REVITALISING INDIAN AGRICULTURE & NEW FARM LAWS: CHALLENGES & OPPORTUNITIES AHEAD

admin | February 23, 2022 | Law, Taxation Laws | No Comments

This article was written by Aishwarya, a student of KIIT Law School.

Abstract

“Farmers”the most important part of the economy were protesting against the three Bills that claim to be beneficial for them.The three farm Bills were enacted by the parliament as an attempt to provide convenience to the farmers.

All the three bills got assent of the president and they are i) The Farmer’s Produce Trade and Commerce(Promotion and Facilitation) Act, 2020 ii) The Farmer’s (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 iii)The Essential Commodities(Amendment) Act, 2020.

There are chaos, confusion, havocs and so on among the farmers due to these farm laws.Not only the farmers, but we all need to understand it very clearly and get rid of any sort of confusion. Confusion mars the economy of Farm Laws[1], false narratives have been created about that.

This paper, acting as a mirror is an attempt to show the clear image of Farm Laws with both its advantages and disadvantages.

Introduction to Farm Laws, 2020

History of agricultural committee reports

Since 2000, various agricultural committees were formed with various suggestions on the prevailing conditions of farmers.

Guru Committee Report,2001

The report suggested the remodeling of APMC’s where there was contention because farmers were bound to sell their produce in a regulated market with no freedom of farmer’s choices.

The committee advised that reformation in APMC’s are needed to liberalize these

policies.

Creation of Model APMC Act, in 2003

The model APMC(Agricultural produce Market committee) said that there will be no compulsion upon the farmers to sell through regulated markets but there was a condition along with this freedom. The farmers who won’t sell their produce through APMC’s were not allowed to contest in APMC’s elections.This act also dealt with the aspect of contract farming Agreements which states for the compulsory registration of contract farming sponsors.

National commission on Farmer’s reports, 2006

The committee was chaired by M.S swaminathan and it dealt with the the suggestion of economic survival of farmers having small landholdings, encouraging youth farmers to retain in that field and the report also talked about glorification of Indian farmers and globalization of farming.

State ministers, Incharge of Agriculture Marketing to Promote Reforms Report,2013

Chaired by Harsh Vardhan Patil, the highlight of this committee report was a suggestion to remove all farm related barriers for the efficient sales of farmer’s produce.The barriers which were talked about mainly consisted of Physical Barriers(Movement, Transportation, APMC Regulation and so on), Financial Barriers(tax in the form of excise duty, levy tax or VAT) and statutory Barriers(Like agent fees, commissions, staffs fee).

The motive of this committee was to provide relaxation to the farmers with respect to distribution and selling.

Although, these many committees were formed and put forth their suggestions, none of the committee reports were properly implemented and various loopholes remained in the farming sector.

New Farm Laws,2020

The three Farm laws are very well explained in a detailed manner below:

THE FARMER’S PRODUCE TRADE AND COMMERCE(PROMOTION AND FACILLITATION) ,ACT 2020

This Act[2] basically provides a facilitative framework for an efficient ,transparent and barrier free inter-state and intra-state selling of the farmer’s produce.The Geographical restriction is claimed to be removed and it authorizes the farmers to facilitate direct online buying and selling of the agricultural produce .

The word “produce’’ has been defined under this act as

cereals, vegetables, dairy products, fisheries, poultry, piggeries and so on
Cattle fodders, cotton seeds, raw jute, raw cotton, oil cakes, dung cakes etc.

The Farmer’s produce Trade and Commerce(promotion and Facilitation)Act,2020 allows the farmers to sell their produce within or outside their states, to an individual, large traders, private companies and they can even sell to the online websites if they want to. Section 6[3] of the act also states that farmers are now free from any sort of levy taxes, agricultural taxes and market fee.The Cycle of APMC’s has also been removed by this act of the government.We will read about the APMC mechanism further in detail.

THE FARMER’S(EMPOWERMENT AND PROTECTION)AGREEMENT OF PRICE ASSURANCE AND FARM SERVICE ACT,2020

This Act[4] provides for a rational framework that promotes farmers to do agri business with wholesaler, large retailers, industrialists with the price that is mutually agreeable by both of them.The agreement between the two must be backed up by a legal agreement so that the farmers won’t get cheated by the traders.

Under this act, the term “farming agreement” has been defined as an agreement that has been entered between sponsor, or a third party and the farmer to sell the agricultural produce. The act says that the sponsor shall have to pay not less than 2/3^rd of the agreed amount at the time of delivery, and the rest amount must be paid by the sponsor within thirty days of the delivery of farmer’s produce.The mode of payment may be decided by the government.

The breach of agreement is also mentioned under the act which states that if any one of the party is not able to meet the obligations of the agreement(without Force Majeure clause), then it will be considered as breach of the agreement.

THE ESSENTIAL COMMODITIES(AMENDMENT)ACT,2020

This act is an amendment to the Essential commodities act,1955 which deals with the production, distribution and supply of some commodities.It was introduced to prevent black marketing and hoarding of foodstuffs.

The Essential commodities(Amendment) act,2020 aims to deregulate commodities such as oil,potatoes,onion ,edible oils etc.Earlier, there was no proper situation prescribed to the government to impose the stock limits. It was arbitrarily upon the government to decide when they want to impose the restrictions.No time was mentioned that in what kind of circumstances, this step should be taken. The Essential Commodities(Amendment)Act,2020 has resolved this issue and clearly states that the stock limitation will be put in situations of:

war, famine and natural calamity
Immense price trigger(price rise),100% increase in the horticulture produce subsequently after 12 months or an average of five years, whichever is lower.
When there is a 50% rise in the retail price of non perishable goods, subsequently after 12 months or after 5 years, whichever is lower.

ECONOMIES OF FARM REFORMS IN INDIA

“Change is the law of nature”, As we are very well aware about this term which inhibits us to change according to time and trends.The same is the case with farm reforms.In order to meet the requirements of farmers and agriculture, several reforms took place.Let us look at them one by one:

LAND REFORMS-These reforms formed the basic core of agricultural reforms and are basically divided into for sub parts.
Abolition of the zamindari system-The intermediaries were removed and farmers were given freedom to deal on their own.
Ceiling of Land Holding-The size of land was made fixed for each land holders and no one was allowed to posses more than that measure of land.
Consolidation of land Holdings-Segregated lands were brought together to make production easier.
Cooperative Farming-The farmers were promoted to do farming collectively with each other so as to develop cooperation and enhance their bargaining powers.
GENERAL REFORMS-These are the reforms that don’t directly affect the production, but they do so indirectly.
Expansion of irrigation facilities-Under this reform, 70% of the land was provided proper irrigation by the government.
Institutional credit-Many financial organization were created by the government to provide credit facilities to the farmers.NABARD was one of those financial organization.
Support Price Policy-The MSP(Minimum support price) came into the picture.The MSP was set up by the government to assure the farmers that they cannot sell below the minimum support price.If the farmers were not able to sell their produce, the scheme of MSP said that they can sell their produce to the government on the minimum price.

GREEN REVOLUTION

This is one of the major reforms that has been done in the agriculture sector.The introduction of HYV seeds (high yielding varieties seeds) during 1960’s led to the huge production of wheat and rice.The production increased but their were some negative aspects of Green revolution as well.It was made only for two food grains “rice and wheat” and these two grains led to the excessive absorption of water table.

BUSINESS OF AGRICULTURE IN INDIA EARLIER

Before the farm laws of 2020, India’s agricultural Markets[5] were regulated by APMC(Agricultural produce market committee) Act. The farmers used to sell the produce via large mandis that are regulated by the state governments across India.There are approximately 7000 mandis in India through which the process of selling and distribution of the agricultural produce takes place.The person needed to acquire the licence before buying the produce from the APMC.In the system of APMC a lot of middlemen were involved and the selling process took place through a supply chain.

The sales were processed by the commission agents, who used to play the role of middleman in the selling process.They were basically the link between farmers and traders, though which the produce was first sold to the commission agent, then through the commission agent , it was sold to the traders where negotiation of price takes place.This process of negotiation was not transparent and even not known to the farmers.Then the transaction agent, after selling the produce to traders,charges at least 3%fees that is paid from the pocket of farmer.Through traders,the produce is supplied to the wholesalers and retailers and ultimately it is consumed by the consumers. A lot of conflictions were there among the farmers regarding this APMC system because the system lacked transparency. Even the problem of delayed payments to the farmers was there as well as the low quality of payment modes.

Any trader who wanted to buy the produce had to pay some taxes that was the source of government’s income.The private companies were required to buy the produce from the middleman and that’s why because of lack of communication between the traders and the farmers, the farmers used to have no idea of the price for which their produce had been sold to the traders as well as the consumers.

MSP(minimum support price) was there below which no produce was sold to the buyer.But, this system of MSP was only for 23 crops and the other crops are sold according to the price discovery.Price discovery is basically decided on the basis of supply and demand in the market.

APMC(AGRICULTURAL PRODUCE MARKETING COMMITTEE) & ROOTING OUT MIDDLEMEN

APMC has a prolonged history.It was introduced after 1947 due to several reasons.During 1947 the farmers used to lend hefty sums of money from the zamindars or lenders in order to buy seeds, fertilizers,machines and so on.Unable to repay them,the farmers used to remain in debt and that’s how the thought of setting up the mandis came. But, in mandis also,most of the profits were taken away by the middlemen and the farmer’s condition remained somewhat same.

Now, let us look at the new act that is “The Farmer’s Produce Trade and commerce(promotion and facilitation)Act,2020”, where Farmers have been given a choice to sell directly to the institutional buyers[6] without involving the middlemen .Farmers can even sell their produce directly to the online websites such as BIG basket,Amazon fresh, Jio mart and many more.There is no need to sell via the middlemen who used to charge hefty fees from the farmers.The geographical restriction has also been removed which means now, farmers can sell anywhere they want to.

The tax system, that used to exist earlier has been abolished and now, the private companies can enter into the agreement of buying and selling with the farmers easily.The source of income that the government used to enjoy by the means of these taxes are no more available to them.

MANDATORY LAWS ON MSP

A lot of discussion was being there in order to legalize Minimum support price for all the crops.Why the government is not in favour of accepting mandatory laws on MSP? Before looking for the answer of this question,let us firstly discuss about what the MSP is.

Minimum support price is the benchmark price that is set by the government below which it doesn’t buy the produce of the farmers. Suppose the minimum support price of sugarcane has been set as rupees 2000, but the market rate of sugarcane is 1500, the government, irrespective of the price in the market will buy the produce for rupees 2000 from the farmers.This is the basic principle of MSP. The MSP is determined by the Commission of Agriculture cost and price(CACP) every year.

The government is giving ample of reasons for not accepting the legalization of MSP for all crops.It says that if they will make MSP mandatory for every crop,then it will put a huge burden of 17 lakh crore over the government. Now, the question is, how did they make an estimation of this price.The answer is simple. they calculated the amount on the basis of production of those 23 crops on which the MSP is provided.

Now let us discuss the reality of the real procurement, Does the government procures all the crops? The answer is NO! If we look at the previous year’s data then we will get to know that the procurement was was of only 2.41 lakh crore which is less than half of what the government has estimated. Out of 100%, only 9% procurement is being done by the government and.

If the MSP will be legalized then then it would keep a check on middlemen, the competition in the market will also be enhanced. And yes, the most important thing is that the intervention of government will be their in the agriculture which is very much important for the farming sector.

The Government should discuss it honestly, instead of hiding the procurement data and if it doesn’t want to accept the mandatory laws on MSP, they can even go for other options such as Investment support scheme,price support scheme, Price deficiency payment scheme and procurement schemes.

WHY THE FARMERS ARE PROTESTING? AND HOW ARTICLE 19 OF THE INDIAN CONSTITUTION IS RELATED TO IT?

Now , if all the three farm laws are made to benefit the farmers, then why they are protesting against it?

The laws might be looking beneficial and good on the paper, but in reality there are some contentions regarding them.

There are both pros and cons of these amendments. Suppose, the MSP of rice flour is rupees 1500/quintal, if this is sold to a middleman, the farmers would have got 1200-1300, but now when they have the choice of selling it directly to the private companies, they can even get rupees 1800-1900 for the produce which is obviously profitable for the farmers. But as we can see, there are two sides of every coin, the reverse can also happen, the farmers may be forced by the institutional buyers to buy for the price he says, or else leave the deal. Small farmers with less landholdings are not powerful enough to negotiate with large companies.

The Geographical restriction that has been set aside by the new farm laws are also problematic for the farmers.They will have to pay for the transportation, storage and all expenses related to the movement from one region to another.In spite of that, there is no guarantee whether the farmers will be able to sell their produce in another region.

Many farmers are of the contention that MSP should be legalized for all the crops , but the fact is many farmers don’t make the efficient use of Minimum support price.

Article 19[7]of the Indian constitution guarantees us the following rights:-

Article 19(1)(a)-freedom of speech and expression
Article 19(1)(b)-to assemble peacefully and without arms

Article 19(1)(c)- to form association or unions

Our constitution allows us to protest peacefully without arms and violence, but what happened in Red Fort by the farmers was very disturbing.That was the clear misuse of the fundamental rights that has been guaranteed to us.Article 51A[f] states that it shall be the duty of every citizen to preserve its cultural heritage.Red fort, in New Delhi is one of the prestigious heritage for Indians and the use of violence over there on 26^th January, 2021 is not at all justified in any respect.

CONCLUSION

If we’ll look at the statistical data of suicides in India, we will get to know that out of all the suicide ,the percentage of farmers in suicide is 11.2%.This data shows us that the Farmers are not happy, neither with their life nor with the situation prevalent for them.

This making of farm laws is an initiative towards their upliftment.Although there are some loopholes in the new farm laws, 2020, at least the government thought of improving the conditions of farmers.

The data also shows that only 35% of the farmers are able to efficiently utilize the Minimum support price.They don’t know how the phenomena of MSP takes place.The government should also take an initiative to educate the farmers about the usage of Minimum support price.

A re look at the new farm laws is required with a step towards some modifications into it. It’s just a baby step towards improving the situation of farmers and a lot of work is still left to be done.

[1] An Intellectual Biography of India’s New Farm Laws, available at: www.orfonline.org/research/intellectual-biography-india-new-farm-laws/(Last Modified Dec 11,2020)

[2] The Farmer’s Produce Trade and commerce(Promotion and Facilitation),Act 2020,available at: http://egazette.nic.in/WriteReadData/2020/222039 (Last Modified Dec 20,2020)

[3] Farmer’s produce Trade and commerce(promotion and Facilitation),Act 2020,available at: www.indiacode.nic.in

[4] The Farmer’s(Empowerment and Protection)Agreement of price assurance and Farm services Act,2020, available at: http://egazette.nic.in/WriteReadData/2020/222040(Last Modified April 10, 2021)

[5] Shanu Nair, ‘’How Farmers view the existing mandi system”The Indian Express,Dec 12,2020.

[6] A critical analysis of the farm bills,2020,available at: www.latestlaws.com

[7] Constitution of India, available at: https://legislative.gov.in/constitution-of-india(Last Modified May 13, 2021)