Farm Laws 2020: Correcting a Historical Wrong (Part-II)

Published by
Archive Manager
Dec 8, 2020, 08:00 am IST
The latest reforms pushed by Prime Minister Narendra Modi reverse not just a seven-decade-old stifling policy framework but a seven-century old cycle of impoverishing India’s farmers and by consequence the rural economy. They are the outcome of the two-decade-long consultation process and a bipartisan consensus
–Akhilesh Mishra
At the outset, it is essential to note that these reforms do not dismantle the existing structure of State APMC Mandis. The Mandis will remain, and the farmers will be free to sell in the existing Mandis as they currently do. The MSP structure is also not being dismantled. The MSP system will continue and indeed, even after these three reforms were announced, the Modi government has increased MSP and then made record procurements at the newly increased rates.
Revolutionary Empowerment of Farmers
Features of Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 – The Creation of the National Market Bill· Intra and Inter-State Trade of farmers produce beyond the physical premises of the existing markets.
  • Trade can be conducted at any place of convenience of the farmer, like:
o APMC Mandi
o farm gate
o factory premises
o warehouses
o silos
o cold storages
  • Permits online trading of farmers produce, allowing farmer organisations and private sector companies to set up their own electronic trading platforms.
Features of Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 – The Contract Farming Bill
  • Farming agreements between farmers and buyers are made possible, for production or rearing of any farm produce.
  • The price of the produce will be clearly mentioned in the contract.
  • A specified dispute resolution mechanism, protecting the rights of both farmers and buyers.
Features of The Essential Commodities (Amendment) Act, 2020
  • The Central Government may only invoke the provisions of the Essential Commodities Act, 1955 in an extraordinary situation (war, famine, extraordinary price rises and natural calamities)
  • Imposition of stock limits must only be based on price rises, and can only be imposed if there is a 100% increase in the retail price of horticultural produce and a 50% increase in the retail price of non-perishable produce
Impact of Reforms
  • Modi government has set itself the goal of doubling farmers’ income which necessitated initiatives and reforms must focus on creating more income opportunities and better market access for farmers. The reforms were undertaken in September 2020 ensure precisely that.
  • For every product and for every producer, all of India is a single unified market. Only farmers were denied this benefit of a massive market.
  • With these reforms, Indian farmers will now finally have the freedom to sell their produce to who they want and where they want, an option denied to them up until now.
  • APMC Market yards will now face competition from other markets. This competition to buy from farmers means farmers have the greater bargaining power to decide their price.
  • However, if farmers want to sell within the APMC markets or at MSP, even that is allowed. So, the MSP acts as a safety net for farmers.
  • If farmers find buyers willing to buy from them at their doorstep, they can sell to them. They also have a legal framework protecting their rights when they do so. This provision saves farmers the time, money and effort of reaching markets.
  • Farmers will no longer be bound to pay a long list of market fees, taxes, and cesses on their produce, thus, improving their returns.
  • Development of infrastructure close to the farm-gate will reduce post-harvest losses, improve income through grading & sorting and boost linkages to terminal markets in food processing, retail, and exports.
  • This will also lead to the development of better price discovery mechanisms for farmers, leading to a better price for their produce.
  • eNAM can finally fulfil its potential of serving as the national platform for electronic trading in agriculture produce.
  • Contract farming can act as a form of price assurance and will boost linkages with the food processing sector.
  • These reforms will also boost investment in the agriculture sector, through better backward linkages, assured prices, and contracts for farm services.
  • Bringing farmers together through Farmer Producer Organisations will enable bargaining capacity and economies of scale for even small farmers.
  • The impact of these reforms will see India’s agriculture and food processing industries transformed. With India only processing 10% of its produce and commanding a share of 2.3% in global food exports, both these sectors will receive a much-needed fillip with a liberal procurement regime.
  • Private sector investments will pour in across the entire cold chain, reducing post-harvest losses and ensuring better prices received by farmers.
  • Better backward linkages will ensure a better quality of produce, leading India to capture a more significant share of global export markets. So, even the global markets will open up for Indian farmers.
  • Employment in the food processing sector will rise, especially for the rural youth, and this will put India on the path towards becoming the leading food exporter in the world while maintaining our food security.
  • Most importantly, due to all of these effects, farming can become profitable even for small and marginal farmers.
  • For decades, it was clear that reforms were required to ensure better market access and price assurance for farmers. States had to take the lead in instituting these reforms. Yet, very little was done in this direction in terms of meaningful action.
  • These reforms were required to fulfil these long-standing demands of farmers for which there was a clear bipartisan political consensus.
  • For too long, farmers had been held back by a restrictive regime. These reforms finally provide freedom to our farmers.
Myths vs Realities
A lot of misinformation has been spread by vested interests around these bills. Not only are they unjustified and in most cases are diametrically opposite to what the bills intend to do.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation),
Bill, 2020 – Freedom to Sell Farm Produce Across India Act
Sl. No Myth Reality
1
(a)“Farmers will not get the MSP”
(b)“It may eventually end MSP based procurement system”
(c) “MSP operations will discontinue”
MSP system stays. In fact, the Modi government has increased MSPs multiple times and also procured more from farmers at MSP than any past government!
The new law will not affect MSPs adversely. MSP purchase on agricultural produce is done through State Agencies and there is no change in this due to this law.
MSP procurement from farmers is the top priority of the present Government and it will continue to be so.
2
“Trade & Commerce Act will replace the State APMC Act and affect the functioning of the APMCs”
This Bill is not intended to replace the State APMC Act and do not affect the functioning of the APMC Mandis.
APMCs will continue to regulate the marketing of agricultural produce within the physical boundaries of market yards. They can levy market fee within physical mandi as per their regulations.
The Act only provides farmers with additional marketing opportunities outside existing APMCs.
Both the laws will co-exist for the common interest of farmers.
3
(a)“Infringement into the States powers of making Legislation”
(b)“Encroachment in State Powers”
Inter-State trade falls within Entry 42 of Union List of the Constitution of India.
Though intra-State trade falls within Entry 26 of State List, the same is subject to Entry 33 of Concurrent List of Constitution of India.
Central government is fully competent and empowered to legislate here
Hence, no encroachment in State powers.
4
(a) safeguard is not provided to protect the interest of farmers”
(b)“Exploitation of farmers by Corporates”
Act provides sufficient elaborate mechanism to protect the interest of farmers.
Simple, accessible, quick and cost-effective dispute resolution mechanism is prescribed for the farmers against traders to prevent and curb any unscrupulous acts.
Payment has to be made to the farmers on the same day or within three working days.
5
“The Act doesn’t safeguard farmer payments.
The commission agents under APMC are verified and payment is secured.”
Payment has to be made to the farmers on the same day or within three working days.
Deterring penal provisions have been put in place for traders to curb any malpractices.
The penalty provision against trader will act as determent against any fraudulent motives.
6
“The Act doesn’t safeguard farmer payments.
The commission agents under APMC are verified and payment is secured.”
“Revenue loss of APMC mandis”
“The Act will block the ways for the state to generate revenue from agriculture trade and will lead to the closure of APMCs eventually giving corporates monopoly on agriculture trade”
The State/ APMC will continue to have regulatory powers to impose mandi fees and other charges within market yards/sub yards as per State Legislation.
State APMC Act and institutions established under such statutes will continue to operate and are not affected in any way by this reform ordinance.
But it allows for the development of private mandi infrastructure in the state and hence, improved market access for farmers.
The states with efficient services at APMC market premises will continue to attract farmers and generate revenue.
It is a win-win situation for farmers with both government and private buyers lining up to buy from them.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020 – National Contract Farming Act
Sl. No Myth Reality
1
Corporates will take over farmers’ land and farmers will end up becoming laborers
Agreement will be for crops and not for land. The land of the farmer will not be affected at all.
The law clearly disallows any transfer, including sale, lease and mortgage of the land or premises of the farmer.
The law ensures that buyers/sponsors/corporates are prohibited from acquiring ownership rights or making permanent modifications on farmer’s land.
2
The Act does not provide a legal safety net for farmers against corporates
Clear dispute resolution mechanism outlined. Some farmers have already got due compensation by taking legal recourse against traders.
No recovery of dues against farmers’ land. Farmer’s land is safe, no matter what the situation.
3
The Act does not provide any price guarantee for farmers.
The law clearly says that the price of farming produce may be mentioned in the farming agreement itself, which assures the price.
It also says that, in case, such price is subject to variation, then, the agreement shall explicitly provide for a guaranteed price to be paid for such produce.
If the buyer fails to honour the agreement and does not make payment to the farmer, penalty may extend to one and half times the amount due!
Some farmers have already benefited from this.
4
Big companies will exploit farmers in the name of contract
The contract agreement will guarantee the farmers to get the fixed price.
Farmer can withdraw from the contract at any point without any penalty
5
Such agreement-based farming has never been tried in India
Punjab already has a contract farming law.
PepsiCo already works with farmers of various states including Punjab through contracts, helping farmers realize better prices.

 

Modi’s Commitment to Indian Farmer
It is clear, therefore, that the three farm bills passed by India Parliament, earlier this year have been passed after extensive consultations in, which all stakeholders were on board; the laws will finally free the farmers from the unfair restrictions imposed on them; and will create a unified national market which will increase competition and thereby income opportunities for the farmers.
Prime Minister Modi has been one of the most consistent advocates of farm reforms and his life journey, and experience first as Chief Minister of Gujarat and then as Prime Minister of India are a testimony to this fact. As Chief Minister of Gujarat, he led the state in achieving double-digit growth in agriculture sector for successive years which created the base of growth of the state. It was his record of understanding the pulse of the farming sector that led to him innovating many new policies that propelled the farming sector. He brings the same experience in his Prime Ministerial stint and the record in the last six years are proof of that same commitment. Some of the measures taken since 2014 bear out that the farming sector has always been the top focus for Modi government and his push to double farm incomes are not just statements but actual policy. Take budgetary allocations, for instance. How much you spend on a sector are the firmest proof of your intention. In the year 2013-14, the Budget allocation for the Department of Agriculture was only Rs. 21,933.50 crore. In the year 2020-21, the Budget allocation has been increased by more than six times to Rs. 1,34,399.77 crore.
Or take the consistent focus of Modi government on not just increasing MSP but also procurement under MSP. MSP payment to farmers for paddy has risen by 2.4 times during the last five years in comparison to the period from 2009-10 to 2013-14. MSP payment of Rs 4.95 lakh crore has been made as against Rs 2.06 lakh crore of the previous five years.
MSP payment to farmers for wheat has increased by 1.77 times during the last five years in comparison to the period from 2009-10 to 2013-14. MSP payment of Rs 2.97 lakh crore has been made as against Rs 1.68 lakh crore of the previous five years. MSP payment to farmers for pulses has increased by 75 times during the last five years in comparison to the period from 2009-10 to 2013-14. MSP Payment of Rs 49,000 crore has been made as against Rs 645 crore of the previous five years. MSP payment to farmers for oilseeds and copra has increased by ten times during the last five years in comparison to the period from 2009-10 to 2013-14. MSP Payment of Rs 2,5000 crore has been made as against Rs 2460 crore of the previous five years.
The provision of PM Kisan, which provides the direct benefit of Rs, 6,000 per year to every farmer in India is another indicator of the deep understanding and sensitivity that the Prime Minister has towards our farmers. The amount is beneficial for the marginal and small farmer and contributes as an extra income for meeting many of his needs.
Future of Farming Sector
The latest reforms pushed by Prime Minister Narendra Modi, unmindful of any short-term political blowback by vested lobbies, are thus genuinely historic. They reverse not just a seven-decade-old stifling policy framework but in fact a seven-century old cycle of impoverishing India’s farmers and by consequence the rural economy.
The agriculture reforms are significant not just for India but for the larger world too. As free trade becomes a norm, income levels will rise in rural India, a population zone of over 600 million, there will demand of all kinds of goods and services. While this will undoubtedly contribute to India’s GDP growth, it will also be a significant opportunity for the producers of these goods and services, across the world, to cater to an entirely new market hitherto untouched.
(The author is CEO, Bluekraft Digital Foundation and was earlier Director, MyGov India)

 

 
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Published by
Archive Manager
Dec 8, 2020, 08:00 am IST

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