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Critical Analysis of Farm Bill, 2020

The farm bill is a package of legislation passed roughly once every five years that has a tremendous impact on farming livelihoods, how food is grown, and what kinds of foods are grown. Covering programs ranging from crop insurance for farmers to healthy food access for low-income families, from beginning farmer training to support for sustainable farming practices, the farm bill sets the stage for our food and farm systems. As a leading advocate for family farmers and sustainable agriculture, it's our job to make sure that this important bill is good for farmers, consumers, and for the natural environment.

Every five years, the farm bill expires and is updated: it goes through an extensive process where it is proposed, debated, and passed by Congress and is then signed into law by the President. Each farm bill has a unique title, and the current farm bill is called the Agriculture Improvement Act of 2018. It was enacted into law in December 2018 and expires in 2023.

The original farm bill(s) were enacted in three stages during the 1930s as part of President Franklin Delano Roosevelt's New Deal legislation. Its three original goals to keep food prices fair for farmers and consumers, ensure an adequate food supply, and protect and sustain the country's vital natural resources responded to the economic and environmental crises of the Great Depression and the Dust Bowl. While the farm bill has changed in the last 70 years, its primary goals are the same.

Our food and farming system confronts new challenges today, but through citizen and stakeholder action for a fair farm bill, we can ensure the vibrancy and productivity of our agriculture, economy, and communities for generations to come.

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 were 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 and more such other slogans which was also supported by few opposite political parties and even sponsored by some Anti  Social and Anti National elements, who all had an intention to break nation.

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.

Farmers came on to the streets, protesting against three Bills on agriculture market reforms that were passed by Parliament and became laws once they too got signed by the President. In Punjab and Haryana, bandhs were observed, with blocked roads and mass rallies. Opposition parties and farmers groups across the political spectrum have expressed concern that the laws could corporatise agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.

What are the three Bills?
The Bills which aim to change the way agricultural produce is marketed, sold and stored across the country were initially issued in the form of ordinances in June. They were then passed by voice-vote in both the Lok Sabha and the Rajya Sabha during the delayed monsoon session this month, despite vociferous Opposition protest. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to sell their harvest outside the notified Agricultural Produce Market Committee (APMC) mandis without paying any State taxes or fees.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, facilitates contract farming and direct marketing. The Essential Commodities (Amendment) Bill, 2020, deregulates the production, storage, movement and sale of several major foodstuffs, including cereals, pulses, edible oils and onion, except in the case of extraordinary circumstances. The government hopes the new laws will provide farmers with more choice, with competition leading to better prices, as well as ushering in a surge of private investment in agricultural marketing, processing and infrastructure.

Will farmers get minimum support price?
Most of the slogans at the farmers protests revolve around the need to protect MSPs, or minimum support prices, which they feel are threatened by the new laws. These are the pre-set rates at which the Central government purchases produce from farmers, regardless of market rates, and are declared for 23 crops at the beginning of each sowing season. However, the Centre only purchases paddy, wheat and select pulses in large quantities, and only 6% of farmers actually sell their crops at MSP rates, according to the 2015 Shanta Kumar Committee's report using National Sample Survey data. None of the laws directly impinges upon the MSP regime.

However, most government procurement centres in Punjab, Haryana and a few other States are located within the notified APMC mandis. Farmers fear that encouraging tax-free private trade outside the APMC mandis will make these notified markets unviable, which could lead to a reduction in government procurement itself. Farmers are also demanding that MSPs be made universal, within mandis and outside, so that all buyers government or private will have to use these rates as a floor price below which sales cannot be made.

Why were protests vociferous in some States?
More than half of all government procurement of wheat and paddy in the last five years has taken place in Punjab and Haryana, according to Agriculture Ministry data. More than 85% of wheat and paddy grown in Punjab, and 75% in Haryana, is bought by the government at MSP rates. Farmers in these States fear that without MSPs, market prices will fall.

These States are also most invested in the APMC system, with a strong mandi network, a well-oiled system of arthiyas or commission agents facilitating procurement, and link roads connecting most villages to the notified markets and allowing farmers to easily bring their produce for procurement. The Punjab government charges a 6% mandi tax (along with a 2.5% fee for handling central procurement) and earns an annual revenue of about ₹3,500 crore from these charges.

What are some other concerns?
One of the major concerns raised by regional political parties and non-BJP State governments is that agriculture falls in the State list, arguing that the Centre should not be making legislation on this subject at all. They are concerned about the loss of revenue from mandi taxes and fees, which currently range from 8.5% in Punjab to less than 1% in some States.

Some economists and activists say both Punjab and Rajasthan are considering legal measures to expand the bounds of their APMC mandi yards to ensure that they can continue collecting taxes on all agricultural trade within their State's borders. States such as Chhattisgarh and Odisha have only seen procurement increase over the last five years, after the implementation of decentralised procurement. Paddy farming has received a major boost with procurement at MSPs and farmers fear their newly assured incomes are at stake.

The majority of agricultural marketing already happens outside the mandi network, with only 7,000 APMC markets operating across the country. Bihar, Kerala and Manipur do not follow the APMC system at all.

However, most private buyers are currently small traders at local mandis. The removal of stock limits and facilitation of bulk purchase and storage through the amendment to the Essential Commodities Act could bring large corporate players into the agriculture space. Although they will bring much-needed investment, they could also skew the playing field, with small farmers unlikely to match them in bargaining power.

Key provisions of the laws
The key provisions of new farm laws are intended to help small and marginal farmers (86% of total farmers) who don't have means to either bargain for their produce to get a better price or invest in technology to improve the productivity of farms. The Act on Agri market allows farmers to sell their produce outside APMC Mandis to whoever they want. Anyone can buy their produce even at their farm gates.

Though commission agents of the mandis and states could lose 'commissions' and 'mandi fees' respectively (the main reasons for the current protests), farmers will get better prices through competition and cost-cutting on transportation. The law on contract farming will, on the other hand, allow farmers to enter into a contract with agri-business firms or large retailers on pre-agreed prices of their produce.

This will help small and marginal farmers as the legislation will transfer the risk of market unpredictability from the farmer to the sponsor. The third law seeks to remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. This provision will attract private sector/foreign direct investment into the agriculture sector.

What farmers fear?
Farmer unions in Punjab and Haryana say the recent laws enacted at the Centre will dismantle the minimum support price (MSP) system. Over time big corporate houses will dictate terms and farmers will end up getting less for their crops, they argue. Farmers fear that with the virtual disbanding of the mandi system, they will not get an assured price for their crops and the arthiyas -- commission agents who also pitch in with loans for them -- will be out of business.

Farmer�s demands
The key demand is the withdrawal of the three laws which deregulate the sale of their crops. The farmer unions could also settle for a legal assurance that the MSP system will continue, ideally through an amendment to the laws. They are also pressing for the withdrawal of the proposed Electricity (Amendment) Bill 2020, fearing it will lead to an end to subsidised electricity. Farmers say rules against stubble burning should also not apply to them.

How MSP affects farmers
MSP is the minimum price paid by the government when it procures any crop from the farmers. It is announced by the state-run Commission for Agricultural Costs and Prices (CACP) for more than 22 commodities on an annual basis, after calculating the cost of cultivation. Food Corporation of India (FCI) -- which is the main state-run grain procurement agency -- largely buys only paddy and wheat at these prices. The FCI then sells these foodgrains at highly subsidised prices to the poor and is thereafter compensated by the government for its losses.

What the government says
The three farm laws have been projected by the government as major reforms in the agriculture sector that will remove middlemen and allow farmers to sell anywhere in the country. Until 2020, the first sale of agriculture produce could occur only at the mandis of the Agricultural Produce Marketing Committee (APMC). However, after the Farmers� Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 came into force it allows farmers to sell outside APMC mandis in India.

According to the prime minister, these bills were expected to usher in a revolutionary change in the arena of Indian agriculture and would go in some way, perhaps a long way, in doubling the incomes of the farmers. We need to understand these legislations and their long-term impact on the agrarian structure against the expectation outlined by the government to see to what extent this policy prescription will go in doubling of farmers incomes and what kind of revolution will now be on the anvil.

As per census 2011, 96 million cultivators enumerated farming as their main occupation, down from 103 million in 2001 and 110 million in 1991. Still 46% of the workforce is working full-time in farmlands. The size of the operational holdings for small and marginal farmers has shrunk from 1.15 hectares in 2010-11 to 1.08 hectares in 2015-16, according to provisional estimates of the 10th agriculture census 2015-16, and small and marginal holdings constitute almost 90% of our total agricultural land holdings.

Another striking feature of India's agriculture is the continuing trend of increase in the numbers of small holdings in the country. The first agricultural census done in the beginning of the 1970s reported that figure at 71 million. In the last five decades, those numbers have grown exponentially from 138 million in 2010-11 to 146 million in 2015-16, as per provisional estimates of agriculture census 2015-16.

In other words, the average size of operational holdings has considerably reduced from 2.28 hectares in 1970-71 to 1.15 hectares in 2010-11, and 1.08 in 2015-16, shows data.

What is more worrying is the fact that the top 10% of the households are now cultivating almost 50% of India's total cultivable lands whereas the bottom 50% are cultivating less than 0.5% of India's cultivable lands. The decline in the India-s bottom 50% land holdings is steady. The table below is rather self-explanatory of the plight of the farming sector households.
Table 1: Percentage of land cultivated by bottom 50% and top 10% of rural households
1987-88 1993-94 1999-2000 2004-05 2009-10 2011-12
bottom 50% 4.1 3.8 2.7 1.9 0.8 0.4
top 10% 48.6 47.9 49.6 48.9 50.3 50.2

Low income levels
Given the state of holdings and the fact that two-thirds of them are in dry land farming areas of the country it is not surprising that the average income levels for the farming households and individuals are extremely low. As per various estimates from governmental sources, the average income of farming household stood at a mere Rs 8,931 per month in 2016-17. This would roughly translate into slightly over one lakh rupees for a year.

What is alarming is the fact that almost 35% of the income has come from the wages. There is little reason to believe that the above figures have changed. Overall, we can safely state that almost 85% of our farmers fall in the category of marginal and small farmers with less than two hectares of land holdings. It is against this crucial factor that we need to understand the legislations passed and the impact they might have on the very structure of our agrarian edifice.

What are the three bills?
The present government introduced three acts:
  1. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020
  2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020; and
  3. The Essential Commodities (Amendment) Ordinance, 2020.

Rajya Sabha passed these three bills while farmers are protesting against all three Farm Bills, while it was further given an asset by the President of India which at all gave it a shape of an Act, there were majorly protesting against the provisions of the first Farm Bill.

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.

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 witnessed a wide protest over all in the Country, which was 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.

Farmers are debt ridden, starved of funding and of assured price mechanism. The three legislations if taken together accentuate the crisis even further. In the absence of a guaranteed support price mechanism, the legislations even fail to mention a very strong support for the MSP as a benchmark price as a fundamental condition for open agriculture trade and winding up of mandis.

For years farmers have demanded statutory support price for their produce from the government. The question is what is the base level of that income that will be taken for it to double and to what?

There is a need to restore the shaken confidence of the agrarian sector. In order for that to happen the government of India needs to give an iron clad guarantee on holding the price line 100% over and above the inflation-linked cost of production to the primary producer and not allowing any players to offer a price below that line to them. Only such a guarantee will ensure the confidence of the farmers in the system.

We need to understand that if the country has to come out of her grave economic crisis, the answer does not lie in the economies of the urban or of the extractive economies of the capital. The answer decisively lies in the revival of the rural with dignity and respect. The country, it must be understood, cannot survive if the rural falls and chances of such an event happening today can only be averted with a considered policy response initiated with empathy and care.

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