The New Farm Acts : The Main Points of Concern

Farmers in huge numbers from Punjab, Haryana, Uttar Pradesh and many other states    have blocked entry-points to the national capital They have been protesting ever since the government issued three ordinances on 5 June 2020 which were later passed by the Parliament in September 2020 and are now laws, having received presidential approval.

They are apprehensive that these laws are aimed at corporatising the India’s agricultural sector, its provisions are weighed in favour of rich agro-companies, and they would harm the farmers more than “empowering” them.

The Central Government, on the other hand, is emphatic that the new laws will “unshackle” the farmers by providing them more than one avenue to market their produce at competitive prices and thus would enhance their earnings.  The farmers are far from convinced. Economists and experts are divided on the issue, and the debates that should have preceded the passing of the laws in Parliament, are taking place now in both print and electronic media.

Before looking into the issues that are agitating the farmers, it may be noted that the Government, well aware that the Parliament was going to seat in a couple of months time, decided to give immediate effect to the legislations by  promulgating on 5 June 2020 three ordinances, viz. (i) the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, (ii) the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, and (iii) the Essential Commodities (Amendment) Ordinance 2020. In September these were presented to the Parliament as bills and were passed with no meaningful discussion.

This is contrary to the spirit of the constitution.

Main Points of Contention

The chief objections of the the farmers’ organisations, opposition parties and some of the state governments against the three Acts can be summed up as under.

I. Violation of Constitutional Provisions

The Constitution clearly lays down that Agriculture is a state subject, which means that  the Central Government has no powers to legislate on it. Yet, it has done so, thereby encroaching upon a domain that belongs exclusively to the States. Whether the Government’s interpretation of agriculture as an industry that allows it to legislate on the subject will pass muster at the Supreme Court only time will tell.

II. Inadequate prior consultation with stake-holders

Although the Government is in a denial mood on this point, it is now quite clear that while there might have been enough discussions within the government about these ordinances (now Acts), there had hardly been any prior talks with those for whose benefit the legislations are purported to have been made. If such discussions were held beforehand with the farmers’ organisations then perhaps the need for the farmers to agitate so intensely wouldn’t have arisen.

Not only that.  In its hurry to pass the bills the government not only refused to send them to the relevant Parliamentary Committee for threadbare discussions, but it decided to steamroll them through the Parliament amidst chaos in the houses during the little time that was available for even a perfunctory discussion on such an important issue. 

III. Objections against the specific laws and their provisions

(1)  The Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Act 2020:

It provides a framework for contract farming agreement between farmers and buyer and for settlement of disputes.  The main objection is :

The Act does not provide that contract price of the crop should be at least equivalent to or above the Minimum Support Price (MSP) for that crop.  Thus, it will be open to the buyer/companies to dictate the price, especially after the Agricultural Produce and Livestock Market Committee (APMC) markets crumble due to unfair competition with the private sector, as apprehended by the farmers, and as it happened in the Bihar experiment.

(2) The Essential Commodities (Amendment) Act 2020: It empowers the Central government to regulate trade in food items in extraordinary circumstances or impose stock limits if there is a steep price rise. The points of contention are:

(a) Till now only farmers, farmer cooperatives and Farmer Producer Organisations could stock their crops without any limit or restriction on quantity.  As a result, they could take a conscious decision on selling their crops at the most favourable/opportune time. Therefore, under this Act the farmers are not getting any new freedom.

On the contrary, the government has removed all the foodstuffs from this category allowing companies and traders also to store as much quantity of food crop as they want. This amounts to promoting hoarding. Besides, under the amended law the government has also given up its role of controlling manipulated price rise and inflation. While the farmers don’t gain out of this amendment, the hoarders will benefit and the consumers will surely be hurt as a result of this change in the law.  

(b) According to the amended Act, the government can intervene only if there is 100% increase in the retail price of horticultural produce; or 50% increase in the retail price of non-perishable agricultural foodstuffs over the price prevailing immediately preceding twelve months, or average retail price of the last five years, whichever is lower.

Even in such cases, the law says, “Provided that such order for regulating stock limit shall not apply to a processor or value chain participant of any agricultural produce, if the stock limit of such person does not exceed the overall ceiling of installed capacity of processing, or the demand for export in case of an exporter.”

It explains further that “the  expression  “value  chain  participant”,  in  relation  to  any agricultural product, means and includes a set of participants, from production of any agricultural produce in the field to final consumption, involving processing, packaging, storage, transport and distribution, where at each stage value is added to the product“.

It follows from the above that if a “value chain processor” buys some crop and packs and labels the package, (that is value addition) “such person” can stock as much of the product as he likes (up to the limit of installed capacity for processing) regardless of the ceiling the government may prescribe if the market price of the commodity exceeds the applicable limits. The law, thus, permits unbridled hoarding of the commodity by traders. 

In time, availability of foodstuff required for the Public Distribution System will also be affected, especially after the APMC markets become inoperative/extinct as a fallout of these reforms.

(3). Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020:

It allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets. The State Government cannot levy any fees/cess, etc., for trading taking place outside the APMC markets. Apart from the obvious loss of revenue for the States, the points of concern are:

(a) The government says that now the farmers will have freedom to sell to anyone and anywhere. Under the bill, the agri-business companies, corporates and traders will be allowed to open their own markets to purchase agricultural products from farmers. However, for the transactions taking place in those private facilities the State Governments cannot realise any fees/cess, etc. In other words there will be no charge for transacting the trade outside the APMC markets.

It is obvious that no one will go to the APMC markets if there are no taxes for trading outside them. The traders will find it cheaper to buy outside. This puts the private buyer at a clear advantage.  The system is thus weighed in favour of the private player, and ultimately the APMC markets will become extinct as a result of unfair competition.

At a recent panel discussion on TV, a panelist was drawing a parallel to the BSNL being on a tenuous life support, as a result of similar “reforms” in the communications sector. He had a point.  

The corporate buyers may initially lure the farmers with a portion of their gain due to absence of fee/cess but once the APMC system is destroyed, the buyers will  dictate terms to the farmers, who will have no “alternative” left. So, although the Act has not done away with the APMC markets, its effect is going to be just that.

b) The Act has no provision to protect the farmers from price fluctuations and resultant loss suffered by them.  Presently, the Government prescribes an MSP and its agencies buy foodgrains, etc., at that price.  While the farmers are free to sell the produce above this price, they are assured of at least this minimum price fixed by the government. They want a provision in the law stating that whether in APMC or in private markets, no one can buy the produce at a price below the MSP. 

IV. Disputes – No Role for Courts and Protection of officials against Prosecution

Another very serious concern is about the provisions related to resolution of disputes, if any, arising out of implementation of both the Farmers (Empowerment And Protection) Agreement On Price Assurance And Farm Services Act, 2020 and the Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Act, 2020.

Not only have all civil courts been barred from taking any action in matters arising out of these Acts, but the Government officials – the Sub Divisional Magistrate and the Collector/Additional Collector also cannot be prosecuted for any anything they may do or even intend to do under these laws in good faith.

The identical wordings in both Acts are:   (a) “No civil Court shall have jurisdiction to entertain any suit or proceedings in respect of any dispute which a Sub-Divisional Authority or the Appellate Authority is empowered by or under this Act to decide and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any rules made thereunder;” and  (b) “No suit, prosecution or other legal proceedings shall lie against the Central Government or the State Government, or any officer of the Central Government or the State Government or any other person in respect of anything which is in good faith done or intended to be done under this Act or of any rules or orders made thereunder.”  [emphasis mine]

Is this empowerment of the farmers, or of the district officials? And what is the yardstick by which to judge whether an action or intended action is in “good faith” or not?  The concern, not entirely without basis, is that this will encourage unholy nexus between the companies involved and the officials to the detriment of the farmers’ interest.

The Bihar Experiment and its Results

In this connection, it would be fascinating to have a look at the result of the abolition of the APMCs in Bihar.

The Bihar Government had done in 2006 what the Central Government has done now.   The state removed the APMCs and allowed the free market to decide the price of farm produce, while retaining MSP for food grains required for the Public Distribution System.

While abolishing the APMCs, the Bihar Government had announced that the move would attract private investment in agriculture, in cold storage and warehouses, and will allow the farmers to trade their produce in the open market, without any regulation.  That, the Government of Bihar said, would increase the farmers’ income as they would get better price for their crops. Now, the  Centre too has claimed that the three new Farm Acts would have similar benefits.

But on ground, how did Bihar’s experiment work?

A 2019 report by the National Council of Applied Economics Research (NCAER), which studied in detail the impact of Bihar’s farm policies on ground says, “Despite the abolition of the APMC Act in 2006, private investment in the creation of new markets and strengthening of facilities in the existing ones did not take place, leading to low market density. Further, participation of government agencies in the procurement and scale of procurement of grains continue to be low. Thus, farmers are left to the mercy of traders who unscrupulously fix lower prices for the agricultural produce that they buy from farmers.” 

The Report Concludes, “The repeal of the Bihar Agriculture Produce Market Act (APMC) did not enthuse the private players enough to set up and run agricultural markets in Bihar”.  The report is in public domain on the website NCAER.

There is no reason to believe that the larger “experiment” that has now been thrust upon the country by the Central Government through the new Acts will have any better result than what Bihar has already experienced. In fact, even protagonists of the reform who support the Central Government’s point of view, could not hide the “downside” of these steps. 

In his article titled “Don’t Kill Second Green Revolution” in the Times of India of 3 December 2020,  the noted Scholar and Author Gurcharan Das has basically argued that the three bills related to agricultural reforms are all for the benefit of the farmers and he has called this step as “the Second Green Revolution”.  . 

Talking about the need for improved productivity by using modern farming technologies, he says, .”The farmer, however, doesn’t have the money to pay for it. Nor does the government. Hence, the next reform should give farmers freedom to lease their lands to agri-professionals with capital and technology, and become in turn shareholders and workers on the same land, setting the stage for the second green revolution.”   In the very next para he says: 

“The downside to this scenario is a fear of big business taking over agriculture. The answer is for farmers to organise themselves in the form of cooperatives, or farmer-producer organisations like Amul that the PM has spoken about”….. (TOI, 3 Dec 2020)

For any farmer the very idea of losing his piece of land and becoming a landlless labourer is abhorrent. Clearly, the so-called illiterate farmer has seen through the apparently beneficial provisions of the new law and is alarmed that the “reform” may pave the way for big business to take over agriculture. No wonder he is seeking scrapping of the laws in their present form.

The idea of forming cooperatives or Farmer-Producer Organisations is good.  However, rather than abdicating its responsibility in the name of “reform” the Government must, at least initially, hand-hold and guide the small farmers in forming such FPOs.

No one is saying agricultural reforms are not required. The difference is one of perspective and about protecting the interests of the vulnerable stakeholders. As the farmers have dug their heels for the long haul, the Government must shun its stubbornness and revisit the whole issue, even if that means suitably recasting the legislations for the greatest good of the greatest number. . 

One thought on “The New Farm Acts : The Main Points of Concern

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  1. A very well researched article giving a detailed account and analysis of the recently enacted Farm Laws and the plight of the farmers who may (?) well be at the mercy of rich and powerful corporates over a period of time.

    Liked by 1 person

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