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Critical Evaluation Of Agricultural Bills, 2020

In India, agriculture is one of the major contributing sectors to GDP as well as one of the most employed sectors. According to national agriculture data, it is clear that over 50% of Indians are employed in agriculture, of which 86.2% are small and marginal farmers. Cultivating not more than 2 hectares of land. To safeguard agriculture and to increase the production of agricultural goods has come with a minimum support price which is the floor price below which no consumer is allowed to purchase. This protected farmers from distress sales, and the government procured directly, making it available to needy people at a reasonable cost.

This practice is slowly being side-lined by the present government, which seeks to privatise the agricultural sector; this would result in leaving 86.2 marginal farmers leaving to the mercy of private players. So, farmers raise many concerns about Agricultural Bills, 2020. In this paper, the authors will try to critically evaluate the impact of bills on the farmers' incomes, and the reformative nature of the bills concerning private traders' monopoly.

Sub-Topic: How will the entry of private capital, which proposes to allow farmers to enter into deals with large buyers such as exporters and retailers, solve the ongoing crisis in agriculture?

Indian agriculture has noticed significant transformations over the past decades. These changes range from many different sectors to new and improved technologies, farming becoming more mechanised, soil, environment and weather changes, new markets and demand, and mainly to agriculture evolving from living or way of life to a full-fledged business known as agribusiness.[1]

India's agriculture policies mainly revolve around three main mandates, a consumer imperative (keeping food prices low for a large low- income population), a farmer welfare imperative (raising farmer's income), and a production imperative (national food security and control of food during the crisis). Tensions of these mandates have resulted in contradictory policies whose costs have been increasingly borne by farmers, the government purse, and the natural environment.

By releasing the significance of agriculture in the socio- economic order of India, the government has planned to double the farmer incomes by raising productivity and lowering the extra costs of farmers, and going towards the diversification of high-value agriculture.[2] After considering these things, the government has passed three new agri sector bills which will change many things in agriculture field and agribusiness in this ongoing crisis.

The two bills: Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and the Framers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 and the third bill was passed as an ordinance- the Essential Commodities (Amendment) Ordinance, 2020.

If we consider our question: How will the entry of private capital, which proposes to allow farmers to enter into deals with large buyers such as exporters and retailers, solve the ongoing crisis in agriculture?
First, we need to understand the right of farmers to make a contract with private capital, as per clause 3 Chapter II[3] of the Farmers (Empowerment and Protection) Agreements on Price Assurance and Farm Services Bill, 2020 (Bill No. 112-C of 2020) explain the Farming agreement and its period- "clause 3 (1) A farmer may enter into a written farming agreement in respect of any farming produce, and such agreement may provide for:
  1. The terms and condition for the supply of such produce, including the time of supply, quality, grade, standards, price and such other matters; and
  2. The terms related to the supply of farm services: Provided that the responsibility for the compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider, as the case may be.

Before deciding the facts of how this agreement between farmers and private capital will solve the problems in this ongoing crisis, we need to discuss and understand the problem and flaws in the significance of agriculture in India, previous action taken by the government to increase the income of farmers and other associated or connected challenges in India's agriculture i.e. subsidies issues: power, urea, credit and MSP (output price supports), other consumer-oriented policies, flawed market styles or policies, slow growth rate, and marginal land holdings etc. to compare between these private capitals actions and how this will improvise these states of Indian agriculture in this ongoing crisis.

Significance of Agriculture in India:
The significance of Indian agriculture is in everything, as most Indians directly or indirectly depend on agriculture for employment more than any other sector of employment. It addresses the issue of malnutrition and helps reduce it from a lower level that directly affects public health and worker productivity and provides food security.

This affects India's economy and GDP (gross domestic product), as a major part of agriculture would add at least a percentage point to India's GDP. After this ongoing crisis of COVID-19 (lockdown), our growth rate has fallen down with our economy and these new bills were passed after considering these points. Moreover, these major significance has been covered to understand the benefits of implementing these recent bills.

Government Schemes To Increase Farmer Income:
Our main motive is to increase farmers' income to make our agriculture better. For this, our government use to subsidise water, power and fertilisers to decrease farmers' production costs, increasing yields through better farming practices by providing proper quality inputs, chemical fertilisers and water, especially high-yielding seeds.[4] Although some issues relate to these government subsidies, the agriculture subsidies were introduced to incentivise farmers to develop more crops to reduce production costs, check food prices, and protect consumers' interests.

However, these subsidies are inflicting significant damage on different aspects of the Indian economy. The subsidised power has not only led to the overuse of groundwater but also severely damaged the health of power distribution companies; those subsidised urea has led to the overuse of nitrogenous fertilisers which damage the land, soil as well as pollute the local water bodies; loan waivers for farmers have weakened the basic structure of Indian Banking system due to those increased NPAs (which directly affect the Indian economy); MSP is basically applied to only handful of crops i.e. wheat and rice that are procured by the government.[5]

How this agreement will improve the ongoing crisis:
These problems stated above are directly connected to the recent bill, where private capital has been given a chance to enter Indian agriculture. The agreements that were considered to be signed in between farmers and private capital will increase the productivity and farmer's income if private companies pay the farmers the proper amount of production, then it will be better for government to utilise these subsidies in other things to empower the fallen economy of India.

This will give them a chance to the government to gain power in the international market through this, and the farmer will also become more efficient and utilise the sufficient amount for all mandatory productions effectively to bring more and proper results that will increase their income.

There was the issue of lack of storage infrastructure that compelled farmers to go for distress sale; whenever there was a price rise in agriculture commodity, the government used to impose restrictions on exports to cover or protect the consumers of India as most of the policies are consumer-oriented.[6] Therefore, this provides resistance for farmers taking advantage of high prices in foreign markets, but now after allowing private companies to hold warehouse and cold storage systems after these recent bills, the farmers can have their profits with the whole production consumption.

There is a flaw in our Indian Agriculture market system policies as there is a restriction imposed by the APMC (Agriculture Produce Market Committee) Acts that were passed by various states to regulate the mandis, where Indian farmers can only sell their crops and production at the local market to village aggregators, APMC to government at very nominal MSP (Minimum Support Price).

Marginal land holding as stated in clause 8 of the Farmers (Empowerment and Protection) Agreements on Price Assurance and Farm Services Bill, 2020 which defines that no farming agreement shall be entered in any transfer, including sale, lease & mortgage of the land or premises of the farmer; or raising any kind of permanent structure until the sponsors or private capital companies will agree to sponsor to bring it back to its normal structure; and any change in accordance to this agreement will not give any right to private capital in any form, the sole ownership of such structure vest with the farmer after conclusion of agreement or expiry of the government.[7]

Drawbacks of the agreements and relation between Farmers and Private Capital:
The BJP government or central government objective is to bring foreign capital in India through front door by using these three bills- the Farmers (Empowerment and Protection) Agreements on Price Assurance and Farm Services Bill, 2020, the farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and the Essentials Commodities (Amendment ) Act, 2020, which will encourage the private investors from home or abroad into storage, logistics, marketing, transportation and production of agricultural products within country or abroad as mentioned above also as how this will help farmers and agriculture of India but the language that government is using to defend these initiatives is that these are aimed at increasing the choice of freedom of the farmers to sell beyond local or village mandis, that is notified under APMC market yards and the state boundaries.[8]

In bringing FDI (Foreign Direct Investment) from inside or outside of India, would affect or hit the marginal, small and medium farmers whose bargaining power against these big investors would be very tiny in reaching any contract regarding prices and implementing these contracts that will turn out in economic slavery by these farmers.

These recent bills include wheat, rice, sugar cane and cotton, along with other commodities or products, and these products are the main crops of Punjab and Haryana, the two major cities of agriculture in India. Moreover, the dispute resolutions mentioned in these bills are ineffective as they are against farmers due to the unequal distribution of power relations between traders and farmers.[9]

There is no provision related to the continuity of MSP, which is mainly relevant for wheat and rice, the two major food crops grown in Punjab and Haryana and some other states of India. Section 11 of the act defines: "At any time after entering into a farming agreement, the parties to such agreement may, with mutual consent, alter or terminate such agreement for any reasonable cause."

With unequal power relations between a farmer and an agribusiness firm or traders, a farmer's consent to change or terminate a contract can be subjected to powerful economic and non-economic pressures.[10] There are many flaws under these recent acts that need to be reviewed by some specific body that can easily relate to the problem on the ground level.

Agriculture is a state subject containing many important levels of production like water, irrigation, power, extension etc, which are majorly controlled by states. However, the central government play a very elite or important role in this. Thus, reforms will succeed if and only when the central and state governments will work closely together in a spirit of "cooperative federalism".[11]

These recently passed bills and acts by the central government will bring more poverty to small, marginalised and middle-class farmers, who don't have much education to understand these functions and process of these acts and they hold the minimum bargaining power in the contracts which in itself is void- "unequal bargaining power is not valid to enter into any kind of contract".

  1. Rana Kapoor, Evolving role of the Private Sector in Agriculture, (4th August, 2008). Available at (Last visited on 5th November, 2020)
  2. Id.
  3. The Farmers (Empowerment and Protection) Agreements on Price Assurance and Farm Services Bill, 2020, 112-C of 2020, Cl. 3.
  4. Ashok Gulati, Devesh Kapur & Marshall M Bouton, Reforming Indian Agriculture, Economic & Political Weekly, Vol. 55 issue no. 11 (14th Mar, 2020).
  5. Id.
  6. Id.
  7. Supra note 3, Cl. 8.
  8. Pritam Singh, BJP's Farming Policies Deepening Agrobusiness Capitalism and CentralismJ, Economic & Political Weekly, Vol. 55 (10th October, 2020).
  9. Id.
  10. Id.
  11. Supra note 1.

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