FARMS ACTS 2020: FRIEND OR FOE TO FARMERS?
Indian Parliament, in the preceding year passed three bills related to agriculture and farming, together known as the Farmers Bill. The Bills include The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Bill and The Essential Commodities (Amendment) Bill. The bills received the assent of the President on September 27th, 2020, and then published in the official gazette.
After passage of the said bills, Indian politics took an entirely unusual twirl and all the politicians suddenly started talking about the betterment of farmers only. All of a sudden, it all became farmer centric, as the bills started receiving criticism and turmoil started creating, and thousands of farmers all across the country started protesting against the three Farm bills passed by the Parliament.
The major intention behind the passing of these Acts was to make the necessary agricultural reforms for the upliftment of the farmers. It is not veiled that even after 75 years of our independence; the agriculture sector of our country has not advanced much. Around 60% economy of the country depends on agriculture, yet it has been the most overlooked sector and farmers, even though being the backbone of the country, are the most unnoticed and ignored sect of people in our country. Their income is so less that it becomes difficult for them to feed their family, and that is why we see hundreds of our farmers committing suicide every year. The bills were passed with the objective of bridging this lacuna.
WHAT ARE THE THREE ACTS?
The three Acts are namely, The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act of 2006, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Act of 2020 and The Essential Commodities (Amendment) Act 2020.
The Farmer's Produce Trade and Commerce (Promotion and Facilitation) Act of 2006 is a law that promotes and facilitates the trade and commerce of farm products. This Act gives an discretionary alternative to the farmers to sell their agricultural produce outside of the physical markets established by state “Agricultural Produce Marketing Committee laws (APMC acts)”. This Act encourages farmers' produce to be traded freely within and between states. It also proposes the development of an electronic trading network for direct and online produce trading. The act contains various provisions that aims to change the current functioning in agriculture sector and seeks to make the procedure convenient, expeditious and expedient. The Act allows farmers to trade anywhere outside of state-notified APMC markets, including farm gates, cold storages, companies, warehouses and other locations. This will ensure that the farmers have more access and exposure to market. Fees, cess, or any other payment on farmers' produce is prohibited by state governments or APMCs.
Another Act is Farmers (Empowerment and Protection) Price Assurance and Farm Services Act of 2020. This Act focuses on increasing the income of the farmers and attempts to provide them a basis to involve themselves in contract farming, in which farmers enter into a direct agreement with a buyer (prior to the sowing season) to sell their produce to them at a “pre-determined prices.” The act allows farmers and sponsors to enter into farming agreements. Any third parties involved in the transaction (such as aggregators) must be listed expressly in the contract. State governments may establish registration authorities to provide for an electronic registry of farming agreements. Agreements can cover supply, quality, standards, price, and farm services, and they can cover mutually negotiated terms between farmers and sponsors. This will enhance the value of the farmers’ produce and will ultimately help in paving path for increasing their income.
And, the third is the Essential Commodities (Amendment) Act, 2020. This is basically the amendment to the Essential Commodities Act of 1955 which aims to limit the government's ability to control the output, procurement, and distribution of such primary commodities. A few things have been removed from the category of “Essential Commodity”, such as Cereals, pulses, oilseeds, edible oils, onion, and potatoes are no longer considered essential commodities under the act.
WHAT IS THE NEED OF THE ACTS?
The existing system of selling the farm produce, governed by APMC Act, 2003, which involved APMC Mandis and the middlemen, had become inefficient for the farmers, specially the small farmers. Though the Act was designed to protect farmers’ interests, it perversely rendered farmers dependent on middlemen, who are known to charge “more than just a commission” for the services they render. Small farmers could not take benefit of MSPs as the APMC Mandis were out of reach for them for they could not afford the commission of middlemen.
The new Acts attempt to bring about the much-awaited and much-needed reforms in the agriculture sector. The common idea behind these three Acts is to allow and facilitate the private players to enter into the agriculture sector and invest in agri-food supply chains conveniently and effortlessly, resulting to gains in efficiency downstream along the supply chain and that these gains will be passed on to farmers in the form of higher output prices or lower input prices as the case may be.
THE ACTS: MAIN CONCERN-
As mentioned before, India is primarily an agrarian economy. These three Acts envision transformation in some significant facets of the farm economy, for instance, trading in agricultural commodities, price assurance, farm services including contracts, and stock limits for essential commodities. These Acts seek to bring about the much needed reforms and usher a revolutionary change in the agricultural marketing system such as creating trading areas free of middlemen, removing restrictions of private stock holding of farm produce and take the market to the farmer.
Here, a foremost question that arises in our minds is that if things are these great, where does the problem lie? Why are so many farmers protesting against it? Precisely the entire conundrum is in relation to the fixation of MSP. There is this situation of perplexity and uncertainty among a group of farmers regarding the same. Basically the Acts provide for setting up of new private markets where no taxes will be charged for transactions which would save taxes. Since the transactions will be tax-free, the speculation is that that gradually all the traders will start buying farm produce from private markets which will eventually result in the end of APMC. So, the concern is that with the end of APMCs, MSP will also end. However, it is pertinent to mention that such is not the case. The Acts nowhere mention that APMC markets will be ended, they only seek to expand the horizon for farmers to explore more alternatives for selling their produce and earn more profit. Another fear of the farmers is that the Acts provide for contractual agreement with private players, slowly with time these private players will start exploiting them and take their land away from them.
ECONOMIC ASPECT OF THE ACTS
The economic aspects of these Acts rather the pricing scheme in particular, can be divided into two approaches. According to the new Acts, the new market structure which would be set up would determine price either according to the demands of the consumers or would be as per the contractual agreement.
Pricing according to consumers demand
Now, in the first case, where though the farmer has gained the freedom to sell anywhere through the country, practically this can only be undertaken by fraction of the farmers who are educated and socially aware, thus providing them the opportunity to explore untapped markets or markets with high demand which has less suppliers. But this is a viable choice only for a limited number of farmers, since due to lack of knowledge, resources and following the traditional ways of selling their produce, most would continue to depend on the pre-existing structure of Mandis and selling it for the Minimum Support Price (MSP).
Pricing according to the contractual agreement
And in the second case, in the case of entering into a contractual agreement with seller, the produce is either sold in a pre-determined rate according to the contractual agreement as laid down by The Farmers Agreement on Price Assurance and Farm Services Act. The apprehension here is that this may expose the farmers to exploitation in the hands of private corporate. These contracts may act as breeding grounds for their exploitation. With price fixed before the actual production of the goods, leaves the producer in a disadvantage as when the final produce is ready, they may be worth much more than the agreed amount due to various market factors and thus depriving them of this benefit. Though the Act lays down sections covering pricing of farming produce in a contract, it is to be borne in mind that a larger fraction of farmers in India lacks the essential knowledge and information required to make a rational decision to get a fair deal. Most farmers are impoverished and would be the ideal targets for exploitation. However, all the farmers, big or small, if educated enough to understand their better and able to make informed decisions must reap the benefits of the flexibility of the proposed free market.
PITH AND SUBSTANCE OF THE ACTS
To decide the true nature of any Act and whether the Act is ultra vires or not, the doctrine of pith and substance is applied; and, its spirit is quintessentially analyzed. The doctrine’s role is imperative here as it prevents a statute from being held unconstitutional merely on the ground that it trenches into the restricted legislative domain by accident. Any incidental encroachment by a statute on a prohibited field may not impair the competence of the concerned legislature to pass the law until it is determined that it falls within the permissible field in pith and substance. In the case of these three laws, pith and substance of laws cannot be simply said to be trade and commerce. These laws are supposed to regulate the entire agriculture process.
Prime Minister Narendra Modi while addressing the nation said that these three Acts will bring radical reforms in the agrarian sector by shifting its old pattern, now every farmer will have an opportunity to move outside the APMC premises to sell their produce. They will no more be just stuck to the only market, they will have right to move freely and decide on their own will that who do they want to sell and where they are getting the best price for their produce. This will instill a sense of empowerment in the farmers.
NATURE OF THE ACTS- COLORABLE OR COMPOSITE?
In view of the theory of colorable law, it is crucial to scrutinize and evaluate as to what is the scope and sense of legislative responsibility in relation to the power bestowed on it. Talking of competency of the union government to pass the Acts, it is to be understood that though agriculture being a state subject under Entry-14 of the State List (List-II) of Schedule-7, the union government under Articles-248, 249 of the Constitution is empowered to make laws on any subject of the state list using their residuary power. Further, the union government is also empowered by virtue of Entry-33 of the Concurrent List (List-III) under the 7th schedule to make laws in matters of public interest. The Supreme Court has observed in Ujagar Prints v. Union of India “In deciding the validity of a law questioned on the ground of legislature incompetence the State can always show that the law was supportable under any other entry within the competence of the Legislature.” Hence, the union government did not transgress their limits and the laws have been lawfully passed within the constitutional periphery.
We need to understand that overall development of the country cannot be achieved only with urban development as it does not lie entirely in the economies of the urban sector. It decisively lies in the revival of the rural areas with dignity and respect.
There can be no denying that the existing system of selling farm produce to the market was flawed and it certainly did need change. The farmers in our country are in a pathetic space which needs to change. The shaken confidence of the agrarian sector must be restored.
In order to strengthen our agriculture sector, these reforms were essential but due to some loopholes in the Acts, they are facing criticism of people. While the intent of the government is laudable, these loopholes must be bridged. If these loopholes are bridged after consultation with the farmers, they can bring a positive change in the agrarian sector and in the lives of our farmers.
Constitution of India
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, No. 21, Acts of Parliament, 2020
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, No. 20, Acts of Parliament, 2020
The Essential Commodities (Amendment) Act, 2020, No. 22, Acts of Parliament, 2020
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Ujagar Prints v. Union of India; 1989 AIR 516, 1988 SCR Supl. (3) 770
This article is written by Soumya Mani, who is a final year student of BBA LL.B (H) from Amity Law School, Amity University, Lucknow.