India is on the cusp of revolutionary reform.
The Agriculture Bill will probably pass in Rajya Sabha, opening up the way for contract farming, open market for agricultural produce, and private capital + FDI in agriculture for the first time!
This is the 1991 moment for the agriculture industry in India, which will finally escape the license raj of the APMC Act.
What are the major changes on the cards?
What are the changes that you anticipate?
Is this a game-changer for agritech companies?
Will this mean our agriculture and food export can grow rapidly now?
We have one of the most inefficient and backward agricultural systems in the world. The Netherlands, a country that is smaller than the size of Delhi NCR exports way more food to the rest of the world than we do! The Netherlands is the 2nd biggest food exporter in the world, the US is the biggest, while India is only 11th!
Basically, we have massive potential for growth here if we use advanced Agri technology and private capital. We could be the largest food exporter in the world. We can end world hunger.
And this is a sector that grows barely 1% year on year, while 50% of Indians work in this sector!
It is a drag on our GDP. If this sector grows really fast as it should, we can have better GDP than we ever did.
It was not possible because of archaic laws. It can finally change now!
Would love to hear the thoughts on this.
But first, let me share a few more details with you:
What are these farm bills or agriculture bills?
There are four bills that were passed in Lok Sabha yesterday, and will be presented in the Rajya Sabha tomorrow, i.e. Saturday:
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020;
- The Farmers (Empowerment and Protection) Agreement of Price Assurance;
- Farm Services Bill, 2020; and
- The Essential Commodities (Amendment) Bill, 2020.
They will replace an ordinance already in place.
What will change in the agriculture sector?
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill aims at opening up agricultural sale and marketing outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers.
- Earlier these mandis had a monopoly on the trade of agricultural produces! You needed a license from them to be in the business. The mandis can regulate the trade of farmers’ produce by providing licences to buyers, commission agents, and private markets. They also levy market fees or any other charges on such trade.
- If you ever wondered why vegetables, rice, and pulses are so expensive but farmers are so poor and heard about middlemen making all the money and wondered who these middlemen are, here is your answer. It is the mandi system that made money in the middle. Removing the middleman will increase the money in the hands of the farmers, and make it cheaper for you to buy food, at least that is the idea!
- Contract farming is legal in India, provided you register them with mandis. Despite huge potential, the mandis never allowed contract farming to take off in India. Free from the clutches of local mandi committees, contract farming can now finally flourish in India.
- This law removes barriers to inter-state trade of agricultural produces, creating a unified market across India.
- This law provides a framework for the electronic trading of agricultural produce.
- It also prohibits states from collecting any fee, cess or levy for trade outside the APMC markets.
- The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill introduces contract farming in India for the first time. It provides a framework on trade agreements for the sale and purchase of farm produce. The mutually agreed remunerative price framework envisaged in the legislation is touted as one that would protect and empower farmers.
- The important thing is that businesses can now bypass the mandi and directly procure from farmers, provide capital and assured procurement, and even pay for insurance, ensuring a better outcome for farmers!
- The Essential Commodities (Amendment) Bill removes cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities. The amendment deregulates production, storage, movement, and distribution of these specified commodities.
- This reform is intended to attract private sector capital/FDI into the agriculture sector as it will remove fears of private investors of excessive regulatory interference in business operations. We can also expect more investment for infrastructures like cold storages, agritech startups, and food supply chains.
- 20-25% of India’s horticulture produces simply get wasted! This happens due to a lack of supply chain and cold storages. Since the private sector was not really allowed to participate in the agriculture business or trading of these commodities, private capital was hard to come by in the supply chain. With these new changes, we can see a lot of capital flowing into this sector over the coming years, which puts an end to this wastage.
- It is important for corporates to get involved in farming from stage 1 if agricultural export is really going to take off. Indian farmers do not use advanced technology, uses a lot of chemical fertilizers and pesticides that make a lot of the produces impossible to export, and cannot ensure delivery of produces due to flood, rain, draught etc. Use of advanced technology that large corporations can fund will end these problems, as there are many ways to save produces from inclement weather, and produce high-quality food items without using much water through techniques like aquaponics.
- Most importantly, this is going to create a competitive market environment in agriculture for the first time through a unified market and cut wastage of farm produce.
What does this mean for lawyers? What work can we expect to see if this works out?
- Farming contracts – an entirely new category of contracts that will keep a lot of lawyers busy. Indian farmers bear the risks of price volatility of food and agricultural commodities in the market, and this is a big problem, especially when it comes to perishable goods. Contract farming agreements between farmers and food processing companies or fast-moving consumer goods companies for the supply of specified commodities at pre-fixed prices will be a game-changer for the market. Farmers will get an advance as well as assured price from businesses that will compete with each other to get the best produce! Lawyers would be working for food processing companies, FMCG players as well as large farmers. We can expect at the village level organizations will come together to provide similar legal services to smaller farmers as a paid service or even legal aid.
- India has a very poor postharvest infrastructure, such as cold storages. Farmers cannot be expected to use or create cold storage facilities. However, if private players are allowed to put in capital, they are likely to build cold storage facilities and efficient supply chain. Removal of the Mandi system and the middleman creates a big incentive for the large end buyers to invest in this ecosystem and supply chain. We can definitely see a lot of projects and investments happening in this sector in the coming years, leading to additional work for lawyers.
- Investment in Agritech and agribusiness – Agritech companies have already been raising investment but this reform will be a gamechanger for them. Their activities used to be heavily restricted. However, this new law opens up a huge horizon of possibility for them. This is definitely going to increase the work of startup lawyers as well as investment lawyers. We may also see increased M&A activities in this sector as it becomes attractive for investors.
- FDI in agriculture – 100% FDI is agriculture was already allowed through automatic route in certain sectors such as horticulture, mushroom farming etc, though the biggest sectors like foodgrains, pulse edible oil etc was controlled massively by the Essential Commodities Act that spooked foreign investors and kept them far away. India saw around 350 Cr of foreign investment in agriculture in the last financial year which is very low compared to the potential. We will expect to see a lot more investment now as government signals that private capital is welcome through this reform. There is no doubt that this would also add to the work for law firms.
- Contract farming disputes – where there are contracts, there may be some disputes. Goes without saying that lawyers will get to work on these disputes. We can expect some defaults by contracting companies when the market prices of farm produce would severely go down for some reason, and farmers are likely to default when production shortfalls caused by bad monsoons or other unforeseen events, such as flood would push prices above contracted levels. This would call for enforcement of these contracts.
- Where poor farmers will be involved in disputes and unable to access legal representation, governments are likely to create local legal aid systems to support them, increasing employment for lawyers.
- Increased commodity trading and electronic trading of food items, as well as a unified market for food, produces would create a whole new volume of trade and for the first time, this will come under the ambit of the formal sector, increasing compliance-related work as well as work-related to technology and security law applicable to commodity trading.
- Lawyers can expect increased work under Legal Metrology related to packaging, labelling of food. Safety standards and quality-related legal issues will also arise more frequently.
- As India becomes more efficient and produces high quality agricultural and food produces more profitably, we can expect a massive increase in agricultural export from India. India today stands at 11th position in agricultural exports, and we can definitely rise to the top. This would mean a massive amount of work around import-export, tax and compliance for lawyers.
- Overall, as the agriculture sector rapidly increases and becomes increasingly formal, there will be a lot more work for lawyers in the years ahead from this sector.
What are the laws and skills that you should be learning if you want to prepare yourself for this boom?
- Lawyers should know how to draft comprehensive and amazing contracts to help clients protect their interests;
- You should even have a working knowledge of investment law to get ready for this boom in the coming time.
- As you may have read in the article, agritech is supposed to get important with these reforms. Extensive knowledge of technology law is almost a given.
- There is a lot to know about tax law and securities law when it comes to therese reforms.
- Lawyers should also expect a lot of compliance work as India becomes efficient and produces high quality in agricultural export from India.
Here are the workshops that are open for enrolment:
Further, here is the webinar schedule:
1) What can you do if the tenant is neither paying rent nor vacating the premises? with Ishan Mukherjee, Real Estate Lawyer, Irshaan Kakar, Civil & Commercial Lawyer and Pranav Tomar, Corporate and Real Estate Lawyer
Date: 20th September, 4 pm
2) Contempt Law & its co-relation to Freedom of Speech with Sumitra Choudhary, Advocate at Supreme Court of India
Date: 20th September, 6 pm
3) Decoding the Implication of COVID-19 on Real Estate Law Practice with Sudip Mullick Partner, Khaitan and Company
Date: 21st September, 4:30 PM
3) How to crack UGC NET (JRF) in the first attempt? with Arpita Yadav, Academician and Advocate
Date: 21st September, 6 pm
4) What is the future of the real estate industry in India? with Vipin Suree, Founder, Space Creators
Date: 21st September, 9 pm
5) My experience of studying at NUS and what I cherish about my LLM with Aashaawari Datta Choudhury, Counselor/Mentor, LawSikho
Date: 22nd September, 4 pm
6) How can young lawyer develop a habit of cross examination? with Ashok Arora, Advocate
Date: 22nd September, 6 pm
7) Protection and enforcement of trademarks with Abhishek Pareek, Associate, LawSikho
Date: 22nd September, 8 pm
Do not forget to register. Hope to see you all there!
To your success,
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: