We buy, cook, eat and even waste food with such ease and live in comfort as food is always available at our realms. We are grateful that we aren’t amongst the 73 million in Africa, 43 million in the Middle East and 18.5 million in the Caribbean who live with an acute food crisis. In an overpopulated country like India where billion-plus live without a crisis over food, it is quite apt that the farmers are referred with a Godly stature ‘anna-daata’ – the providers of food. However, while averting the crisis of our lives, many of them have run into a crisis of their own – debt, exploitation, uncertainty and poverty has been their life. Every fifth year, political parties promise to address the situation, however, only a few and, a very little has been delivered so far. Now, in the midst of a pandemic, the Government has moved some ‘historic reforms’ (as referred in their speeches) and yet the bills were passed in the Parliament in an unusual hurry, amid farmer protests and a wave of confusion in the country. Of course, ignorance has also played its part as the audience doesn’t understand the complexity and the mainstream media doesn’t care to explain! Let us decode the new farmers’ bills and understand what difference do they make.
Sequence of Events
- On June 5, the Government promulgates three farmers related reforms as ‘ordinance’. An ordinance can be passed by President of India on the recommendation by Union Cabinet if the Parliament is not in session. Looking at the reforms proposed, the urgency for the ordinance is questionable instead of waiting for the parliament.
- On September 14, the three ordinances are negatived and three bills are introduced in the Lok Sabha. Opposition parties request for referring the bills to the Parliamentary Committee for review, however, the same is rejected.As the Government holds a clear majority in the Lok Sabha, on September 17, the bills are passed by voice vote, as it speeds up the process.
- On the same day, Union Minister of Food Processing Industries, Ms Harsimrat Kaur Badal resigns from the post in protest of the bills introduced. The resignation is accepted by the President on the recommendation of Prime Minister.
- On September 20, the bills are introduced in the Rajya Sabha. Several opposition parties request for referring the bills to the Select Committee of Rajya Sabha, however, the same is denied. In the first half of the same day, extending the usual time 1:00 pm of Rajya Sabha proceedings, the bills are put to a voice vote and deputy speaker announces that ‘Ayes have it, the bill is passed’.
- The government does not have a clear majority in Rajya Sabha and thus, considering the bill passed by mere voice vote didn’t seem reasonable. The opposition parties demanded a ‘division of vote’ (electronic voting machines be used), however, the deputy speaker denies the same (as per rules, this request cannot be denied). And thus, begins the ruckus which even Rajya Sabha TV had to censor and turn off the Live Telecast.
- Later, eight members of Rajya Sabha were suspended for their behaviour during the proceedings. The opposition parties boycott the Rajya Sabha proceedings. Making most of the opportunity, the Government passed seven bills within four hours, in absence of an opposition – something historically unusual, however, normal during the past few years.
What is the existing law?
Decades ago, when the farmers then were also suffering from the debt crisis, lack of access to markets was identified asa key issue leading to exploitation of the farmers, as their perishable products didn’t find a buyer. Farming in India is fragmented as 85% of the farmers hold land measuring lesser than one hectare. This makes agricultural an unorganised sector as there are no big players, instead of small farmers with very little quantity to offer to the market and thus, unable to access the bigger markets.
To address the same, the Government then introduced model laws for the states which eventually over decades was adopted by the states and Agricultural Produce Market Committees (APMC) were established, as agriculture is under the state list. However, laws such as Essential Commodities Act, 1955 were passed by the Central Government stretching the legal provisions to the furthest, as the Article 248 of the constitution allows Government to form laws ‘in the national interest’.
Modus operandi under APMC:
- The state government divides the state into various geographical areas and mandis are set up for each such area.
- All farmers producing regulated items have to mandatorily bring their produce at the mandis in their area.
- Sales in mandis occur at price decided by auction and price discovery which depends on the demand and supply, with a Government decided Minimum Support Price (MSP) being the reserve price.
- Only licensed traders are allowed to buy from the farmers at mandis to further sell the produce to the wholesalers, retailers, food processing industries, direct consumers or anywhere else.
- All produce which is not bought by the traders would automatically be bought by the State Government at the MSP.
Benefits of APMC mandis:
- Mandis bring the unorganised and fragmented farmers together who can sell the produce in aggregation to the traders who are interested in bulk buying.
- Price is decided by auction and with MSP ensuring cover towards the costs incurred, farmers get a fair price or at least the overall cost is covered.
- Since the produce is perishable, farmers were forced to sell the produce at distress prices quoted by traders. However, with Government guaranteeing the purchase of the unsold produce, the farmers are saved from exploitation.
Problems with APMC mandis:
- The licensing of traders led to license raj whereby at various places trading license was available only to those with political connections.
- The traders at various mandis formed cartels and exploited the farmers by buying only at prices decided by them. Thus, many farmers were deprived of fair prices.
- MSP was too low in comparison to the prices that the ultimate consumers or the processing industries paid. There is no legal status of MSP in absence of laws to enforce the same.
What are the reforms?
The bills are now enforceable by law as the President’s assent has also been received. While the protests by farmers are ongoing, the Government has issued various advertisements including English newspapers, addressing the farmers to explain the truth and the lies. While most farmers may not read English newspapers, the gist of reforms is as follows–
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
- Farmers are allowed barrier-free intra-state and inter-state trade outside the APMCs.
- Anyone is allowed to trade the farmer’s produce, paving the entry of private players.
- Anyone can enter into a trade to buy future scheduled farmer’s produce i.e. contract farming.
- Anyone can establish electronic trading platforms for direct buying and selling of farmers produce.
- State Governments cannot charge any fee, cess or any other charge on such trades.
- The dispute between farmers and trader to be settled by Sub-Divisional Magistrate.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
- Anyone can contract with farmers for buying future produce. Aggregators or others can also act as third parties in such agreement.
- The minimum duration of the agreement will be one cycle, maximum five years by default unless otherwise decided by the parties to the agreement.
- Price can be mutually decided. If the price is variable on certain factors, then there should a guaranteed price mentioned in the agreement and reference to how additional premium would be decided.
- At least two-thirds of the agreed amount must be paid at the time of delivery. The remaining amount can be paid within 30 days from delivery.
- The farming agreement would be exempt from all state laws surrounding farming produce.
The Essential Commodities (Amendment) Bill, 2020
- The central government can regulate the supply of certain food items (to be notified as and when required) including cereals, pulses, potato, onions, edible oilseeds, and oils, under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity of grave nature.
- The central government can regulate how much stock a person can hold if there is a 100% price increase in horticultural produce or 50% in non-perishable agricultural food items. Price prevailing 12 months before or 5 years average retail price, whichever is lower, would be considered for comparison.
- The above limits shall not apply if the same is lower than overall installed processing capacity (in case of food processing industries) or the demand for export (in case of the exporter).
- The act shall not apply to Public Distribution Systems e.g. Government-sponsored ration shops.
Significance of the reforms
- The reforms will unlock the heavily regulated agricultural sector and allow farmers the freedom to trade within or even beyond the states.
- Private sector companies can directly deal with the farmers and provide a better higher price for the produce.
- Farmers can enter into contracts to continuously supply the produce to a particular private food processing industry or anyone else by way of Farming Contracts.
- The entry of agricultural aggregators or online marketplaces will technologically aid the farmer and also help increase his access to the market.
- Amendments to the Essential Commodities Act will allow the Government to control prices of food items and also prevent hoarding of the same.
Criticisms against the reforms
- In an open market, prices are decided by negotiations, unlike APMC mandis where prices are decided by auction. Private players can easily encroach the small farmers as they do not have the negotiation power to deal with them.
- There are no taxes on the open trades under new reforms, while APMC mandis will continue to have tax levies by the state. This makes the APMC mandis less attractive and thereby, indirectly ending the mandi system.
- Though by far-stretching the constitutional powers the government has legally introduced laws on a state subject, the current reforms override the state government’s powers. Creating an alternate space where the states cannot collect taxes affects the revenue of the states. Further, the law prohibits the state from regulating the farming contracts, retaining all power with the centre on a state subject.
- The reforms are more inclined to benefit the private players and multinational corporates than the farmers. Agricultural is one of those sectors where Government regulation is required in the national interest. Leaving it out at the hands of the market would make the sector profit-oriented.
- Concerns surround the farmers if they are empowered to raise a dispute or litigate against the private players; or in the first place, owing to lack of knowledge, even negotiate fair contractual terms with the big private players.
- ‘The middlemen will be eliminated’ doesn’t hold, as the same middlemen will now operate as sponsors for farming contracts, freely and legally.
Do the bills end the APMC mandis or MSP regime?
No, not directly. The reforms create an alternate market space where there are no taxes, free trade, and no government intervention. Theoretically, free trade sounds great, however, practically free trade works on negotiation powers and other tactics – something that private players are well-versed at. ‘Hands-on experience with paperwork’ doesn’t appear on a farmer’s resume. By making the alternate space more attractive, the Government is pushing the traders and corporates to opt for direct trades, not mandis.
The renowned ‘Swaminathan Report 2006’ had recommended MSP to be fixed at 50% above the weighted average cost of production. The farmers and many economists demanded to legalize the MSP i.e. dealing below MSP as illegal and punishable by law. However, the bills did nothing about MSPs, it doesn’t even talk about it. Instead, ‘one nation, one market’ is being advertised and it is claimed that ‘free trade will ensure the right price’. However, free markets are profit-oriented and thus, there is no surety that there will always be win-win situations.
What went wrong?
The sanctity to law-making definitely went for a toss.
- The laws were introduced directly as ordinances, the need for which is unexplained. There isn’t any urgency for contract farming or free agro trade. The timing co-incidences the Bihar Elections, however, there’s no definitive answer here.
- The laws were promulgated as ordinances, thus, the Government had six months to pass laws in the Parliament or rollback the ordinances. This explains why the Government seemed to be in a hurry to pass the bills (by all means); laws which shouldn’t have been ordinances in the first place.
- Any major reform in any sector is first discussed with its stakeholders and held up for months to gather comments. A law which affects the entire farming sector was neither passed on to stakeholders for review nor thoroughly discussed in the parliament. How do we trust this law?
- Agriculture is a state subject. The current APMC boards have been established by state laws. However, the new farmer bills bypass the states’ power. In the name of ‘national interest’, the bills are a ‘power-game’, as they leave no scope for state’s intervention though the Constitution primarily bestows the same on states’ shoulders.
- On one hand, the reforms are being referred to as ‘historic’, however, they were not referred to the Select Committee because they are insignificant (as per interviews). Either the reforms are historic or insignificant, they can’t be both. Referring to the Select Committee would have allowed a thorough investigation of the proposed law and discussion of the findings in parliament.
So, what’s the verdict?
Everybody is ploughing – some are ploughing the farm, to sow seeds for good harvests in the future, while some others are ploughing the farmers, to sow seeds for good votes in the elections. We don’t know who’s is who, as all discussions lead to one question, “Is capitalism good for our country? Or for time being, good for our anna-daata?” Only time-travel can fetch us an accurate answer to that question.