Assessing the Impact of Agri Reforms

 

 

 

The Farmer’s Bills passed by the Parliament are creating ruckus in some parts of our country. The main plank upon which the agitation takes its life is the Bill’s potential danger of farmers being subject to exploitation by corporate and other big Investors. The three Bills passed in quick succession by the Parliament, in fact, aims at barrier-free trade for farmers and their freedom to engage with investors of choice. A cumulative reading of the provisions of these three Bills may allay the apprehensions and perceptions of its naysayers.

 

 

It was during 2004 the country witnessed a spate of farmer’s suicides all across evoking much resentment in the public psyche of the nation. A commission was appointed by the Government of India as National Farmers’ Commission under the Chairmanship of Dr M S Swaminathan. One of the cardinal recommendations of the Commission was that the country should strive hard to move on to `One India One Market’ for ensuring fair price to the Farmers and take legislative measures to enable farmers to bargain with traders of their choice. The Commission found that the stumbling block in the way to framing of a comprehensive national legislation is the subject `agriculture’ remaining in Concurrent list. The Constitution amendment which would bring the subject `agriculture’ in the Concurrent list would enable the Government of India to lay broad general frame work for farming and marketing of agricultural produce, with States still enjoying freedom to supplement the general law with regional adaptation wherever required. The Congress party in its election manifesto for 2019 general election promised revamping the existing State legislations on Agriculture Produce Manufacturing Committee(APMC) with a uniform law applicable to the country for enabling the farmers to have barrier free trade including export. The Government of India promulgated three Ordinances on 5th of June 2020 bringing in comprehensive bedrock legislation for farming, conferring freedom of trade to farmers. Now the Ordinances took the shape of Bills. The Bill passed by both houses of Parliament, received Presidential assent on 27th September, 2020.

 

 

The most important of the three bills passed by the Parliament is the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (for brevity the Farmers Trade Bill). In spite of the Constitution assuring freedom of trade as fundamental right to its citizens, for the marginal and small farmers of the country it was desperately eluding, or rather denied for decades together.

 

The existence of the Agriculture Produce Marketing Committees created by various States all over the country except Kerala, Manipur and Bihar almost brought in a collective monopoly or oligopoly of APMC’s over agricultural produce. The characteristic players of this institution are the `Arthyas’ (Commission agents), who were financing marginal and small farmers in agricultural operations with their preset role as middlemen between farmers and APMC’s. The real price fetched by the farm produce never went to the farmers’ kitty but fell into the pockets of the commission agents.

 

The farmers always remained as a lifetime debtor to the commission agents. The present Farmers Trade Bill, by Section 3, ensures any farmer or trader or electronic trading and transaction platform the freedom to carry on interstate or intra-state trade and commerce in farmer’s produce in a trade area. Section 4 of the Trade Bill gives freedom to a trader to engage in interstate trade or intra-state trade of scheduled farmer’s produce with a farmer or another trader in a trade area. The only requirement for the trader is that he should have a Permanent Account Number allotted under the Income Tax act 1961 or such other document as may be notified by the Central Government. The Bill also tries to avert unscrupulous traders deceiving farmers by offering deferred payment. Section 4(3) of the Trade Bill mandates every trader who transacts with farmer shall make payment to the farmer the price of the farm produce on the same day or within a maximum of three working days. The receipt of delivery mentioning the bill payment amount shall be given to the farmer on the same day, the provision further enjoins. But at the same time, the Proviso added to Section 4(3) enables the Central Government to prescribe a different procedure for payment, when the trader happens to be Farmer’s Produce Organization or Agriculture Co-operative Society.

 

The burden to make immediate payment isrelaxed only in the case of collective of farmers and co-operative sectors when they take the role of traders. The most striking feature of the Trade Bill is that it provides an opportunity to Farm Producers Organization or Agriculture Co-operative Societies to establish and operate an electronic trading and transaction platform for facilitating interstate or intra-state trade and commerce of scheduled farmers ina trading area. The Act also ensures the use of local language of the place of operation while electronic platform is being used, which in turn may avert dubious acts of traders encashing on linguistic handicap of farmers. The way the concept of trade area is defined in the Act to enable trade of farmer’s produce outside `mandis’, is the aching part of the legislation for the agitating middlemen and commission agents. Section 6 of the Trade Act proscribes levying of market fee, or cess under any State APMC Act or any other State law on any farmer or trader or electronic trading and transacting platform for their trade and commerce in scheduled farmers’ produce in a trade area. This provision of the Act gives a death blow to the revenue of some of the North Indian States, particularly the State of Punjab which collects tax @ 8.5% on procurement of wheat and paddy. More than 85% of wheat and paddy grown in Punjab and 75% in Haryana is bought by the Government which generates whopping revenue to the exchequer of these States. Out of the 8.5% tax collected by these States, 3% will go as market fee, another 3% to rural development fund with the remaining 2.5% falling into the pockets of commission agents.

 

 

With the complete lifting of power to levy taxes on farmer’s produce by the present Traders’ Bill, a hassle free trade is assured to the farmers and, also traders engaging with them. Section 7 of the Trade Bill stipulates that Central Government may develop a Price Information and Market Intelligence System for Farmer’s produce and a frame work for dissemination of information relating thereto. If this system as suggested by the statute is developed by the Central government, it would enable the farmers to haveup-to-date market details on price of their commodities to have an informed bargaining with traders. Another important aspect of the Trade Bill is the provision for establishment of a Dispute Resolution mechanism with the Sub Divisional Magistrate as the authority for adjudication. The Sub Divisional Magistrate is empowered to refer all the disputes to a Conciliation Board to be appointed by him as a prelude for resolution. On the failure of parties arriving at settlement, adjudication process by the Sub Divisional Magistrate is contemplated under Section 8 of the Act. The Act also provides for the creation of an Appellate Authority from the orders of the Sub Divisional Magistrate. The orders of the adjudicating authorities are deemed to be decrees. The decretal amount is enamored to be recovered as arrears of land revenue. As far as farmers’ produce and its trade are concerned, a broad fundamental frame work is laid down by the Trade Bill liberating the farmers from the tentacles of middlemen and `Mandis’ (Trade Centres), and in turn enabling them to trade with traders of their choice.

 

 

The Farmers are mainly dependant on local usurers and local financial companies for hand loan to have their agricultural operations made functional in every crop season. The Farmers (Empowerment and Protection)Agreement on Price Assurance and Farm Service Bill (for brevity the ‘Farmer’s Price Assurance Bill’) gives freedom to farmers to enter into farming agreement with sponsors, or another farmer prior to the production or rearing of any farming produce of a predetermined quality. The Sponsor in the agreement agrees to purchase the farming produce from the farmer and to provide farm services. Section 2(g) of the Farmers Price Assurance Bill defines farming agreement as instrument principally containing the terms aforesaid. A Farming Agreement includes `trade and commerce agreement’ and `a production agreement’. Explanation to Section 2(g) of the Farmer’s Price Assurance Bill makes clear that where the ownership of commodity remains with the farmer during production and he gets the price of produce on it delivery as per the agreed terms of the sponsor ,it is a `Trade and Commerce agreement’. Section 3 of the Farmer’s Price Agreement enables the farmer to enter into written farming agreement in respect of any farming produce and such agreement may provide for the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters. The agreement may also include the terms related to supply of farm services.

 

The most important feature of the agreement is its clause precluding a farmer from entering into farm agreement in derogation of any of the rights of a `share cropper’ (Tiller or occupier of a farm land agreeing to give fixed share of crop or to paya fixed amount to the land owner for growing or rearing of farm produce; Explanation to Section 3(2) defines a ‘share cropper’). The provision to prevent the rights of actual tillers of land being compromised by farmers with potential investors is a laudable feature of the Bill, indicating meticulous data analysis by Government of the niceties of tenancy prevailing across the country.

 

Section 3(3) of the Farmer’s Agreement on Price Bill says that the minimum period of the farming agreement shall be for one crop season or one production cycle of livestock and the maximum period shall be five years. Section 2(n) of the Act enlists the persons who can be `sponsors’ in a farming agreement.

 

An individual, a partnership firm, a company, a limited liability partnership, a co-operative Society, a Society or any association or body of persons incorporated or recognised as a group under any of the ongoing programmes of the Central Government or the State Government can assume the role of a `sponsor’ under the Bill. These persons/legal entities can engage with a farmer as investor for purchase of farm produce at a predetermined price and provide farm services. Farm services include supply of feed, fodder, agro-chemical, machinery and technology, advice, non chemical agro input and such other input for farming. (Section 2(b) of the Bill).

 

The provision in the Bill giving an advisory to the Central Government to issue necessary guide lines along with model farming agreement for facilitating farmers to enter into written farming agreement is another commendable facet of the legislation. The model Farming Agreement would avert the possible manipulations which may be practiced by the sponsors for manoeuvring the terms of the contract to their advantage. Section 12 of the Bill provides for a registration authority for facilitating the registration of Farming agreement.

 

 

One of the fulminations against the Farm Price Assurance Bill is the potential danger of corporates manipulating the agreement to result in divestiture of the land of the farmers. But Section 8 of the Price Assurance Bill rules out any possibility of the disenfranchisement of land of farmers. Section 8 says that no farming agreement shall be entered into for the purpose of any transfer, including sale, lease and mortgage of the land or premises of the farmer. The Bill again contained provisions for insulating the proprietary right of farmers over their land. Section 15 of the Bill says that no action for recovery of any amount due in pursuance of an order passed by the Adjudicating Authority shall be initiated against the agricultural land of the farmer. Further Section 14(2) (b) (iii) provides that where the farming agreement in dispute is in contravention of the provisions of the Act, or default by the farmer is due to `force majeure’, then no order for recovery of amount shall be passed against the farmer by Adjudicating Authority. This clause protects farmers against any liability on crop loss in the event of natural calamities. The Sub Divisional Magistrate is prescribed by the statute as the adjudicating authority for dispute between the farmers and sponsors.

 

Aless cumbersome adjudication proceedings with initial endeavours on conciliation is provided under Section 13 of the Act with Sub Divisional Magistrate as the dispute resolution forum.

 

 

One of the flaws of the Bill projected by the critics is the lack of provision for Minimum Support Price (MSP). The Bill only aims at enabling the farmer to enter into contract farming with sponsors. The farmer, under the Act, can enter into Farming Agreement on predetermined price of the farm produce. Before cultivation starts the farming agreement is concluded wherein the benchmark price is fixed. Section 5 of the Farmer’s Price Assurance Bill says that the price to be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself. The caveat next stipulated in the provision even takes care of price variation which may occur during crop season. Section 5 of the Bill in its second limb says that if the price is subject to variation, such farm agreement shall explicitly provide for a `guaranteed price’ to be paid for such produce. In addition to that, it is further stipulated that a clear price reference for any additional amounts over and above the guaranteed price, including bonus or premium, to ensure best value to the farmer and such price reference may be linked to the prevailing prices in the specified APMC or electronic trading and transaction platform or any other suitable bench mark prices. A further statutory safeguard for ensuring the price fixation is again stipulated in Section 5. The method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement, the Proviso to Section 5 again ordains so. The Prime Minister, while allaying the fears on minimum support price or floor price, assured that the present régime of Government procurement by declaring minimum support price would continue. The present Bill only confers liberty to the farmer to engage freely with investors and traders avoiding middlemen’s trickery.

 

 

The amendment to the Essential Commodities Act, 1955 is done to factor in the consequential developments in farm production following free trade and contract farming regime. It is quite sure that if contract farming progresses with large scale players taking the lead, the restrictions on stock of food stuffs by the rigour of Essential Commodities Act would turn out to be a roadblock. Hence the deregulation on supply of food stuffs including cereals, pulses, potato, onions, edible oil seeds and oils becomes a necessity. Hence Section 1A was inserted in Essential Commodities Act for removing restrictions on supply of food stuffs. But as a measure of great prudence, Section 1A of Essential Commodities (Amendment Bill) 2020 keeps intact power of the Central government to regulate the supply of these food stuffs under extra ordinary circumstances which may include war, farming, extra ordinary price escalation and natural calamity of great nature. As far as stock limit is concerned, the restriction shall be based on price rates. The cap on stock limit of agriculture produce may be fixed by Government only when there is 100% increase in the retail price of horticultural produce or 50% increase in the retail price of non perishable agricultural food stuffs over the price prevailing during the preceding 12 months or average retail price of last 5 years, whichever is lower. The amendment of Essential Commodities Act on supply and storage of foodstuffs was a long felt need even otherwise as these regulations in its inception proceeded on an adhoc legislation. Many of the provisions of the Essential Commodities Act became archaic by now as the restrictions then imposed were only to tackle the famine of the early sixties.

 

 

Arguments are raised against the Bill based on its constitutionality. No doubt `agriculture’ is a subject under State list, Entry 14. But `interstate trade’, which also forms the subject matter of the Farmers Trade Act, is coming under Entry 42 of the Union List. The `trade and commerce of food stuffs’ (Entry 33) and Price control (Entry 34) are falling under the concurrent list which also form sheet anchor of the three farm legislations. The pith and substance of the farm legislation is the subject contained in the Concurrent list, upon which a legislation can legitimately be made by the Union Legislature.

 

It was in 1965 at Ram Leela Maidan, the then Prime Minister Lal Bahadur Shastri, raised the slogan `Jai Jawan Jai Kissan’.

 

We were fastly going to the war front then with Pakistan. Now we are battling out the pandemic Covid-19 under the leadership of the present Prime Minister, Narendra Modi. The faceoff with our neighbour China at Ladakh is portending another war. Need of the hour is to make India self-sufficient in all respects. The incantation, `Atmanirbar Bharath’ to which every Indian is now initiated into, can be realised only when our farmers are empowered and emancipated. The three farm Bills passed by the Parliament would form the Trident(‘Trishool’) in the hands of our farmers against the demonic middlemen to decimate their `kingdom of commissions’. The three Farm Bills will usher in new culture in Indian farming sector which will eventually make Bharat self sufficient in agriculture with a rapid pace towards a world player’s role.