‘Call Them Farmer bills as you May, but Their Actual Beneficiary Will be Others’

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‘Call Them Farmer bills as you May, but Their Actual Beneficiary Will be Others’

‘Call Them Farmer bills as you May, but Their Actual Beneficiary Will be Others’

- Dr. Amar Singh

20th September, 2020, is the date that will be remembered in history as the moment when the Narendra Modi government decided, through an act of Parliament, to nullify structural gains made in Indian agriculture since the 1960s. Successive Congress governments had, through the green revolution, assured procurement at MSP regime, establishment of the FCI and dedicated funding institutions like NABARD ensured that Indian farmers could move forward from two centuries of systemic colonial exploitation and suppression. On the other side was the food security of the nation, India had gone from being dependent on emergency imports from foreign powers to be able to not only hold massive buffer stocks but export food grain to other countries as well.

A so-called overhaul of the above-mentioned system was firstly carried out through ordinances promulgated in the middle of the national lockdown. Agriculture supports the largest number of Indians directly and indirectly. If major changes were being done to the sector why were farmers, their unions, farm experts and elected representatives from states and the state governments not consulted? A larger question is that did any of the above-mentioned stake holdersdemand these changes? Who was the Government out to please? It would seem at a preliminary look that the Government led by Narendra Modi has finally done what no Congress government did in the last three decades- Bow to the pressure of the WTO with regards to Indian agriculture. The Indian arrangement has been a bone of contention with WTO and Agri-corporates creating pressure on successive governments to dilute price protections for farmers and do away with stock holding restrictions (aimed at protecting consumers and farmers under essential commodities act). 

Few more observations before I delve into the acts themselves in detail. Has any study been done on the impact these bills will have on the employment status of millions of people who work in the agriculture sector? We haven’t been able to protect existing jobs let alone plan to adjust and absorb those who maybe left without work as a result of these changes.

Can these sweeping changes be actually done when lakhs of farmers across the country are up in arms? The States have the primary role to play in the management of the agriculture sector, should the objections being raised by so many Chief Ministers be simply ignored? The word MSP, so critical to ensuring some semblance of fair remuneration to farmers, has not even been mentioned once. The intent is clear, the bills have been passed to fulfil an agenda which will ultimately disempower the farmer and force him off his land in the long run. Let’s now look at the individual acts in detail-

I)              The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 sets out to give farmers and traders the freedom to conduct commerce outside notified Mandi areas as per the state APMC Acts. However, there are a number of issues that need to be addressed.

The Central Government is misusing Constitutional provisions to interfere with independent functioning of the states. Under the Seventh Schedule of the Indian Constitution, ‘Agriculture’ and ‘Markets’ are state subjects. The Union Government wants to use Entry 33 of List III of the Seventh Schedule under Article 246, and Entry 42 of List I of the Seventh Schedule to interfere with agriculture produce marketing systems of the states. Section 12 and Section 14 of the Act violate the principle of cooperative federalism by allowing the Central Government to issue orders to state authorities directly and having an overriding effect on state laws including APMC Act.

Section 6 prohibits the levy of any fee or cess on trade areas set up under this ordinance by states through their APMC Acts or any other state law. This will undoubtedly put a strain on the revenues of states. For example, Punjab alone collects nearly Rs. 3900 crore per annum from market fees. This money is utilized for construction of rural infrastructure, welfare measures for farmers. At a time when the Union Government is not able to effectively transfer to states their share of GST, closing off another revenue stream would be detrimental to their fiscal health.

There is no mention of the minimum price to be paid to farmers for their produce. In fact, the term MSP has been deliberately left out. Combined with the fact that a majority of farmers are small and marginal, with little or no knowledge of market mechanisms, they may end up undertaking distress sales.

The assumption that APMCs, as a whole, are ineffective and the private sector can provide a better alternative are also unfounded. The case of Bihar, which repealed its APMC Act in 2006, is relevant here. A 2019 study by NCAER found that despite the repeal of the APMC Act, “Private investment in the creation of new markets and strengthening of facilities in the existing ones did not take place in Bihar, leading to low market density. Further, the participation of government agencies in procurement and the scale of procurement of grains continue to be low. Thus, farmers are left to the mercy of traders who unscrupulously fix lower prices for agricultural produce that they buy from farmers. Inadequate market facilities and institutional arrangements are responsible for low price realization and instability in prices.”

There are a number of economic factors associated with the APMC Mandis in states where public procurement through agencies such as FCI takes place. These include farmers, arthiyas, mandi employees, labourers, shellers, transporters and the public procurement agencies themselves. The incomes of non-farmers involved in trade and commerce activities related to APMCs need to be protected.

The dispute resolution mechanism under Chapter III is excessively bureaucratic and unnecessarily convoluted. It gives too many powers to Sub Divisional Magistrates to resolve disputes. The SDMs are already burdened with a number of duties. Already, Marketing Committees exist for dispute resolution under state APMC Acts. These committees have representatives from both farmers and traders in their respective area, making them truly representative of the section they serve.

II)             The Farmer (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 enables farmers to enter into pre-harvest agreements for supply of farm produce and services including parameters such as quantity, quality, grade, standard, price etc. Here too, there are a number of issues that need to be addressed.

Section 7(1) and 7(2) provide for the unconditional exclusion of farming agreements from all state laws and from the Essential Commodities Act 1955 effectively ending any type of control or oversight by the State governments. Section 24 gives the Central Government overriding powers to make any provision for “removing the difficulty” that may arise in giving effect to the provisions of this Ordinance. These are clear violations of the concept of cooperative federalism.

The Act assumes the existence of a perfect market, wherein all players hold equal bargaining power. However, in reality, small and marginal farmers will be unable to understand or comply with the complicated contracts and will often be at the mercy of sponsors who have access to an army of lawyers and legal experts. There is little protection provided on this front.

Perhaps most importantly, the pricing of farming produce as mentioned in Section 5 states that the price to be paid to farmers will be set out in the agreement and must include: (i) a guaranteed price to be paid for the produce, and (ii) a clear reference for any additional amount to be paid over and above the guaranteed price, including a bonus and premium. The price reference may be linked to prevailing prices or any other suitable benchmark. The method for determining price or additional amount must be annexed to the farming agreement. There should be no exception available here that the minimum price to be paid should be not less than MSP in cases where such a price has been fixed and declared.

The Essential Commodities (Amendment) Act, 2020 is aimed at lifting restrictions on stocking of foodstuffs or any other item as the Central Government may notify. Imposition of stock limits shall be based on price rise, subject to: (i) hundred percent increase in retail price of horticulture goods, or (ii) fifty percent increase in retail price of non-perishable agricultural foodstuff, over the price prevailing in the immediately preceding twelve months or average retail price of the last five years, whichever lower. Importantly, the EC Ordinance allows “value chain participants” (exporters, processors and traders) to hold large stock of farm produce, without limits, except in certain grave situations such as war, natural calamities or famine.

Firstly, the amendment will make it very difficult for the State Government to take action against the storage and valuation of essential commodities. Secondly, fluctuations in prices weigh heavily in favour of traders and corporates when there is no restriction on stockpiling. Thirdly, the provisions increase the risk of black marketing.

All the three Acts need to be looked at together, as part of a larger narrative. The ‘Shanta Kumar Committee’ had suggested that the Union Government, to water down the National Food Security Act, reduce population eligible to receive PDS items from 67% to 40%, step back from public procurement of farm produce at MSP, and encourage greater private participation in the food sector. On the same lines:

• Farmers Produce Trade and Commerce (Promotion and Facilitation) Act weakens the existing mandi structures, makes space for private entities to enter the farm gates, limiting regulation in agriculture trade, and reducing government procurement at MSP, thereafter; 

• Amendment in Essential Commodity Act provides safe environment to traders and big businesses for unconditional stocking of huge quantities of procured produce, and finally; 

• The Farmer (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act paves the way for private investors to enter into long term contracts with farmer, ultimately, controlling the whole system of agriculture from supply of inputs to marketing.

Thus, while they may be called Farmer bills, but their actual beneficiary will be others. The Prime Minister claimed on 15th August, 2020, that he has provided freedom to farmers. But he failed to mention that this freedom comes at the cost of dismantling the public procurement system, reduced protection to farmer incomes and increased earnings for traders and corporate entities at the cost of farmers. In fact, the BJP is trying to undo the gains made in food security and agriculture since the 1960s.

The intent this time seems to be focused on robbing individual farmers of their bargaining power, opening up the massive Indian agricultural sector and farmland to corporate takeover and ultimately make marginal/small farming economically impossible.

Author is sitting MP, Loksabha from Shri Fatehgarh Sahib, Punjab