so there are any controversies rising from different front whether it may be the farmer and their organisations or the political parties or state government who raised doubt on the constitutional validity of these acts. So we need to discuss one by one elaborately.

i) Issues of farmers: 

Before coming to the issues of farmer with the farm bills, we need to understand that since India’s independence, the overall conditions of farmers has not improved much. Because, as per 2011 census, 96 millions cultivators enumerated farming as their main occupation decreasing from 103 million in 2001 and 110 million in 1991. Knowing that farming employs almost 46% of total work force directly, its contribution to GDP is less than 20%.
As per agricultural census, the number of small holding farmers in the country increasing every year i.e the number was 146 million in 2015-16. Also the average size of land holding is steadily decreasing from 2.10 hectare in 1970-71 to 1.15 hectare in 2010-11 and 1.08 hectare in 2015-16. Interestingly the top 10% households are cultivating almost 50% of India’s cultivable land and the bottom 50% households are cultivating less than 0.5 % of the cultivable land.
So for a farmer, who is already poor, debt ridden, it is not easy to accept the drastic change in agricultural system. One of the main issues of farmers is their perception regarding the bills which is not positive. Farmers are least interested in the promises done by the government in creating ecosystem where farmers enjoy great autonomy in selling their products. Farmers are reluctant to any changes in the existing system of MSP and APMC. Especially farmers from Punjab and Haryana, who are hugely benefited from green revolution. MSP and APMC, do not want any intervention. In Punjab and Haryana alone government purchased almost 201 lakhs tone of wheat and 226 lakh tone of rice and that also at MSP.
One more issue is that government has not given strong clarification on continuation of MSP. So it creates a trust deficit among the farmers for government. And it is not a good sign for country like India whose farmers are the backbone of country.
Subsequently, government has significantly deregulated its authority on agriculture market by giving private players a free hand to deal. And we know private enterprises are profit oriented. So farmers fear that big companies will bind them with unfavourable contracts and they will become helpless to fight any legal battle against the private payers. Especially, the marginal farmers will be the real sufferer here.
Promoting trade outside APMC will reduce the significance of mandis. Currently, APMC mandis acts as a reference for private sector in doing business with farmers moving all the transaction out of APMC premises will make APMC non-functioning after few years. Now it has two adverse implications. First, the statement government could not levy any fees on transactions done in APMC which leads to huge revenue loss. Secondly, the middle-mans working in mandis now loose their income and livelihood. So ultimately small farmers will be left with no back up option to return to APMC inn case of exploitation by private sectors.
The absentee landlords now mostly go for direct contract with retailer, corporates rather than the tenants which again disturb the income of small farmers.
And finally, the farmers raised the issue of complete throwing agriculture into open market as during economic crisis the sluggish market will not provide profitable price to the farm produce.

ii) Issue with corporatisation: 

As discussed above giving corporates autonomy to large extends in agricultural sector will cause APMC mandis to die down eventually. And certainly, government may away with MSP system after sometime. There is strong possibilities of these consequences. With very limited government regulation, Big players could do their monopoly in agri-market.
In this scenario, the small retailers, small business firms may not get enough opportunity to do trade with farmers. So business will be under the mercy of big corporates and market forces.
Though, private players will opportunity to directly do contracts with farmers, but if they prefer to transact through middleman as it will be simple and less effort required. So problem of middleman will remain.
Internationally, if we see USA and European countries, thee also private farm organisations have strong hold on agriculture which adversely impact primary producers. So those countries are rethinking on their supply chain. So India could use this experience to anticipate issues with strong corporatization of agriculture.

 

Also See: The Precarious Shape of State Finances

 

iii) Constitutional issues : 

In Indian Constitution, the 7th schedule has defined the subjects of jurisdiction for Union and state governments. List I has subjects reserved for Union Government, List II has subjects for state and List III has subjects for consideration of both centre and state called concurrent list. In the cases where both centre and state formulate laws on subject listed in List III, central law will prevail over state law.
Now while formulating the farm bill, Union government has invoked Entry 33 of List III. In simple term Entry 33 says that Parliament can make laws in public interest on the matters involving trade, commerce, production, supply, and distribution of industrial products.
As we know agriculture and its related matters are under state list and state has exclusive rights to decide agriculture related decisions. The Entry 14,26, 27, 28 of state list provide state government these rights Such as Entry 26 refers to “ trade and commerce with the state”, Entry 27 refers to “ production, supply and distribution of goods”, Entry 28 refers to “marker and fairs”.
But confusion arises because entry 26 and 27 of state list are subjected to entry 33 of list III. So we can say by making these new bills, the centre has encroached the jurisdiction of state. It is a clear violation of federalism which is a basic structure oof our constitution.
The new farm bills can be formed as “colourable legislation” as per the doctrine given by SC in various cases. So, it is unethical to do things indirectly which you are not allowed to do directly.
Second issue is that central government has taken or considered agriculture as an industry but in reality, it is a way of life for many Indians and means of livelihood.
Also parliament has passed these bills without proper scrutiny done by any parliamentary committee. So these suspicious circumference raises finger at the constitutional validity of these bills.
And more importantly, political parties are taking the issues actively may be cause of the vote bank politics as farmers are crucial sources of votes in the time of elections.

iv) Good aspects of the bills : 

No doubt these bills provide Indian farmers a large scope of freedom of choice and freedom to sell their produce anywhere.
Most of the Indian farm laws are obsolete in nature, outdated and required amendments. Like the Essential Commodities Act was originally formulated after independence due to the food security issues. But now the scenario has changed, there is no food scarcity. So it need to be amended.
It is anticipated that freedom to corporates, retailer, private players could increase the farmer’s income, so that government vision of doubling farmer’s income by 2022 could be possible. And lesser state interventions could encourage more investment in agriculture sector by private entities. It could subsequently lead to increase in production, use of technology in farming.
For long time huge government resources used in revenue expenditure for agriculture like subsidy, MSP but now government with the help of private partnership can focus on building capital infrastructure like roads, communications, cold storage, market hub, R&D etc. in this way government able to answer the questions raised by WTO on unfavourable or excess support given to Indian farmers by government.

Conclusion :

It is a reality that none of the systems on the earth is perfect, so as our APMC mandi system. It has many faults which need to be addressed. But replacing one faulty system with other one is not a wise solution. In a progressive country like India, it is very necessary that both government sector and private sector coexist together and work harmoniously. So government has done appreciable changes through the farm bills by encouraging private sector but at the same time government, it means both centre and state should keep some regulation on agricultural sector rather completely pulling out of it. It is the job of the leaders, who formed the bills, to give proper and enough clarification on MSP, APMC and other back-up plans like- fast resolution of conflicts between farmers and corporates if happen. Because the trust of the farmers need more active and direct assistance from authorities like direct cash transfer, universal basic income and food and nutrition availability. So agriculture which is a way of life for may Indians, decisions taken on behalf of it should be properly scrutinized and designed by the policy makers.

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