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Critical Analysis of Farm Bills 2020

On September 27, 2020, the president of India Mr. Ram Nath Kovid gave his assent to the three farm reform bills - The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Bill 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020, and The Essential Commodities (Amendment) Bill 2020. These bills have been passed by the parliament in the recently concluded Monsoon season. Our Prime Minister Mr. Narendra Modi hailed by passage of these bills by saying “A watershed moment in the history of Indian agriculture!”
 
But the thing to worry about is the farmers for whose betterment these Acts have been made are on streets protesting these Acts. Farmers organizations like Bhartiya Kisan Union (BKU) and the All India Kisan Sangharsh Coordination Committee (AIKSCC) have been protesting the bills from September 2020 itself. They have raised the slogan of ‘KISAN BACHAO MANDI BACHAO’ in this article we will discuss the reforms brought by new Acts, why are farmers protesting and way forward.
 
Brief History And Provisions Of New Acts
India is and has been an agrarian economy. After India gained Independence in 1947, farmers used to sell their products direct to the consumers. But due to prevailing system of Zamidars or money lenders, farmers were trapped in perpetual debt. Farmers need to buy seeds, fertilizers and other things required for growing a crop, for buying all these things you need money so farmers took loans from Zamidars or money lenders who used to charge a very high interest rate on the principal amount.

Farmers were unable to pay such a hefty amount and in such cases to get their money back money lenders or the Zamidars used to buy the whole produce of the farmers but, they paid very less amount to farmers because farmers did not have the bargaining power. Now to again sow their fields farmers required money so this cycle continued, and farmers were always in debt.  
 
This process was very exploitative so to help the farmers and end this system government of India introduced APMC (Agriculture Produce Market Committee) Act. It was introduced in 1960’s at the very same time when green revolution started in India many experts believe that in the major of green revolution APMC Act played a major role. APMCs set up Mandis or Markets across India where farmer’s produce was sold.

There are around 7000 APMCs in India at present. Now, the process of selling the produce is that after harvesting crops are brought to the Mandis or Markets where they sell the produce through auctioning or price discovery. Whom are the farmers selling the crops? Not to the government but the middlemen or Arhatiyas. Middlemen are people between the farmer and the retailer or big traders. For example, farmers sell their vegetables to the middlemen and then the vegetable vendor buys vegetable from the middleman, vegetable vendor will not buy directly from the farmers. Government gives license to these Middlemen; shops, storage facilities etc. are provided to them in APMC markets. Many people work in these APMCs, there is storage of grains, so it requires laborers, accountants so overall it is a self-thriving ecosystem. One thing which should be noted here is these APMC markets are regulated by state governments, a tax is charged on each transaction so in a way government knows at price produce is being sold.
 
Now what about the produce that are not bought by the middlemen in these markets? This is being bought by the government at MSP (Minimum Support Price). MSP is constant throughout the country. MSP also ensured that produce bought be the middlemen were not below a certain price. When everything is so good are farmers happy? According to National Crime Bureau report 2018, 1,34,560 suicides were reported in India out of which 10,350 were farmers remember this was total number of reported cases.

This system was good seeing 1960’s but with time we need to evolve similarly, not much was done to APMCs and some problems popped up. Middlemen started exploiting farmers they formed cartels or an understanding among themselves and started buying the produce at MSP only and sold to traders at a high rate. For example, MSP for onion is Rs.8.5 per kg (data as of February 06, 2019) but we buy onions at Rs 35 – 80 per kg depending on state. In a way we can say Minimum Support Prize became Maximum Selling Price. Voice arose from time to time to remove these defects and in response government brought the three Acts in 2020. These three farm Acts seek to replace ordinances issued in June 2020.
 
These Acts envisage to bring change in some of the key aspects of the farm economy — trade in agricultural commodities, price assurance, farm services including contracts, and stock limits for essential commodities. These Acts sought to bring much needed reforms in the agricultural marketing system such as removing restrictions of private stock holding of agricultural produce or creating trading areas free of middlemen and take the market to the farmer.
 
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 or The Market Place Law
We have already discussed the process currently in place well according to the new market place law, farmers can sell their produce anywhere not just in the APMC approved mandis or market places but literally anywhere i.e., they can sell inside the state, outside the state, or if they wish they can also sell it online. Which means according to union government this law is been brought in to give freedom of choice to farmers they will have a variety of marketplaces. The government says, this is actually going to do good to them because they can choose from several options.
 
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020 or The Contract Farming Law
Farmers can enter into ‘written agreements’ with anyone, including a company, and sell them their produce for a set period of time, as per the contract. In other words, companies can now have contracts with farmers for buying with farmers for buying their produce. They can set the price for the produce, the standards and qualities and other legalities can be mentioned beforehand. The Union government says this will protect and empower farmers to sell to anyone a whole seller, a retail giant or an exporter. They will have written contracts which will protect the farmer in case the buyer tries to cheat them. And they can also sell future produce today, according to the government.
 
The Essential Commodities (Amendment) Bill 2020 or Essential Commodities Amendment
Essential Commodities Act was first brought in decades back in 1955. The Act basically controls the production, supply and the distribution of certain commodities that are known to be essential. So if an item comes under this Act for instance a food item or an important drug then companies and supermarkets cannot hoard these items when there is a shortage, they also cannot artificially increase the prices etc. the list of essential commodities as per the original act includes:
  • Drugs (medicines);
  • Fertilizers (inorganic, organic, mixed);
  • Foodstuff (including edible oilseeds and oils);
  • hank yarn made wholly from cotton;
  • Petroleum and petroleum products;
  • Raw jute and jute textiles;
  • Seeds (food crops, fruits and vegetables, cattle fodder and jute seeds).
The new amendment has removed food stuff such as Potato, Cereals, Pulses, edible oilseeds and oils, from the list of essential commodities which means unless there is a dire circumstances like a war or famine or an extraordinary price rise these commodities will not be considered under the essential commodities list.
 
Further, the government cannot impose a stock limit i.e. it cannot stop a supermarket chain or a retailer from hoarding unless there is a 100% (percent) increase in price of perishable goods or 50% (percent) increase in price of non-perishable goods. All items removed from essential commodities act are: Rice, Wheat, Potatoes, Onions, and Oil.
 
Controversies
Everything looks great on paper, but then where does the problem lie? Well there is a difference between good legislation and good implementation of the Act, many critics have raised their concerns regarding this Act. The very first concern is that an Act which is going to be implemented in the whole country has neither been discussed with states which will be most affected by the Act nor with the experts in this field accusing the government of destroying cooperative federalism.
 
We are witnessing a country wide protest, which is more intense in Punjab, Haryana and Western Uttar Pradesh. The reason is obvious as this region has the most organized form of APMCs. Although there is no provision of removing of APMCs then why are farmers fearing and raising slogans of MANDI BACHAO? APMCs are under state government and are maintained by taxes collected in APMC market’s transaction. Government says in private markets, which can be set up now, no taxes will be charged in the transactions of private market so this would save taxes, all companies and traders will buy farm produce from private markets which will slowly result in the end of APMC because the state government will have no funds to maintain APMC. If this happens states will have a lot of revenue loss and union government has not mentioned any way to compensate them, especially in Punjab and Haryana.
 
Middlemen will become jobless and there is a concern that there is a possibility of middleman in private sector also because our farmers are not in a position to bargain with corporate houses. In private sector there will be no control and exploitation by middlemen may multiply. (86% farmers of our country are marginalized farmers i.e. they have less than 2 acres of land.) With the end of APMCs, MSP will also practically end this is the most important concern.
 
We are talking about ‘One nation One market’, ‘freedom of choice of market’ any farmer can sell his farm produce anywhere, looks good on seeing but the ground reality is this already exists and a farmer can sell his produce any where he wishes in any part of country, it does not happen because our farmers do not have medium and money to transport goods from one place to another because government itself says 86% of farmers are marginalized.
 
Contract farming is looked upon as privatization of farming, two major concerns here are that farmers will never be able to negotiate with the corporate sector. Act does not prescribe or specify that contract price of the crop should be at least equivalent or above the MSP. It means the contractor/companies can pay whatever price they want to the farmer.
 
Being big private companies, exporters, wholesalers, and processors, they will always have an edge in disputes. Written contract is not mandatory which means farmer will never be able to prove violation of terms of contract. Farmers have a valid point because they have seen privatization in markets of seeds and fertilizers where government believed prices will go down because of competition but results are opposite, and farmers fear the same in this case also.
 
Limits of hoarding have been removed because the situation of ‘Extraordinary price rise’ is way to high to reach which simply means big private players can any time cause artificial price fluctuation. Not only farmers will be affected by it, consumers will also be affected because the main goal or focus of a private company will be to raise its profits.
 
Way Forward
Yes, there were many flaws in the decades old APMC Act, but critics believe that the need was to plug the loopholes instead of introducing a new system altogether. A similar system has already been introduced in America and some European countries where it has failed miserably, we can only hope this does not happen in India and government will not repeat those mistakes.
 
From the attitude of government, the stand of government is very clear that it is not going to change anything because already it has been termed as Masterstroke. Right now, it is just an Act both are results are possible; farmers income becomes double as said by the government, or their conditions worsen as feared by farmers. History is the best judge. While the intent of Government is laudable, we will be able to see the results of these new Acts after few years only. Right now, everything is just a speculation.

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