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The Farmer's Acts, 2020: Positive and Negative Sides

Are the three Farmer's Acts, 2020 passed by the Parliament of India against the interests of the Farmers?

FOR THE MOTION

i. Competent Legislation:
The argument that these Acts are an assay to attack on co-operative federalism is ill-founded for Entry 42 in the Union List of the Seventh Schedule of the Constitution enlists inter-State Trade and Commerce and Entry 33 in the Concurrent List also empowers both the Centre and the State Governments to legislate upon trade and commerce pertaining to the production, supply and distribution of the products of any industry controlled by the Union including products such as edible oils, cattle fodder, etc. So, both the entries if read together, will capacitate the Parliament to legislate upon these subjects. It is by no test of reason an encroachment upon the State subject by applying the doctrine of pith and substance. Thus, these laws pass the Competency of Legislation test given that they deal with the trade and commerce and not with the agriculture which is a State subject at Entry 14 of the State list.

ii. No Eradication rather flourishment of APMCs:

The implementation of the 1st Act will not result in the eradication of the APMCs in the State. It would rather generate a healthy competition between the APMCs and the newly introduced agricultural trade and commerce mechanisms. The objective of regulating agricultural markets was to protect farmers from exploitation by intermediaries, ensure better prices and timely payments which it failed to achieve. The APMCs would now predominantly focus on providing better infrastructure, enticing incentives to the Farmers to keep them fastened to them. The APMCs have certainly not been able to augment the financial stability or standard of living of the farmers. It has rather fettered their growth by keeping them with no opportunities left but to earn their livelihood within the peripherals of the APMCs by disgorging market cess/levy to the APMCs which together ultravires Article 301 of the Constitution of India. Even the private traders had to pay 2% Mandi tax within APMCs. The concept of inter-state and intra-state trade has made them more independent. They are no longer required to pay extravagant commissions to the Commissioned Agents [CAs]. They like any other retailers or wholesalers can directly contract on one-on-one basis with the traders. The boon of a Price Information and Market Intelligence System for farmers' produce and a framework for dissemination of information relating thereto by the 1st Act has given support to the Farmers for they had to be contingent on the CAs, their peers, etc. in order to know the market prices. With the introduction of the electronic trading and transaction platform, the lives of and execution of trade for, both the Farmers and the Traders have become hassle-free. It promotes liberalization of trade and commerce in agriculture because there is no tariff or market cess/levy outside APMCs.

iii. Certainty, Independence and Sense of Security:
The 2nd Bill has made the farmer a king for the first time in the seventy-one years of Independence. The farmers now, out of their own volition, are free to contract with any Sponsor for the buying and selling of his farm produce. Even the Sponsor can agree in the agreement to provide farm services such as machinery, technology, tools, etc. indispensable for the production to the Farmer. The farmer will have a sense of security that even before the production of the farming produce, someone is bound by the written farming agreement to purchase his produce. To ensure best value to the Farmers, it suggests pre-determination of purchase price and incorporation of the same in the WFA. If the price is subject to variation, then it protects the Farmer by making a provision for a guaranteed price to be paid for such produce and a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium and makes it mandatory to annex the mechanism for determining such purchase price, guaranteed price or additional amount to the WFA. The guarantee price is another form of MSP, the only difference is that earlier it was granted by the Government now it will be based on the mutual decision of the Farmer and the Sponsor. So, like the MSPs in Mandis, there is a guarantee price in the Contract Farming. It puts more obligation on the Sponsor only to ensure that the taking and acceptance of delivery of the farming produce befalls within the mutually agreeable time. Impartiality and fairness are also ensured by the appointment of a third -party qualifies assayer to monitor the cultivation and rearing.

iv. Instant Payment Mechanism:
Both 1st and the 2nd Act make stringent provisions of the payment of purchase-money to the Farmer by the Trader and Sponsor respectively. The Trader is bound to pay to the Farmer on the same day of delivery or within maximum three working days after delivery and requires him to give a receipt of delivery with the acknowledgment of payment due to the Farmer on the same day. The Sponsor on the other hand, shall (a) where the farming agreement relates to seed production, make payment of not less than two-third of agreed amount at the time of delivery and the remaining amount after due certification, but not later than thirty days of delivery; (b) in other cases, make payment of agreed amount at the time of accepting the delivery of farming produce and issue a receipt slip with details of the sale proceeds. Let us understand the financial woes of the Farmers related to the Mandis from the below study conducted by Mr. Sthanu R Nair, Mr. Reddy Sai Shiva Jayanth and Mr. Rahul V; ………………Over half of the farmers we interacted with (57%) are unhappy with the mandi system of sale. The reasons are exploitation by CAs, lower price realisation, lack of transparency in the trading process, collusion among traders, price cartelisation, delay in payments and low quality of mandi infrastructure. The delay in payments to the farmers ranges from three to fifty days. Instant payment is made only after deducting the interest on loans obtained by farmers from CAs. The payment delay forces the farmers to depend on borrowing from CAs, local money lenders and savings for their daily expenses.[1] These Acts ensure instant payment to Farmers.

v. Dispute Redressal Mechanism:
For any disputes that may arise between the Farmer and the Trader or the Farmer and the Sponsor, a robust mechanism is provided involving three stages and the penalties laid down are deterrent enough to coerce the Traders and Sponsors to act in compliance with laws. This system is farmer friendly and gives consideration to the interests of the Farmers exceedingly by providing for expeditious disposal of the disputes. Civil Courts are kept out of this system to evade the prolongment of litigation.

vi. Boosts Private Investment:
The exercise of deregulating the supply of erstwhile essential commodities in the 3rd Act attracts private investments. As there is no control of the government on the stock holding limits save in exceptional circumstances, more businessmen will contemplate over giving this agriculture related products business a trial and earn profits. The Farmers have to personally deal with these people now so they have got the bargaining powers in their hands. Although the objective of the Essential Commodities Act, 1955 was to prevent hoarding and black marketing of goods since just post-independence our country faced shortage of goods that led us to import goods from USA and other countries, the situation has changed now. …A note prepared by the Ministry of Consumer Affairs, Food and Public Distribution shows that production of wheat has increased by 10 times (from less than 10 million tonnes in 1955-56 to more than 100 million tonnes in 2018-19); during the same period, the production of rice has increased more than four times from around 25 million tonnes to 110 million tonnes. The production of pulses has increased by 2.5 times, from 10 million tonnes to 25 million tonnes. In fact, India has now become an exporter of several agricultural products. With these developments, the EC Act has become anachronistic….[2] It is a liberalization of trade and commerce. Thus, the amendment is the need of the hour because the supply outweighs the demand.

vii. Minimum Support Price [MSP] Is Still Alive:
Since the new legislations do not abolish APMCs, the MSP is very much there within the contours of the Mandis. The Farmers have the choice to either play safe by trading within the Mandis and earn MSP or take a smidgen risk and become financially stable. Those Farmers who want to play big and expand themselves can pursue inter-State and intra-State trade. They are free to choose what they wish to do. Within the conventional APMCs, no authority can snatch away from them their right to MSP. Whereas outside, there is a great probability of their earning way more than they earned over the period of years within the Mandis under APMCs monopoly. The new laws rather complement the APMCs than annihilate them. It allows both the frameworks to grow simultaneously. The Farmers ought not to chafe as the MSP is not in peril.



viii. No Transfer Of Property In Trader's Or Sponsor's Favor:
Due to the 1st Act, there is no chance of shifting of the Farmer's property title to the Trader. Similarly, the 2nd Act too strictly prohibits the Sponsor from acquiring any ownership rights in the Farmer's property. It categorically frowns upon the Sponsor for erecting any permanent structure on the Farmer's land or making any modification on the Farmer's premises and directs him to remove the same after the conclusion of the agreement. If the permanent structure is not removed then the ownership of that structure shall vest in the farmer and the Sponsor later can make a hue and cry that the expenses for its erection were incurred by him.


AGAINST THE MOTION
  1. Incompetent Legislation:
    The three Acts are in complete contravention of the Constitutional provisions by applying the test of doctrine of colorable legislation. Colorable Legislation is that under the 'color' or guise of power conferred for one particular purpose, the legislature cannot seek to achieve some other purpose which it is otherwise not competent to legislate upon. Simply, a Statute tries to do indirectly what it cannot do directly.

    It is beyond the authority of the Union to legislate upon the subject 'agriculture' as it is exclusively a State subject at Entry 14. Hence, the Parliament by incorporating the term 'trade and commerce' throughout the 1st Act cannot evade this fact that the Act actually deals with the subject agriculture and matters incidental thereto. It is noteworthy that the Parliament is empowered under Entry 34 of the Concurrent list to control the price of commodities. However, the exclusive warrant to bring substantial changes in the agricultural sector vests ab initio in the State Legislatures. Therefore, these Acts fail the Competency of Legislation test.
     
  2. No Protection To Farmers:
    MSP means in case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies like Food Corporation of India [FCI] purchase the entire quantity offered by the farmers at the announced minimum price for public distribution system. Let us understand the ramifications of absence of MSP in the new framework of farm trade and commerce with the ensuing example. In 2018, the Devendra Fadnavis led Maharashtra government had amended the Agricultural Produce Market Committee (APMC) Act in 2018 making it illegal for private traders to purchase farm commodities below the official Minimum Support Price (MSP).

    This development meant that private traders who purchase below this price will attract a one-year jail term or a fine of Rs 50,000, depending on the severity of the offence. Making the purchase of farm commodities below the MSP a punishable offence has attracted objections from traders and industry players. It was argued by the critiques the new MSP policy, seeking to provide farmers at least a 50% return over their production costs, could interfere in normal demand-supply mechanisms and make the government the biggest buyer of commodities.[3]

    Perusal of these few lines only sketches out the formidable state the food-producers will go into. When the private buyers got piqued at such an altruistic idea of being bound to purchase above or at MSP, it coerces me to ask a question how far these private entities will take care of the interests of Farmers under the pavilion of unregulated, unaccounted, non-deterrent, unsupervised and unorganized system? Wouldn't they humbug the system that is created for making the Farmers economically equipped by forcing them to sell their produce to them at an inconsequential price?

    The lockdown has prompted states to allow farmers to sell their produce directly without any intermediation of mandis, but they are not getting the desired price for their produce, officials said. Direct marketing initiatives have helped the government decongest mandis, but farmers are selling their produce below minimum support price (MSP), said an agriculture department official. Ravinder Singh Chaudhary, a farmer leader, said in Rajasthan, Madhya Pradesh and Uttar Pradesh, where there is no assured procurement of entire crop, farmers have to sell produce at 1,600-1,800 per quintal. Since traders are loading harvest right from the farm gate, farmers are selling 10-15% lower than the MSP.[4] Thus, the fantasies of the Government do not seem to materialize on the ground.
     
  3. Government Should Foster And Not Hinder MSP:
    The real fate of the MSP can be comprehended straight from the horse's mouth. Chand Singh, 70, a farmer who owns 4 hectares of farmland in Kalajhar village, says traders rejected 20 tonnes of paddy that he cultivated as it was affected due to humidity.

    If traders don't accept it, I will have to sell it to a private agent at a much lower price than the Minimum Support Price (MSP). In July 2018, the MSP of paddy was Rs 1,750 per quintal but agents are paying only Rs 1,300-1,400 per quintal. Maize producers' states like Karnataka, Maharashtra, Madhya Pradesh and Telangana have the largest share of maize market, but here too the selling price is lower than MSP. The MSP of maize is Rs 1,700 but the market rate is around Rs 1,200-1,400. Market prices of most kharif crops like paddy, pulses, coarse cereals continue to be below the federally fixed MSP from the last one year, says Ramandeep Singh Mann, a Delhi-based agricultural activist.

    The price has been quite low from July 2017 till September 2018. Once again, Prime Minister Narendra Modi's tall promises to farmers fizzle out, he complains.[5] According to Agmarknet, a government agriculture market portal, that records data of more than 2,700 markets, out of these 2,700 markets, the price has crashed in more than 1,700 major markets for commodities like cereals, pulses, oilseeds and cotton between October 1 and October 21.[6] MSP scheme already seems to be a flop program due to poor implementation.

    When the Farmers are at loss nevertheless there being a protection in the form of MSP from the Government, then it can be smoothly foreseen by any rationale mind that when the Farmers are compelled to sell their farm produce already at a price lower than the MSP to the traders under Government regulations within the APMCs, the want of MSP or any guarantee price for that matter regulated by the Government outside the Mandis would perhaps result in the sale of the Farmer's produce at trifling prices to the Traders. This situation would, instead of doubling the Farmer's income by 2022 rather put them into cafard. Therefore, the Government ought to foster rather than hinder MSP.
     
  4. Implement the Recommendations of Swaminathan Commission:
    As per the Agriculture census of 2015-16, the majority of land holdings in India i.e., 86 percent are small and marginal.[7] Small land-holders possess land of around 1-2 hectares and Marginal land-holders possess less than 1-hectare land. To improve the condition of Farmers including the Large land holders, a National Commission on Farmers, chaired by Prof. M. S. Swaminathan, submitted five reports through the period December 2004 - October 2006.

    The issues on which they give recommendations are:
    1. Land Reforms
    2. Irrigation
    3. Productivity of Agriculture
    4. Credit and Insurance
    5. Food Security (MSP should be at least 50% more than the weighted average cost of production)
    6. Prevention of Farmers' Suicides
    7. Competitiveness of Farmers
    8. Employment:
      1. Bioresources[8]

        The Government out of all the recommendations tendered by the Committee, worked only on Single Market concept when the concept of land reforms ought to have been given the first priority to bridge the inequality in land holding. With these laws, Large land holders may benefit to a decent degree but the Small and Marginal land holders will not be able to earn anything. They have no option than to operate through Mandis.
         
  5. Beneficial for Private Businessmen only:
    The decision of the Government to regulate the supply of certain essential commodities only under exceptional/extraordinary circumstances and lifting of the stock-holding limit with some conditions is derisive as it will lead to inconceivable hoarding and inflation in the market. Only in case of substantial price rise of the Horticultural produce and non-perishable agricultural produce will the Government come into action and pass an order for regulating stock-limit of any agricultural produce and in that too, the processors and value chain participants have been exempted to follow this order if they have adequate demand of export or the stock limit of such person does not exceed the overall ceiling of the installed capacity of processing.

    Otherwise, the private buyers can keep as much stock as they want till some unlikely price rise turns up. For example, if onions were of INR 40 immediately preceding twelve months of the date when their prices spurt to INR 80, then the Government will pass an order imposing stock-limit. The businessmen will take the produce at any unjust price from the Farmer, the Farmer will have to propitiate himself with the peanuts as he doesn't have the time, money, resources and energy to bargain for:
    1. Firstly, he would always want to get rid of the farm produce as early as possible to prevent them from rotting since he doesn't have the infrastructure to store them,
    2. Secondly, he would wish to take some money with him to home to carry out his daily expenses,
    3. thirdly, he will look forward to plan his next cultivation and rearing rather than wasting his time in indulging into bargaining that will give him no outcome but loss.

      The businessmen will have an edge over the Farmers for they will establish their warehousing hubs, logistics hubs to stock the agricultural produce for a longer period. Reformation in agriculture markets will involve modernizing the supply chain, beginning from the farm gate.

      These professionally and privately managed hubs would then include cleaning and bagging facilities, as grading and assaying facilities and would be equipped with modern storage systems, including silos. Later on, the warehousing hubs can, over a period of time, take over many of the mandi functions and be treated as private mandis. Where is the Farmer here in this picture? All of this will bolster Businessmen only.

      It's a complete privatization and liberalization of the agriculture. The Government seems to have no funds left with its exchequer so that it can buy the produce at MSP hence, it wriggled out of its accountability put the destitute Farmer's fate in the private sector's hands for them to exploit them.
       
  6. Duty-free Trade Will Flourish Private Sector and Further Debilitate The Government:
    The Government is turning the Socialist Democracy into a Capitalist Democracy. There is no levy on trade and commerce in agricultural produce outside APMCs. It is a good opportunity for the private entities to first pillage the farmers then to augment their wealth for there is no tax liability. The Government that has already proved itself to be incompetent of handling MSP, is further debilitating itself by stopping the inflow of revenue thereby making the private sector more powerful.

    In future, it is inevitable that it will lease out mandi yards to suitable private sector entities on condition that infrastructure is modernized and management is professionalized. Instead of asking the private entities to provide better infrastructure for the storage, processing, distribution, etc. of agricultural produce, it could have itself created proper infrastructures, employed people there and paid them remunerations by curbing corruption in the Country and levying duties on the private businessmen and progressive taxation.

    This way the Government could have overseen the stocks, inflation, the just and equitable transaction between the Farmers and the Traders, generated employment, levied duty and prevented economic concentration with a particular class.
     
  7. No Regulatory Authority:
    The APMC framework was regulated by the State Government, so the Farmers also had the sense of security that there is a watch of the highest authority of the State over the system. But now due to over-liberalization, there is a sense of fear in them that they would be duped by the powerful and professional businessmen. There is no deterrence left in the system.

    What mechanism will the Government have to supervise the stock-limits of the private warehouses? Who will know what terms and conditions the traders and sponsors are entering into with the innocent and genuine Farmers? Shouldn't there be any Government intermediary who would explain to the farmers everything about the contracts they will execute? What security do they have if they fail to produce as per the farming agreement due to uncertain natural events? How will they be compensated? These are some of the questions that makes it indispensable for a sector like farming to have a regulatory authority to grapple with these imbroglios.
     
  8. Inflation Will Kill Common Man:
    The 3rd Act will open the floodgates for black-marketing. As the Government fixes the ceiling-price of the Scheduled drugs to prevent over-charging, and making them available at a reasonable price to, the consumers, what provoked it to deregulate supply of essential food-grains and encourage inflation? It is the Farmer who toils on the fields, sheds his blood, sweat and tears. His unpackaged products will be purchased at a cheaper rate and the same will be packaged and kept in a better infrastructure for the common man to purchase at thrice the rate at which it was bought.
Can we really compare the arduousness indispensable for manual production of food crops on the field with the effortless packaging work of the machinery? The Government instead of caring for the businessmen care for the common man and develop such a mechanism that the common man should be able to directly purchase the farm produce from the farmer without any duty. This will at least keep the black marketing at abeyance.

Conclusion:
Not everything in the three Acts is unsuitable. There are loopholes in the Acts. There are many whys and hows, that these Acts cannot answer. In both the acts, the Parliament has not specified what should be the payment mechanism. The third Act should be annulled as it is draconian in the sense that it will enhance hoarding, inflation and black -marketing.

The reason for its formulation given that there is a substantial production in the country in this period relatively hence, there is a need to allow the demand to rise is illogical. It should first check whether the common man of its country is competent or is in a position to afford the basic necessities of his life. If not, then what is the point of projecting a hollow picture to the world that inflation in our country implies bedrock per-capita income.

References:
  1. https://www.newindianexpress.com/opinions/2020/dec/12/how-farmers-view-the-existing-mandi-system-2235123.html#:~:text=All%20the%20farmers%20said%20they,monopolistic%20power%20and%20political%20backing.&text=First%2C%20by%20allowing%20the%20farmers,their%20dependence%20on%20the%20mandis.
  2. https://indianexpress.com/article/explained/essential-commodities-act-amendments-explained-6442362/
  3. https://yourstory.com/smbstory/illegal-for-private-traders-in-state-to-buy-farm-produce-below-msp maharashtra-govt
  4. https://economictimes.indiatimes.com/news/economy/agriculture/no-middlemen-yet-farmers-still-sell-produce-below- msp/articleshow/75468415.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
  5. https://www.downtoearth.org.in/news/agriculture/more-than-60-markets-sell-agricultural-produce-below-msp-61921
  6. http://agmarknet.gov.in/
  7. Agriculture Census 2015-16
  8. https://www.prsindia.org/report-summaries/swaminathan-report-national-commission-farmers
End-Notes:
  1. https://www.newindianexpress.com/opinions/2020/dec/12/how-farmers-view-the-existing-mandi-system-2235123.html#:~:text=All%20the%20farmers%20said%20they,monopolistic%20power%20and%20political%20backing.&text=First%2C%20by%20allowing%20the%20farmers,their%20dependence%20on%20the%20mandis.
  2. https://indianexpress.com/article/explained/essential-commodities-act-amendments-explained-6442362/
  3. https://yourstory.com/smbstory/illegal-for-private-traders-in-state-to-buy-farm-produce-below-msp maharashtra-govt
  4. https://economictimes.indiatimes.com/news/economy/agriculture/no-middlemen-yet-farmers-still-sell-produce-below- msp/articleshow/75468415.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
  5. https://www.downtoearth.org.in/news/agriculture/more-than-60-markets-sell-agricultural-produce-below-msp-61921
  6. http://agmarknet.gov.in/
  7. Agriculture Census 2015-16
  8. https://www.prsindia.org/report-summaries/swaminathan-report-national-commission-farmers

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