The President of India passed 3 Farm Acts in the wake of the Covid-19 pandemic on 5th June 2020 to bring the reforms in the current Agricultural system. This Research article will explore the 3 acts with the view to determine the objects and reasons and to build an understanding of the farmers protest against the promulgation of the acts.
This article also explores the constitutional validity of the passed acts with a detailed analysis of the federal structure and distribution of legislative powers between the centre and the states. The reasons behind the farmers protest organized by farmers of Punjab and Haryana are also discussed in this article while shedding light on the APMC system. This article also tries to find the solutions and reforms to the mentioned acts with an analysis of Farmer’s contention.
Introduction
On 5th June 2020, in the wake of the Covid-19 pandemic, the president gave his assent to the three acts passed by the parliament in the name of agricultural reforms, these three acts are-
- Farmers’ Produce Trade and commerce (Promotion and Facilitation) Act 2020;
- The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020;
- Essential Commodities Act (Amendment) Act 2020.
Ever since President Ram Nath Kovind gave his assent to these acts exercising his power under Article 123 of the Indian Constitution the farmers protest is being organized against these three acts by Farmer unions like Bhartiya Kisan Union (BKU) and All India Kisan Sangharsh Coordination Committee (AIKSCC). The unconventional and controversial voice-vote in Rajya Sabha when the bill was introduced to the lower house is discussed in this article as well.
What are these Acts about?
Before understanding what these acts are about it is important to understand the need for such reform in the Indian agricultural system. The first act describes the need for reforms in the APMC system under the Objects and reasons but before understanding, it is important to understand what is the APMC system that is governed by each state.
After India gained its independence, farmers were able to sell their crops to the consumer directly but then this system got replaced when the zamindari system became prevalent in rural India. Farmers faced immense scrutiny by not being able to handle the debt in which they were trapped due to the loans they took from local zamindars and money lenders which in return charged heavy interest on the principal loan amount. This made farmers vulnerable to losing their land and they had no choice but to sell the harvest to the local money lenders at a much lower amount than the actual price of the crop.
This called out for the zamindari system to be abolished and to reform the agricultural system to help farmers come out of the debt they were trapped in, thus while the green revolution was taking place, Agricultural produce marketing committees (APMCs) were set up. The State APMC Act in the bill defines it as ‘any State legislation or Union territory legislation in force in India, by whatever name called, which regulates markets for agricultural produce in that State‘.
Many experts believe that within the Green Revolution, the APMC Act played a serious role. APMCs founded Mandis or Markets across India where farmer’s produce was sold. Now, the method of selling the product is that after harvesting crops are dropped at the Mandis or Markets where they sell the produce through auctioning or price discovery.
Here, the farmers are not selling their crops to the mandis, but to the middleman or Arhatiyas who act as a chain or connect between these farmers and buyers. Some salient features of the APMCs are as follows. The government gives licenses to these Middlemen; shops, storage facilities, etc. are provided to them in APMC markets. Many people work in these APMCs, there is the storage of grains, so it requires laborers, accountants so overall it is a self-thriving ecosystem. These APMC markets are regulated by state governments, a tax is charged on each transaction so in a way government knows at price produce is being sold.
Some goods are not being bought to the market by the middleman but by the government. These government’s procured goods are bought at MSP (Minimum Support Price) which is constant throughout the country.
The problem in this system arose when the middleman started exploiting the farmers by forming cartels or creating an understanding between them where they bought the produce at MSP from the farmer but sold it at a much higher rate to the buyers like a vegetable vendor. For example, the MSP of onions is Rs 4-9/kg according to 2020 data but it is being sold for Rs 35-80/kg depending upon the states. Hence, MSP became Maximum Selling Price.
The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
Allows the trade of farmers’ produce (both interstate as well as intrastate) beyond the physical premises like the mandis in the APMC markets. Here, the state governments are not allowed to levy any ‘market fee, cess, or levy outside APMC market‘.
In other words, this new legislation creates an ecosystem that is farmer-friendly and allows farmers to have a choice regarding the sale and purchase of Agri-produce. This bill also proposed an electronic trading and transaction platform for a seamless trade electronically. In addition to mandis, farmers are also given the liberty to try and do trade at farmgate, cold storage, processing units, etc. Hence, farmers would be able to engage in direct marketing, effectively removing the middleman and intermediaries resulting in a full realisation of price.
Procurement of MSP will continue under this as well.
Hence, farmers can sell their crops at MSP rates as well. Mandis under the APMC system will not stop functioning but under this legislation, farmers would have an option to sell their produce in places other than mandis as well. The E-NAM trading would also continue and trading of farm produce would increase on electronic platforms resulting in greater transparency and time-saving.
Dispute Resolution: The Disputes arising in any farmer agreement must be resolved through the process of conciliation by a conciliation board appointed by the Sub-divisional magistrate under section 4 of the bill.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
Released on the 24th of September 2020 will empower the farmers for engaging with processors, wholesalers, aggregators, large retailers, exporters, etc, on a level playing field. In other words, the bill introduces the system of contract farming which is an alternative for the farmers to sell their produce outside the APMCs by setting up a cost-effective framework.
According to Chapter 2, 3(l) of the act, a farmer may enter into a written agreement that should provide the terms and conditions of the supply including time, quality, grade, standards, and price. The minimum period of the agreement shall be 1 season or 1 production cycle and a maximum of up to 5 years. In other words, the farming will be undertaken on a contractual basis with a pre-decided price and quantity. One thing to be highlighted is that the sponsor is restricted from acquiring the land of the farmer or for purpose of sale, lease, or mortgage of the land or premises of the farmer. Like any other contract, the farming contracts may terminate or be altered by mutual consent under reasonable circumstances.
Dispute Resolution:: The Disputes arising in any farmer agreement must be resolved through the process of conciliation by a conciliation board which will consist of representatives of the parties to the agreement, this an alternate authority in respect to disputes arising from these agreements is the SDM(sub-divisional magistrate).
The Essential Commodities (Amendment) Act, 2020
Received the President’s assent on 26th September 2020 is an Act that further amends the Essential Commodities Act of 1955 which primarily regulates the production and storage of essential commodities. The amendment primarily amends section 3 of the original act and inserts the clause 1A which empowers the central government to regulate the supply of the food items and impose a stocking limit on it under certain extraordinary circumstances which shall be discussed below:
- War
- Famine
- Extraordinary price rise (up to 100%)
- Natural calamity
The stock limit imposition described in the bill mentions that the stock limit shall be imposed on the crops only in cases of price rise to 100% on horticultural produce and 50% increase in the retail price of non-perishable agricultural food items the increase will be calculated based on price trends prevailing over preceding 12 months or the average retail price of last 5 years. Such an order of stock limit shall not apply to a processor or value chain participant of any agricultural produce if the stock limit of such person does not exceed the overall ceiling of installed capacity of processing or the demand for export in case of an exporter.
Constitutional Validity of the Acts
As mentioned at the beginning of the article the Unconventional and controversial voice-vote in Rajya Sabha at the time of introduction of these bills raised many questions on the constitutional validity of the 3 Acts which were promulgated by the president on 5th September 2020 in the exercise of his power under article 123. The main question arises here- Does the courts have the power to judicially review the president’s satisfaction of promulgating the act in emergency circumstances? Clause (4) of Article 123 which was later deleted in the 44th amendment of the constitution 1978, provided that the president’s decision of promulgating the act shall be final and binding and no court has the power to review it, in a judgment Supreme Court further expressed that the president’s satisfaction is not the final and conclusive decision and is open to judicial scrutiny.
Further, the acts are based on Agriculture which is a state subject under entry 14, and the markets under entry 28 of the list 2 in the seventh schedule of the Indian constitution, and making a bill on the state subject goes against the spirit of Cooperative federalism, according to farmers the passing of these bills goes against the very spirit of democracy as the farmers were not the part of decision making in the bills on whom the bill is made. However, the Centre argues that the trade and commerce come under the third list of the seventh schedule under Entry 33 thus giving the Centre the authority to make laws on agricultural trade and commerce of the state.
These acts are seen to have an overriding effect over the State APMCs which is one of the main reasons for Farmer’s contention. Although going by Entry 33, the center has the authority to make legislation on inter-state trade but at the same time passing legislation on the intrastate trade is a direct interference with the state’s power to make laws. It has already been pointed by the Sarkaria Commission report on Centre-State relations that Entry 33 is seen to empower the Centre to make laws on agriculture. Thus these acts are seen as authoritative and violative of the spirit of democracy and federalism. The Centre is bound to respect the exclusivity of powers as described in Article 246 of the Indian Constitution and should respect the Democratic and Federal spirit of our country.
Reasons behind the Farmers Protest
With all the contentions farmers have one of the biggest contentions is no mention of minimum support price (MSP), however, the Union food and Agricultural minister assures that the minimum support price is still in place and there is no need to worry about it, farmers does not want anything lesser than repealing of these bills. This is because they fear that the private players would take over the market and would easily be able to exploit the farmers through hoarding and other malpractices. This is because the nature of the bill itself is suspicious and not to mention farmers are still open to selling their produce outside of the APMCs, State APMCs never prohibit farmers from doing choice based marketing then what was the need to bring a parallel market system? This question is being raised by every farmer.
Farmers believe that these bills override state APMCs by creating a private market that is more open and liberal whereas the state APMCs have certain requirements like license, government monitoring, and market fees whereas in private mandis these requirements are absent. These provisions are the key reason why experts and farmers think that in near future APMCs will be abolished too as the private mandis do not require the taxes and market fees which in the case of State APMCs is a must. This abolishment of APMCs is another fear among farmers.
Many states like Punjab had also amended their State APMC act by the 2017 model APMC act to set up private market yards. Not only MSPs but this system also results in the Public Distribution system which will also ultimately be affected by less government intervention. Government intervention takes place at many places in the selling of the farmer’s produce when the product is not brought by traders in APMCs, the government takes this responsibility of buying the produce at MSP also government intervenes when there is a price crash in mandis but if the mandis themselves would be ended then the government would not intervene and thus will reduce end the MSP and PDS system of the ongoing market.
Also, Section 6 of the act mentions a waiver on market fees as already mentioned above which will lead to harmful effects on the bargaining power of the farmers promoting traders to buy the product outside the APMCs. Furthermore, this will lead to a reduction in the revenue collected by States through APMCs which is also mainly used to develop rural roads and linkage. Also, the middlemen who are being demonized by the government are viewed by farmers as their primary source of loan and the relationship is not only professional but more personal between the farmers and the middlemen, they are also responsible for other works such as storage and transport of the goods and without them, it is difficult for a farmer to bear this cost.
The second bill also has some major problems in it which has caused farmers to protest, one being the negotiating powers of the farmers against that of the big corporates and the other being the unavailability of courts in case of a dispute, both these problems are valid and cannot be ignored. The power-sharing ability in a contract is highly undermined by this bill, the farmers are the weaker party in front of a big corporate, not to mention a report claimed that 86.2% of farmers in India are small and marginal landholders(less than 2 hectares) which makes them vulnerable of exploitation by deceitful and one-sided contracts created by big corporates.
Another concern that arises relates to the three-tiered dispute settlement described in the Bill, first, a conciliation board, second, the Sub-divisional Magistrate, and third, the Collector or Additional Collector as the Appellate authority. This means in case of a dispute a farmer cannot move to a civil court but instead would have to apply to SDM, not to mention that farmers are already very poor to fight any legal battle against big corporates.
Coming onto the third bill some of the main contentions shown by the farmers are the abolition of hoarding limit which can lead to black marketing and price rise as it will enable the exporters and traders to adjust the demand and price of a particular crop, enabling them to store large quantities of crops until the price increases and then sell it which will be of no gain to farmers and will hurt the price of these food crops making the consumer at loss. Now since the bill is of no gain to consumers and farmers both then why is this legislation passed? Thus the question arises on the actual intention of the government to pass such regulation that too controversially in the wake of the pandemic.
Solutions to the Farmers Protest?
Since the bills are flawed they are subject to be changed and all the flaws should be looked upon by the government, the whole scenario has taken a political angle which again is making the farmers suffer, it is important to hear their demands before taking any further steps. Every voice should be heard in a democracy.
The verbal assurance of MSP given recently to farmers is not enough, giving it on paper is a must, thus the MSP should be made mandatory throughout the country. The Swaminathan committee has advocated the point that the farmers should be provided with an increase of 50% in MSP higher than the cost of production. Making MSP a legal right and constant throughout the country will help farmers get the right price of their crop as in the end after not being entertained by corporate traders selling their produce to the government is their last resort.
The second important solution to help farmers sell their produce is by strengthening the existing market system rather than indirectly ending it by bringing an alternative market. To strengthen the state APMCs, the government should instead ensure better road connectivity, setting up more APMCs closer to the rural area to lessen the transport fee, provide better storage facilities and electricity supply, and to make sure that government intervenes in the market to ensure better PDS. To lessen the burden of existing markets it is important to set up subsidiaries of it.
Climate change directly affects agriculture which also leads to farmers committing suicide in cases of failure of crop production, it is important to stop this from happening. Legislation should be introduced to save farmers in cases of crop failure due to natural calamities. Gaining trust is the most important step that should be taken by the government and the trust can only be gained if the bearers of the consequences are also made the part of the decision making enhancing the spirit of democracy, here the consequences are being faced by the farmers and unfortunately they were never made a part of the decision making which is also a major reason why the farmers protest is happening.
Conclusion
These acts are the prime example as to why decision making should involve the bearer of the consequences that arise from the wrong decisions of the government. These acts are constantly being thrown upon the farmers who are the actual stakeholders and the protests being done is one of the drawbacks of authoritative decision making.
Agriculture is often known as the backbone of India as the Indian economy rests on it majorly. Sure reforming the current agricultural is necessary but replacing it with another flawed system can only create new problems both for the country and its citizens, the flaws in the existing agricultural system could have been reformed without creating unnecessary provisions making farmers even more vulnerable, but disregarding them for raising their voices to validate political loyalties is even worst.
Instead of bringing stability in the existing market, these acts seek to indirectly benefit the rich triggering economic disparity again making the farmer suffer Thus the voices of the stakeholders should be heard and these acts should be reassessed.
Editor’s Note
The farmers protest / agitation on Delhi’s border is presently more than 50 days old, and the government appears to have made up its mind that it’ll neither put a stop nor revoke the three laws passed by Parliament. The dissidents say that the provision of dispute resolution under Section 8 does not adequately defend farmers’ interests. Farmers fear the proposed framework of conciliation can be misused against them. They say the act does not permit agriculturists to approach a civil court.
In those private member Bills, farmers’ leaders had pointed out how markets are being run by dealer cartels plundering primary producers right beneath the nose of the government. Presently, the three farm Bills will lead to a monopoly of dealer cartels while purchasing from farmers. Hence the court should look into this matter.
Submitted by Brahm Sareen and Bhawna Mangla of University School of Law and Legal Studies, GGSIPU.