Author: Priyanshu Raj, Student at Lloyd Law College, Greater Noida.
It cannot be denied that the present agricultural market equipment is in the need of reforms for the welfare of the farmers. However, the recent Farm Bills introduced by using the Union Government and handed with the aid of the Parliament; confronted robust opposition from a range of entities.
Taking the ordinance route all through the COVID-19 pandemic and unexpectedly passing the Farm Bills in each the Houses; raises questions as to the actual intention of the Government.
The Farm Bills aim to provide farmers the freedom to sell to any consumers backyard the APMC premises; enter into contracts with shoppers without delay and lifts restrictions on inventory limits to incentivize personal funding in agriculture. The Farm Bills, however, seem promising on paper but do not acknowledge the realistic difficulties associated with the proposed set up. This article throws light on the background of the farmers and agriculture post farm bills, explains the presentmodel of APMC and points out flaws in the same, gives a brief how APMC = exploitation, explains thenew farm bills, enumerates the pros of the bills and the reasons for protests, throws light on the farmers’ concern, provides the way forward and finally concludes that the bills are not a farmer’s plight.
“The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways.”
~ John F. Kennedy
The quote stands true seeing today’s scenario where the farmer suicides are notable and the food provider is compelled to starve for the same. India is a country where more than 70% of the populace is engaged in agricultural activities however it is additionally a saddening fact that a hand that feeds the kingdom is entangled in the fetters of starvation.
In latest days, agitation through farmers in a range of components of the us of a can be observed. These are due to the introduction of two new payments i.e. “The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020” and “The Farmer’s (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020” in the lower residence with the aid of the Union Minister of Agriculture
After the independence of 1947, farmers directly used to sell their agricultural produce to consumers. But, due to the Zamindari system and other situations prevalent in the country, maximum farmers were under debt and money lenders used to charge high interest rates for the debts taken by the farmers. When farmers failed to pay the interests, then those money lenders used to buy the produce from farmers at a very cheap price and for the next production farmers had to again take the loan from the money lender and eventually,this process became a cycle which farmers were unable to come out from and were simultaneously exploited.
AGRICULTURAL PRODUCE MARKET COMMITTEE (APMC) ACT
For solving the problem of farmers’ exploitation Govt. interfered in it and introduced the APMC act in 1960’s. According to this act, the farmers could not sell their produce directly to consumers nor any one could purchase from them. All sale was to be done through ‘mandis’ which were established through APMC act, and the mandis were to be run by the state govt.
How does the present model of APMC function?
Each state govt. has its own APMC. The state divides the mandis according to their area and each area has its own specific mandi. If any trader wants to purchase anything from mandi, he has to acquire the license of that specific mandi. Similarly, thefarmers of that area are allowed to sell their production on that specific mandi. This system of selling and purchasing things from the specific mandi is mandatory for traders and farmers. So, if any trader wants to purchase product from APMC, then he has to acquire license from APMC.
How products get sold through APMC?
The products are sold through the auction system in APMC. Auction system is divided in 2 parts:
- Minimum Support Price (MSP) System:
MSP system means the minimum support price system. The govt. of India decides the MSP for 22 crops. MSP means that the auction price cannot go down the MSP, it is the opening price for the auction.
- Price Discovery System:
Crops apart from those 22 crops, are sold by Price Discovery System. Under this system, the price of the crop is discovered on the basis of demand and supply of that produce in the market.
SUPPLY CHAIN :
Under the APMC, the products get sold through a supply chain. Means when farmer produces something it reaches to the consumer at last before that there are lots of middle men in the process, which the new system is trying to eliminate.Farmer will take his product to APMC mandi and there he will meet with commission agent also called ‘arthiyas’. These commission agents will take forward the farmers produce to the traders for selling the product and they will negotiate and will discover the price and this process is not transparent. After that, the transaction agent comes to the farmer and inform him at what price his product is sold. Now, the transaction agent charges 3% market fees on the price which farmer is going to get, which is paid by the farmer only.
Now, finally the product is upon the trader, from the trader it goes to the wholesaler from wholesalers to the retailers and there on to many vendors.After all this, it finally comes to the consumers.
The consumer receives the product at a 50% difference than the original cost of the product with a wastage of at least 25% of the total produce. Considering an example if Mr. A is getting a product ata price of ₹70, the farmer is getting only ₹7 for his produce and all the remaining cost goes in the pocket of middlemen and also as market fees.
FLAWS IN THE EXISTING SYSTEM OF APMC:
We can clearly see two major flaws in the existing APMC system:
Political consideration for traders:
APMC market is totally under the control of state govt. So, many people hold the idea that not everyone can become a trader. Only those people can become traders in the APMC market who have any political consideration or are close to the state govt.
Lack of transparency, Cost variations:
There are many middle men between the producer (farmer) and the consumer (people). The negotiation of the product by these middle men creates lack of transparency during the price determination as it happens in the absence of farmer. Also, high cost is incurred for the product which the common person bears for the product for which the farmer gets ‘peanuts’.
Why was the APMC Act introduced?
In 1963, when the APMC act was introduced, its objective was to protect the farmers from exploitation by money lenders and middle men by developing an efficient marketing system, promoting agro-processing and agricultural exports and specifying procedures and system to establish an effective infrastructure for the marketing of agricultural produce. But, with the passage of time, this act has itself turned into exploitation of farmers.
How is the act (APMC) exploiting farmers?
The APMC act says about MSP many times the traders in mandi form a group and deny to buy the agricultural produce of farmers at MSP in that particular mandi. Now, since the produce of farmers is perishable in nature, they agree to sell the produce at whatever price the traders give in order to save their produce from going worthless by getting perished. Just because of this, the farmers take advantage of the farmers’ situation and pay them much below the minimum price of the product.
Also for the notice, nothing like ‘regional MSP’ exists in the country. For example if Mr. B is producing rice in Chhattisgarh, the cost of production is different and if Mr. B is producing the same rice, say in Tamil Nadu, the cost of production is different but the MSP allotted for rice is same throughout the country, immaterial of the cost of production in different states. This concept of MSP has resulted in numerous protests by farmers in different states of the country seeking improvement in the system.
So, the APMC act has become a reason for monopoly and exploitation. It has become counter productive. So, in case if we do not even think of introducing new farm bills, there is a must need for rectification in the APMC act.
What the government should do?
In 1991 when the policy of LPG (Liberalization, Privatization and Globalization) was introduced then the govt. reduced its control from maximum industries for creating a free market and economy. Just like that, govt. should also reduce their control in agriculture and farming industry. Definitely there needs to be a regulatory and controlled mechanism to make sure that the farmers are not being exploited. But, at the same time, these mechanisms should also suit the needs of 21st century.
FARMERS’ BILLS, 2020
To replace the ordinances issued during lockdown, three bills on reforms in agriculture were introduced in parliament namely:
- The Farmers’ Trade and Commerce (Promotion and Facilitation Bill, 2020)
- The Farmers (Employment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
- The Essential Commodities (Amendment) Bill, 2020
The Farmers’ Trade and Commerce (Promotion and Facilitation Bill, 2020)
- freedom to conduct trade and commerce in trade area (inter state and intra state)
- framework for electronic trading of agricultural produce
- and prohibits the state govt. from collecting market fee, levy or cess for trade outside APMC market
The Farmers (Employment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
- provides framework on commerce agreements for sale and purchase of farm produce
- the mutually agreed remunerative charge framework envisaged in the legislation is touted as one that would guard and empower farmers.
- the written farming agreement, entered into prior to the production or rearing of any farm produce, lists the phrases and conditions for supply, quality, grade, standards and charge of farm produce and services.
The Essential Commodities (Amendment) Bill, 2020
- removes onions, potatoes, cereals, oilseeds, pulses and edible oils from the list of essential commodities. The amendment will deregulate the production, storage, movement and distribution of these food products.
- the central government is allowed the regulation of supply duringfamine, war, extraordinary price rise and natural calamities, while providing exemptions forprocessors and exporters at such times as well.
- Imposition of any inventory limit on agricultural produce must be based totally on rate rise. A stock limit may also be imposed only if there is a 100% increase in retail charge of horticultural produce; and a 50% increase in the retail price of non-perishable agricultural meals items.
The Bills intend to do away with government interference in agricultural trade through creating buying and selling areas free of middlemen and authorities taxes backyard the structure of Agricultural Produce Market Committees (APMCs).
It will provide farmers with an option to sell their products directly to these new zones, without going through the middlemen and paying levies such as mandi fees.
It sought to get rid of inventory conserving limits as well as curbs on inter-State and intra-State trade, and create a framework for contract farming.
Also, these bills promote the advent of Farmer Producer Organizations (FPO) on a giant scale and will help in growth of a farmer-friendly surroundings for contract farming the place small players can benefit.
These bills might also enable personal players to make investments in warehousing, grading and other advertising infrastructure.
A mixed impact of these bills will assist in growing a ‘One Nation, One Market’ for agricultural produce.
Recently, there have been robust protests from farmers, specifically from the states of Punjab and Haryana, against three farm bills that replace the ordinances issued in June 2020.
These bills envisage to lift alternate in some of the key factors of the farm financial machine trade in agricultural commodities, rate assurance, farm choices which embody contracts, and inventory limits for critical commodities.
Why are the Bills being opposed?
Angle of Federalism:
The provisions are being viewed as against the spirit of federalism as agriculture being the part of subjects under state list. Whether Centre has the power to make a law in this area?
For seeking the answer to this question, we need to refer to the 7th schedule and see the entry of agriculture therein.
|List I||List II||List III|
There are 3 lists given in 7th schedule. List I is of Centre in which Centre can make laws. In List II there are subjects in which states can make laws and List III is Concurrent list in which both- the Centre and the states can make laws. So, agriculture comes in List II, entry-14 which means it is a part of state list.
So, speaking strictly, agriculture comes under state where state can make laws for it. State has powers regarding agriculture research and agriculture produce. If we talk about strict division, the power to make laws is with state only, not with Centre. But the strict division is of no worth. Why? For this we will refer two more articles:
|Article 248 – Residuary Powers|
|Article 249- Power of Legislation- National Interest|
Article 248 of constitution states about Residuary Powers. It states that if any entry which is not present in those three lists, the powers will go to the Centre and it can make laws in the matter.
Second article is Article 249 which says that if any entry is the part of state list, the Centre will have the power to make laws on it when it comes to National Interest. So, Centre holds the power to make the law and enact the bill according to provisions of article 249.
Also, if we talk about entry- 33 in List III, the concurrent list reduces the power of state to make laws for agriculture. Under entry 33, the Centre also holds the to make laws in the matter of agriculture and by using the same, the Centre passed the Essential Commodities (Amendment) Act.
So, speaking strictly, the Centre has the powers to make laws for agriculture and the same is not against the spirit of federalism.
Lack of Consultation:
Many reforms which are introduced at Central level as well as the state level govt. have been welcomed by the farmers but however, in this particular case, the problem is not related to the bills, it relates to the method of it’s introduction. The govt. has failed to hold discussions with the stakeholders including the middle men and farmers. Also, the passing of the bills on thesubject of trade and agriculture which are part of subjects on state list, without proper consultation with state govt. adds to the mistrust among various stakeholders including the state govt.
End of MSP
Critics view the dismantling of the monopoly of the APMCs as a sign of ending the assured procurement of meal grains at MSP. To the Centre’s ‘one nation, one market’ call, critics have sought ‘one nation, one MSP’.Critics argue that ensuring a large quantity of farmers get the MSP for their produce and addressing weak point in the APMCs, rather than making these State mechanisms redundant is the need of the hour.
This law nowhere states that the MSPbased procurement of food grains (essentially wheat and paddy) by government agencies would end. Such purchases in state-regulated APMC mandis will continue as before. Not even the APMCs wouldstop functioning; nothing will preventfarmers from selling their produce or traders and processors from buying in these mandis.
What all the law does is provide farmers an alternative platform for selling their produce. This could be a factory premise/processing plant, cold storage, produce collection center,warehouse, silo or even the farm gate. Transactions in such “trade areas” will not be charged with APMC market fee or cess. These levies shall apply only in trades that take place within the boundaries of the regulated market areas or mandis set up under the respective state APMC acts.
Absence of regulation in non APMC mandis:
Another problemraised by the farmers is that the proposed bills provide the preference for company pastimes at the price of farmers’ interests.In absence of any legislation in non-APMC mandis, the farmers may face difficultyin dealing with Corporates, as they completely function on the cause of profit seeking.
Non Favorable Market Conditions:
While retail expenses have remained high, record from the Wholesale Price Index (WPI) suggest a deceleration in farm gate expenditures for most agricultural produce.
With rising input costs, farmers do no longer see the free market primarily based framework providing them remunerative prices.
These fears are gaining strength due to the past experience of States such as Bihar which abolished APMCs in 2006. After the abolition of mandis, farmers in Bihar on common obtained lower expenses in contrast to the MSP for most crops.
No mechanism for price fixation:
The Price Assurance Bill, whilst providing protection to farmers in opposition to price exploitation, does now not prescribe the mechanism for fee fixation.
There is apprehension among farmers that the free hand given to personal corporate homes could lead to farmer exploitation.
Critics are frightened about formal contractual duties owing to the unorganized nature of the farm sector and lack of sources for a legal battle with private corporate entities.
Food Security Fouled up:
Easing of rules of food objects would lead to exporters, processors and traders hoarding farm produce during the harvest season, when fees are generally low as compared, and releasing it later when expenses increase.
This could foul up food securityas the States would have no records about the availability of shares of stock within the State.Critics anticipate irrational volatility in the price of necessities and increased black marketing.
Entry of two biggest groups of Companies:
The entry of two biggest corporate groups- Adani and Reliance has given birth to apprehension among the stakeholders. They view the entry of these corporate groups as a way to their exploitation.
What the Farmers are Concerned About?
Farmers are worried about getting Minimum Support Price for their produce. Other concerns consist of the upper hand of agribusinesses and big outlets in negotiations, for that reason putting farmers at a disadvantage. The benefits for small farmers from agencies will possibly reduce the engagement of sponsors with them. The farmers also concern that the corporations may additionally dictate costs of the commodities.
What farmers want and are asking for is legally guaranteed remunerative prices, that the government ought to commit within the identical regulation to maximum procurement of more than a few commodities tied with neighborhood food schemes, market intervention from the state, agri-credit reforms to benefit small and marginal holders and specific overlooked regions, as properly as reforms in crop insurance plan and catastrophe compensation. It is also vital to empower FPOs as enabled gamers in the market and preserve them out of the purview of overzealous regulation.
The Way Forward:
- To strengthen thecompetition, the government must improve agricultural Infrastructure.Government must massively fund the growth of the APMC market system, make efforts to dispose of trade cartels, and provide farmers accurate roads, logistics of scale and real time information.
- The government must empower thestate farmers commissions.Rather than opting for heavy centralization, the emphasis have to be on empowering farmers through State Farmers Commissions endorsed by means of the National Commission for Farmers, to convey about a rapid government response to issues.
- Consensus Building: The Centre must attain out to these opposing the Bills, along with farmers, give an explanation for to them the want for reform, and get them on board.
The farmers are the soul of the state and their increase and gingering up is the major obligation to be taken care of by using the government. The passing of the bills is a step in the right route providing a higher platform to the farmers to get the desired charge of their agricultural product. It will deliver innovative changes in the lives of the farmer. The reforms will speed up agricultural increase through private sector investment in establishing agricultural infrastructure and grant chains for Indian farm produce in national and international markets, generate employment opportunities, and strengthen the economy. Farmers will be freed from the clutches of promoting their produce at exact places. The procurement of MSP will proceed and ‘mandis’ set up beneath nation legal guidelines will also proceed to operate. It will empower the farmers and foster their growth and development in the country by reshaping theeconomic system of India. Thus, ‘The FarmBills’ of 2020 are not a farmer’s plight, they are the fortune of the farmers, only the govt. requires to communicate them to the farmers in a proper way.