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The Farm Laws 2020: A Tug of War Between Farmers and Government

Author:

Ritwik Mahanti, Student, Kalinga Institute of Industrial Technology( School Of Law)

(Image Source: AP via news 18)


Farming sector in India is one of the most underdeveloped sector of Indian Economy employing around 60% of Population it only contributes around 18% in GDP. Average farmer still earns around 3142 rupees per month. These figures prove that there is an immediate need of reformations in this part of Economy.


Recently government of India Passed three acts in Parliament to remove the ordinance passed by government in first week of June 2020 which lead to mass protests by farmers all across India especially by farmers of Punjab and Haryana. The name of Acts are as follows

The three acts include:


Farmers Produce Trade and Commerce (Production and Facilitation) Act, 2020 [1]

  • Increases the extent of trade areas of farmers' produce from select areas to "any place of production, collection, aggregation".

  • Allows electronic trade of any scheduled farmers produce

  • prohibits state governments from applying any market fee, cess or levy taxes on farmers, traders, and electronic trading platforms for trade of farmers' produce conducted in an 'outside trade area'.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 [2]

  • Constructs a legal structure to enter into pre-formed contracts with buyers mentioning price.

  • defines a dispute resolution mechanism.

Essential Commodities (Amendment) Act, 2020 [3]

  • Removes consumables such as cereals, pulses, potato, onions, edible oilseeds and oils, from the list of essential commodities, allowing for their storage except under "extraordinary circumstances"

  • requires that imposition of any stock limit on agricultural produce be based on price increase.

Together this three acts aspire to deregulate and liberalise the agricultural market. It allows farmers to engage in contract farming selling their produce outside APMC markets and expanding access to the market as it breaks the monopolistic structure of APMC- FCI structure. The amendment allows stockpiling of staple crops to become commercial. The above blog tends review the arguments for and against the Farm Laws and then provide its own conclusion. But first we need to understand what APMC and MSP are and why are they so important.


What is APMC and why is it so relevant? [4]

Agricultural Produce Market Committees (APMC) is the marketing boards established by the state governments in order to end exploitation incidents of the farmers by the intermediaries, where they were forced by middlemen to sell at extremely low prices.

All the produce should be bought to the market where it is sold via auction. Licences are issued to every trader to operate in this market. And no retailer or any shopkeeper can directly purchase from farmers.


Why the APMC Act is Essential for Farmers? [5]

APMC laws had undergone a several modifications over the years to avoid exploitation of farmers and protect them from the middlemen why not allowing middlemen to abuse their power at the time of weighing or payment for produce.


Far-reaching changes were introduced into the APMC Act such as creation of a revolving fund to apply the Floor Price Scheme to protect the interests of farmers, allowing contract farming companies to procure directly from farmers with a predetermined agreed price and so on. e-marketing initiative of the State Department of Agriculture Marketing is considered as a novel one and emulated by several States.


What is Minimum Support Price?

The minimum support price is a minimum price set by the Government of India to purchase directly from the farmers. This rate is to maintain a minimum profit for the harvest, if the open market has lesser price than the cost incurred.


What was the need of introducing MSP?

On the wake of the Green Revolution, Indian policymakers realised that the farmers need some incentives to grow some crops otherwise, they won’t opt for crops such as wheat and paddy as these are labour-intensive and do not fetch lucrative prices. Hence, to, the MSP was introduced in 1960s to boost production by giving incentives to the farmers.


The understanding of the concept of MSP and APMC will make strength and weakness of the above mentioned act clear to the readers


Strength and opportunities of Farm Acts 2020

1. With the passing of above mentioned acts the union government seems to liberalise the current farming system which relies heavily on APMC and middlemen also known as adtiyas, with passing of the current farm acts the farmers of the country will no longer be dependent on APMC to sell their produce and can sail where price is high, gaining more profits. This will help farmers to earn more currently a farmer earns around 36,398 R.s. annually which is quite less, the above acts will help farmers to increase their incomes by allowing them to sell their produce in a place where they can get maximum amount of payment for their proceeds.


2. Secondly there will be no more need of licences for traders to trade in crops and this will reduce the paperwork reducing red- tapism in the system.


3. Thirdly and one of the most important advantage is that it will attract private investments in the agricultural markets which is in dire need of funds in order to improve various systems like cold storages and other infrastructures improving this will lead to much awaited modernisation in agricultural sector improving the output and the income generated by farmer itself.


4. Fourthly, with the introduction of one nation one market all the markets will become national facilitating easy transactions and markets which are in dire needs of commodities which are grown in some other part of the country can easily be transported with fewer restrictions which in turn will give farmers better options to sell their commodities at higher price increasing their income. It also facilitates farmers to sell their produce online which will in turn help him to break the shackles of traditional markets and make him more independent by reducing his dependence on middlemen to their produce.


5. Introduction of Contract farming will insure farmers from unnatural calamities as price will be prefixed farmers shall bear no loss if the output is destroyed in between, Companies on the other hand will provide fertilizers, pesticides and other requirements which in turn will reduce input cost maximising profit.


6. Finally, Essential commodities bill, 2020 can help in stabilising the prices. For example, if the onion supply is more than the demand, they can store them to prevent the price fall greatly helping the common man who suffers the most during such crisis.


Weaknesses and threats of Farm Acts 2020

1. By reducing the status of APMC mandis the government is risking the possibility of farmers getting lower prices than the assured minimum support price (MSP). Similar happened in the case of Bihar where provision of APMC was abolished by the state. A recent study by National Council for Applied Economic research found that abolition of APMC made grain prices volatile. Bihar witnessed an impaired growth in Agriculture since then this is the reason why many economists believe that improving the existent market system seems to be a better course of action then scrapping it off entirely. [6]


2. The government has tried to reduce the importance of adtiays or middlemen by allowing farmers to directly trade with the companies but the companies who engage in contract farming may even employ these middlemen in their behalf as companies are unaware of tradition of markets if this happens not will the purpose of these acts will fail but the smooth and cordial relations between adtiyas and farmers will be destroyed as they will now act for the benefit of companies not for the benefits of farmer, even if it does not happen still farmers will lose a trusted helpmate for example in many parts of Punjab and Haryana farmers would take loans from adtiays and used to pay for a small interest. Now with them not existing farmers can be at loss.


3. Farmers sell generally near their close by markets therefore allowing them to sell anywhere they want is a superficial idea as 85% of the Indian farming community comprises of marginal farmers who do not have access to markets or transports, transporting goods to faraway places costs them more than the profits they make.


4. Contract farming may make farmers slave of companies as with demolition of monopoly status of APMC there will be no legal guarantee backing traders to give certain amount to farmers as MSP will be abolished, hence there might arise a scenario where companies in order to sell at cheap prices offer very low prices to farmers to minimise cost and hence instead of these acts increasing their income their income might even reduce. And chances of exploitation of farmers may arise.


5. Many experts argue that as the bills have been passed with much less deliberations and debates due to this there might be lack of support by state governments, a shining example is what has been done in Rajasthan where they have undermined these acts by exercising their power given under entry 33 of concurrent list which gives power to both centre and state to form laws on the issues related to farming. [7]


6. As the farmers have limited resources and corporates do have large pool of legal personal they can easily overpower the farmers causing an avalanche of legal cases against them and as most farmers are unaware of the legal technicalities of contracts the corporations might threaten farmers to follow their whims and fancies and unduly exploiting them to corporation’s maximum advantage.


7. As allowing traders to store essential commodities under essential commodities act government has allowed them to artificially increasing the price by illegal storage to inflate price this can cause serious losses to consumers and also cause shortage of food items during crisis.


Conclusion

Despite proclaiming it to be much needed revolutionary step in the field of agricultural reforms these bills come with their fair shares of loopholes and rushing the bills in parliament has proven that union government may have been compromising the interest of farmers. Had been these would have been more discussed these loopholes would have been somewhat fixed garnering much required trust from all sides. A more inclusive approach is required for transformation of agricultural sector. A serious discussion should be done on the subject of completely removing the APMCs or improving their shortcomings with all the parties and then propose any amendments.


References

1) https://krishijagran.com/agriculture-world/what-is-apmc-and-msp-why-farmers-are-protesting-for-it/

2) http://www.legalserviceindia.com/legal/article-3903-farm-bill-2020.html

3) https://www.ibef.org/industry/agriculture-india.aspx

4) https://www.downtoearth.org.in/blog/agriculture/farm-bills-2020-who-are-they-meant-to-serve--74540

5) Rathore., Mahipal Singh. “Are all 3 Agriculture Bills Anti Farmers?”. YouTube uploaded by Study Iq, 23 September 2020, https://youtu.be/oQlicIzQork.

Opinions expressed in the blogs are the sole responsibility of the author(s) and do not necessarily reflect the views of The L Word Blog.


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