In a country like India, Agricultural Industry contributes to 16% of the country’s GDP, and 60% of the population is involved in this field 1but the capacity of the majority of farmers to invest and save is very low, where their agricultural productivity is low too, due to insufficient use of inputs. Therefore, farmers need credit to increase their efficiency and agricultural productivity. The farmers need an ecosystem that would empower them to make the right decisions and are treated with dignity and respect. Like an entrepreneur, even farmers need data, tools, and funds to succeed. The farmer acts were initially created during the period of the Great Depression with the aim of giving financial assistance to the farmers who were struggling because of excess crop supply, leading to low prices and to ensure and control sufficient food supply. The combo of the three acts passed by Lok Sabha received backlash by farmers in Punjab and Haryana where farmers are protesting to take these ordinances back. Whether these acts will be a boon or bane for the farmers of the country is a controversial question. Although the farmers are expecting the downfall in the implementation of the acts, the nation hopes that these acts turn out to be a success and the conditions of the farmers improve.
HOW IT WAS PASSED IN THE PARLIAMENT
In the last few days, there was a lot of distress in the Rajya Sabha regarding the farmer’s act. Some MPs were suspended, some were sitting on a protest, some oppositions claim that democracy has been reduced to a joke in our country. On the 24th of September, Union Minister of agriculture tabled the farmer’s act in the Rajya Sabha 2the government assured that these acts will uplift the farmers and assured that these acts are not related to minimum support price. Few opposing members in the Rajya Sabha moved an amendment to send these acts to the select committee of the Rajya Sabha. Despite of this, these acts were passed through voice vote whereas the opposition continuously demanded division of voting but were overruled by the deputy chairperson. This fuelled the ongoing protest, few MPs walked up to the deputy chairman showing him the rulebook of the Rajya Sabha, where it was claimed that the rule book was a teardown. A few MPs even broke the microphone, during this time Rajya Sabha TV stopped its broadcasting and all the microphones were put to mute as if the proceedings were censored.
DOES CENTRE HAVE THE POWER TO FORM LAWS IN THIS AREA?
The allocation of powers and functions between the Union & the States is defined under the Seventh Schedule of the Constitution of India. It contains three lists, that is, the Union List (where only the centre can make laws), the State List (where only the state can make laws) and the Concurrent List (where both centre and state can make laws).
Agriculture comes under list 2- Entry 143, which mentions that it is a part of the state list, and as per the jargon, agriculture comes under the domain of state list where only the state can make laws such as agriculture research and agriculture produce. Therefore, this implies that the centre does not have direct powers to make laws concerning agriculture. Article 248 of the constitution states that Parliament has exclusive powers to make laws with respect to any matter not enumerated in the Concurrent List or State List4 and article 249 gives Powers to the Parliament to legislate in matters in the State List in the national interest5 which implies that the centre holds the power and can make laws concerning state list. Entry 33 of the concurrent list, reduces the power of the states to make laws with respect to agriculture where it is mentioned that the centre can also make laws in the matter of agriculture. Therefore, according to this act, the centre has passed the essential commodities act, whereas, the centre does have the power to legislate in the maters of agriculture.
CAN THIS ACT BE CHALLENGED IN THE SUPREME COURT?
The farmer’s act was passed in a very chaotic proceeding of parliament, where a lot of failures happened in Rajya Sabha such as destroying the microphones, standing on the desk, actions with the speaker, not taking a vote, and such actions question the spirit of democracy. According to article 122 of the Indian constitution, any irregularity, illegality, or unconstitutionality of the preliminary proceedings of the parliament can be challenged in the Supreme Court6 but in practical circumstances, all parliamentary proceedings are given immunity from the purview of the judiciary, so the supreme court cannot interfere in these proceedings, thus, it cannot be challenged in the supreme court.
In 1947, after the independence, the farmers used to sell their agricultural products directly to the consumers, but due to the prevailing system of zamindars, most of the farmers were in debt and were continuously paying high interests to money lenders and whenever the farmers fail to pay their interest, those moneylenders used to buy their agricultural produce at a very cheap price and the next production farmers had to again take a loan from those moneylenders. This became a death trap in which farmers were stuck and could not escape and they were continuously exploited. To stop this continuous exploitation of farmers, Government introduced the Agricultural Produce Market Committee (APMC Act); According to this act farmers were refrained from selling their products directly to the consumer nor anyone can directly purchase from them, all the sales were supposed to be done through “mandi” which was established through the APMC Act and the state governments were given the power to regulate the “mandis”
THE APMC ACT AND ITS FLAWS
Each state government has their own Agricultural Produce Market Committee (APMC) and the states divide the “mandi” according to their area and each area has its specific “mandi”. If any trader wants to purchase from the “mandi” then he has to acquire a license of that specific “mandi”. Similarly, farmers of that area were only allowed to sell their produce on that specific “mandi”. This system of selling and purchasing agricultural products from the specific “mandi” is mandatory for farmers and traders. So, if a trader wants to purchase products from APMC then he has to acquire a license from APMC.
In “mandis” Auctions are done to sell the agricultural products. Auctions can be classified into two sub-categories: –
Minimum selling price (MSP) which is decided by the government, therefore, “MSP” lays down the minimum selling price of the crops, MSP is not for all the crops as of now there are only 23 such crops for which the government decides the minimum selling price so the products cannot be sold at a lesser price from that decided minimum price. Therefore, MSP is the starting level from which the auction starts.
In the second system, the crops that are not listed in MSP are sold by the price discovery system. In this system, the price is determined/discovered by the demand and supply of that product in the market.
The produce gets sold through the auction system, under the APMC the produce goes through the supply chain. This means after the production of the crops by the farmers and before the consumption of those products by the consumers there are a lot of middlemen in the process. According to this supply chain, farmers will take his produce to the APMC “mandi” and there he will deal with an agent also known as “arthyias”; these commission agents will take the farmer’s produce to the traders for selling the products, there they will negotiate and discover the price. Generally, this process is not transparent and after the transaction, the agent tells the farmer the end price of his produce. The agent charges 3% market fees on the price, the farmer is going to get, that is paid by the farmer. And now from the trader, the produce goes to the wholesaler, retailers, the venders, and finally to the consumer. And by the time it reaches the consumer the actual cost of the product increases by 50% and at least 25% of the total produces gets wasted. In short farmers are not getting paid enough for their produce.
In this current system of APMS, there are two major flaws:
• As the APMS are totally under the control of state government, a lot of farmers complain that these traders are only those people who have a good political connection, therefore only those people become traders who are close to the state government, not others.
• Due to too many middlemen/agents between the farmer and the consumer the final product is sold at a very inflated price to the consumers and the farmer has to sell the products at a very cheap rate.
But in 1963, When the APMC act was introduced its objective was to protect farmers from the moneylender and the middle man’s exploitation but in the changing times, this act became the reason of exploitation of farmers. APMC act lays down the principles of MSP but in many situations, the traders form a group/cartel and protest not to buy the produce at the minimum selling price in the particular “mandi”. Because the agricultural produce of the farmer is perishable in nature which means farmers have to sell their product within a limited period of time. Traders take advantage of this situation and form a group and don’t purchase the product at MSP. Therefore, farmers are forced to sell their produce at a minimum price. Apart from this, in India, the MSP is not determined regionally. This means, that the market price of rice can differ in different regions of the country but the MSP will be the same as the whole of India.
Due to the above-stated reasons, the APMC Act has become the reason for monopoly and exploitations it is serving as a counterproductive system. Even if the government does not consider bringing new farm acts, there is an urgent need to rectify the APMC Act for a long time.
ACT-1 (THE FARMERS PRODUCE TRADE AND COMMERCE (PROMOTION AND FACILITATION) ORDINANCE, 2020)
The Trade and Commerce Agreement creates a framework of a contract between the buyer and the farmer before the rearing or production of any farm product. This agreement provides a three-level dispute settlement mechanism that consists of three important bodies which were, the Sub-Divisional Magistrate, the Appellate Authority, and the conciliation board.
• The farmers produce trade and Commerce promotion and facilitation act allows barrier-free intra and interstate trade of farm produce
• Previously farm produce was sold at a notified wholesale market on Monday is run by the APMC
• Each APMC had a licence middleman who would buy from farmers at prices set by auction before selling to institutional buyers like retailers and traders
• The new system, allows the farmers to eliminate the middleman and directly sell the products to institutional buyers at mutually agreed prices.
• However, farmer groups are worried that this would expose them to corporates who have more bargaining power and resources than small and marginal farmers
• 85% of the farmers own less than 2 hectares of land it is very difficult for them to negotiate directly with the large-scale buyers.
• Alternative private Mandi will lead to the ultimate closure of the existing APMC Mandi
• No tax on private “mandi”
• Removal of Geographic restriction small farmers may find it difficult to avail potentially avail better prices at markets further away because of constraints on travel and storage
• There is no restriction on farmers to sell their produce elsewhere, just like previous times
• If a private buyer starts purchasing directly from the farmers they will lose out on taxes that are charged at APMC Mandis
• The potential scrapping of Mandi is middleman endangers the job of million who work there
ACT-2 THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ORDINANCE, 2020)
The major purpose of the Empowerment and Protection Agreement was to provide access to a national framework for agreements to protect and empower farmers to engage with Agricultural based business firms, wholesalers, exporters, processors, or large retailers for farm services and the sale of final farm products at a mutually agreed remunerative price transparently and fairly.
The new bill will allow the farmers to enter into agreements with the Agri-firms, exporters, or the large-scale buyers to produce a crop at a pre-agreed price.
Farmers are worried as it would mean the MSP will be removed and there will be no government control over the prices. They are demanding to link MSP to contract prices. As eventually, the prices will go down in private mandis if there is no alternative government-controlled body to regulate them.
The main objective of introducing a private mandi into the market is to provide an alternative to the farmers but connecting MSP in these markets as well will contradict the basic objective of the acts.
ACT-3 (THE ESSENTIAL COMMODITIES (AMENDMENT) ORDINANCE, 2020.)
The major aim of the Essential Commodities (Amendment) act is to allow economic agents to stock food articles freely and without the fear of being prosecuted for hoarding. The Amendment ordinance introduced a new sub-section 1A under Section 3 of the act that would stipulate control orders of supplying certain foodstuffs that may be issued under extraordinary circumstances such as famine, war, extraordinary price rise, or any kind of natural calamity. However, if stock held by a person does not exceed the overall ceiling of the installed capacity of processing the orders regulating the stock limit will be inapplicable to a value chain participant of an exporter by the ordinance. But in the extraordinary circumstances, the government ‘may’ only choose to exercise regulation because, in such legislative ambiguity, one may question the entire exercise of introducing this particular provision. Sudden changes such as the removal of stock limits or exemption to traders, exporters, and value chain participants may not directly help farmers. Multi-national corporations (MNCs) may prefer to stock up their limit at the time of harvesting during low prices and, thus, this will not be bought from farmers when prices rise.
But after the introduction of the act, according to the Economic Survey, 2020, India no longer faces food shortage problems because the production of food grains had increased since the 1950s and India is also an exporter now, thereby leaving the act to be archaic. The population of India has increased from 360 million in 1951 to 1.3 billion in 2020, which means more mouths are supposed to be fed and the responsibility of food security cannot be ignored and the sight of a migrant scraping for morsels of food during the novel coronavirus pandemic continues to haunt. The agriculture in India is still dependent on the monsoons for producing sufficient food grains and a majority of farms held in India are very small and marginal. The timing of this amendment ordinance, will benefit the big traders, big corporates and MNCs more than affecting the farmers directly.
WHY FARMER’S ARE PROTESTING?
While according to the government these acts will provide farmers a more free and flexible system. Whereas the farmers are in the view that the government is trying to take away the minimum support price and by destroying the monopoly of APMC “mandi” thus resulting in the private operates, traders, commission agents stating prices even below the prevailing MSP. Farmers also believe that these acts will ravage the peasants.
The major reasons for the protest are: –
• The acts are more favourable towards the companies and not legally empowering the farmers.
• MSP to be made a legal right. Currently, procurement is not done for all the 20+ crops for which MSP is declared.
• APMC needs reforms which should not to be removed.
• The middleman plays important role in the agricultural sector thus, they should not go away.
• Investment in the agricultural sector must be from the government instead of the private sector.
The All India Kisan Mazdoor Sabha (AIKMS) had kept certain demands in front of the government, such as, ensuring that the procurement price of all agricultural products should be one and a half times the cost of total production. The Leaders alleged that the present fixation of procurement price by the government lacks proper logic and is too arbitrary, where certain agricultural products do not even have any price prescribed by the government. The AIKMS believed that while assessing the cost of total agricultural production,
The valuation of land rent and family labour has to be included excluding the normal costs related to power consumption fertilizer, seeds, pesticides, and irrigation among others.
In a state like Odisha, where the majority of the peasants are sharecroppers, land rent was never considered while calculating the production cost. Apart from this, the cost of labour contributed by the family members of a peasant is not taken into consideration while making the accounts. Therefore, this demeans the efforts and importance of the workforce.
Thus, the farmers demanded these two major factors to be included while calculating the total production cost of agricultural produce.
According to the leaders of AIKMS, the government should also make efforts necessary to reduce the input cost of agricultural produce, so that would ultimately result in a reduction of its price in the market. Presently, the reduction of price in the market only means a loss for the poor farmers as the input cost is very high and is still rising.
Four major demands of the farmers: –
• Rollback all the three ordinances
• Protect the APMC Mandis
• Clear the loans of the farmers
• A national regulation law must be made for MSP to be at least 50% more than the weighted average cost of production
The solutions to the demands are as follows:
• True independence for the farmer would be assured MSP, both within and outside the APMC Mandi.
• The minimum selling price should be the legal right of a farmer.
• The government investment in the agricultural sector should increase.
• Major reforms in the APMC act and the network of the mandis must be improved.
• The government should provide farmers with an assured income for their production.
The major intention of the proposed legislation was to help small and needy farmers who do not have the means to bargain for their produce in the market or invest in the technology to improve their rate of agricultural productivity. The 2020 farm bill seeks to allow the farmers to sell their produce outside APMC to whoever they want. Because of this, the commission agents of the ‘mandis’ could lose their ‘mandi fees’ and commissions (one of the major reasons for the protest). The farmers have been alarmed about this bill because of getting Minimum Support Price for their produce and also about the big retailers and agri-businesses in negotiations. The simplest solution with respect to the protests for the farm bills can include procurement and statutory backing to minimum selling price in the 2020 bill to wipe out the fear among the farmers. Farmers should be provided with the choice, to sell without the requirement of middlemen, but this is possible only when the roads of villages are linked to the markets, they are provided with climate-controlled storage facilities, the supply of electricity is reliable to power those facilities and there are food processing companies to compete for buying their products. There must be a regulatory and controlled mechanism to make sure that farmers are not being exploited, where policies should be set in such a way that it suits the needs of the 21st century. For example, if due to any reason, the exports get canceled, then farmers should never be exploited for this. The government had declared MSPs for crops but it was not a legal implication. The government has the option to procure the MSPs if they want and thus MSP will be there and procurement by the government continues, therefore, this fear should be clarified and farmers should be guided in this regard. The government must pull back its control from the agricultural and farming sector as the existing system is creating a monopoly. The monopoly does not allow a fair play and only a few could take advantage of that system, which is a problem that should be addressed and can be worked upon.