This article is written by Anindita Deb, a student of Symbiosis Law School, NOIDA. This article is aimed at discussing the provisions of the bills passed in 2020 with the objective of farmers’ welfare.
On September 17, 2020, the Lok Sabha enacted two laws aimed at improving agriculture in the country and increasing farmer income. Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar, introduced the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, and the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, in the Lok Sabha on September 14, 2020, to replace ordinances promulgated on June 5, 2020.
Shri Narendra Singh Tomar stated that Prime Minister Shri Narendra Modi’s government is entirely devoted to the welfare of the Gaon-Garib-Kisan. While farmers would no longer be restricted to selling their produce only at designated locations, he emphasised that the procurement at the Minimum Support Price will remain, as will the operation of mandis formed under state laws. These laws, according to the Union Agriculture Minister, will bring about revolutionary transformation and transparency in the agriculture sector, increase electronic trading, accelerate agricultural growth by attracting private investment in supply chains and agricultural infrastructure, create employment opportunities, and boost the rural economy.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
This Bill aims to create an ecosystem in which farmers and traders have a choice in the sale and purchase of their produce, allowing for remunerative prices to be achieved through competitive alternative trading channels, and promoting efficient, transparent, and barrier-free inter-State and intra-State trade and commerce of farmers’ produce outside of physical premises.
State Agriculture Produce Marketing Committee (APMC) laws govern most agricultural markets in India. APMCs were established with the goal of promoting fair commerce between buyers and sellers in order to effectively price farmers’ produce. APMCs have the authority to:
- Regulate the trading of farmers’ produce by issuing licences to buyers, commission agents, and private markets;
- Impose market fees or other charges on such trade; and
- Provide required infrastructure within their markets to support the trade.
Farmers in India were subjected to a variety of limitations when it came to marketing their products. Farmers were restricted from selling agri-produce outside of the APMC market yards that had been notified. Farmers were also forbidden from selling their produce to anyone other than state government licensees. Furthermore, due to the predominance of multiple APMC legislations adopted by state governments, there were hurdles to the free flow of agricultural produce across states.
Key features of the Bill
Following are the key features of the provisions the Bill intends to introduce:
Trade of farmers’ produce
The Bill permits intra-state and inter-state trade of farmers’ produce outside of:
- The physical grounds of market yards administered by market committees established under state APMC Acts; and
- Other markets that are notified under state APMC Acts.
Farm gates, factory premises, warehouses, silos, and cold storages are all examples of ‘outside trade areas,’ which include farm gates, factory premises, warehouses, silos, and cold storages.
In the specified trade area, the Ordinance allows for the electronic trading of scheduled farmers’ produce (agricultural produce controlled under any state APMC Act). An electronic trading and transaction platform might be established to enable direct and online buying and selling of such produce via electronic devices and the internet. Companies, partnership firms, or registered societies with a permanent account number under the Income Tax Act of 1961 or any other document authorised by the Central government, as well as a farmer producer organisation or agricultural cooperative society, may establish and operate such platforms.
Market fee abolished
Farmers, merchants, and electronic trading platforms cannot be charged any market fee, cess, or levy by state governments for the trade of farmers’ produce done in an “outside trade area,” according to the Ordinance.
Benefits of the Bill
The implementation of the Bill will serve the following benefits:
- The new legislation will create an environment in which farmers and dealers would have the flexibility to sell and buy agricultural products as they see fit. It will also encourage barrier-free inter-state and intra-state trade and commerce outside of the physical premises of markets registered under state agricultural produce marketing laws. This is a watershed moment in the country’s heavily regulated farm markets.
- It will provide farmers with additional options, save marketing expenses, and assist them in obtaining higher pricing. It will also assist farmers in locations with excess produce in obtaining higher pricing, as well as customers in regions with shortages in obtaining lower costs. Electronic trading in transaction platforms is proposed in the Bill with the objective of providing a smooth electronic trade.
- Under this Act, farmers will not be charged any cess or levy for the selling of their produce. There will also be a separate mechanism for farmers to resolve disputes.
One India, one agricultural market
The Bill aims to provide new trading possibilities outside of the APMC market yards to assist farmers in obtaining remunerative prices as a result of increased competition. This will be in addition to the present MSP purchase system, which provides farmers with a steady income.
It will undoubtedly pave the way for the creation of a One India, One Agriculture Market, laying the groundwork for our hardworking farmers to reap golden harvests.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
This Bill aims to establish a national framework for farming agreements that protects and empowers farmers to engage with agribusiness firms, processors, wholesalers, exporters, or large retailers for farm services and the sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner. It also deals with matters related to or incidental to the sale of future farming produce.
Due to small holding sizes, Indian agriculture is fragmented, and it suffers from inefficiencies such as weather dependence, output uncertainty, and market unpredictability. In terms of both input and output management, this makes agriculture dangerous and inefficient.
Key features of the Bill
Prior to the production or rearing of any farm products, the Bill requires a farmer and a buyer to enter into a farming agreement. The agreement will be in place for at least one crop season or one livestock production cycle. Unless the production cycle is longer than five years, the maximum period is five years.
Pricing of farming produce
The cost of farming produce should be included in the agreement. A guaranteed price for the produce, as well as a clear reference to any additional amount over the guaranteed price, must be included in the agreement for prices that are open to modification. In addition, the price-setting procedure must be mentioned in the agreement.
A farming agreement must include a conciliation board and a conciliation process for resolving disputes. The board should include a fair and balanced representation of the agreement’s parties. All problems must first be brought to the attention of the board. After thirty days, if the board has not settled the dispute, the parties may seek resolution from the Subdivisional Magistrate. Parties have the opportunity to appeal judgments of the Magistrate to an Appellate Authority (presided over by a collector or additional collector). A dispute must be resolved within thirty days of the application being received by both the Magistrate and the Appellate Authority. The Magistrate or the Appellate Authority has the authority to impose sanctions on the party that has broken the agreement. However, no action can be taken against a farmer’s agricultural land to recover any outstanding debts.
Benefits of the Bill
The Bill serves the following benefits post-implementation:
- Farmers will be able to engage with processors, distributors, aggregators, wholesalers, large retailers, exporters, and others on a level playing field without fear of exploitation under the new legislation. It will shift the risk of market unpredictability from the farmer to the sponsor, while also allowing the farmer to benefit from modern technologies and improved inputs. It will lower marketing costs and increase farmer income.
- This legislation will serve as a catalyst for private sector investment in agricultural infrastructure and supply chains for Indian farm produce to national and international markets. Farmers will have access to high-value agriculture technologies and assistance, as well as a ready market for their produce.
- Farmers will engage in direct marketing, eliminating the need for intermediaries and enabling full price realisation. Farmers have been adequately safeguarded. Farmers’ land is completely prohibited from being sold, leased, or mortgaged, and it is also protected from any recovery. With explicit timelines for redress, an effective dispute resolution system has been provided.
Controversies surrounding the Bills
Why are farmers protesting the implementation of these Bills
These Acts, according to the government, will “transform Indian agriculture” and “attract private investment.” Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, provides for contract farming, in which farmers produce crops in exchange for a mutually agreed remuneration under contracts with corporate investors.
Protesting farmers are concerned that powerful investors will bind them to unfavourable contracts drafted by major corporate law firms, with liability clauses that, in most circumstances, are beyond the comprehension of poor farmers.
According to the opposition, this would result in the corporatization of agriculture, with the market, like the monsoon, becoming an unpredictable factor of farmers’ fate. Farmers can sell outside the APMC even now, they maintain, and most do, albeit after paying the necessary fees or cess.
The question over the constitutionality of these farm laws
Following are the issues raised on the constitutionalism of the farm laws:
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, do not mention the constitutional provisions under which Parliament has the power to legislate on the topics covered in their Statement of Objects and Reasons.
- Agriculture is excluded from Parliament’s jurisdiction by the Union List and Concurrent List, which give state legislatures exclusive power. No entry in the State List concerning agriculture is subject to any entry in the Union or Concurrent Lists.
- Farming, like education, is an occupation, not a trade or commerce. If foodstuffs are deemed synonymous with agriculture, then all of the states’ agricultural powers, which are detailed in the Constitution, will be rendered obsolete.
The Indian economy is heavily reliant on the agriculture sector and provides the country’s huge population with grains and vegetables all year round. It also provides major import services. Hence, the agriculture legislation ought to be for the benefit of the people who provide all the farming produce, i.e, the farmers. These legislations are expected to ensure that the farmers are not exploited by trade merchants and other intermediaries while also adopting modern technologies in the farming sector and familiarising the farmers with online transaction platforms in order to ease electronic trading. These provisions are expected to boost the Indian agriculture sector.
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