The Farm Laws 2020: Welcome Reforms or Red-Flag?

The Farm Laws 2020: Welcome Reforms or Red-Flag?

India has always been an agricultural economy, with a large section of its population (almost 44%) dependent on farming to earn their livelihood. Thus, it is inevitable that any changes to farming laws would affect many people and come under much scrutiny. This is precisely what is happening now as the Government initiated the Indian Agriculture Acts of 2020, often referred to as the Farm Laws, in September 2020. The Lok Sabha approved the bills on 17 September 2020 and the Rajya Sabha on 20 September 2020. The President of India, Shri Ram Nath Kovind, gave his assent on 27 September 2020.

Thousands of farmers around Punjab and Haryana have protested against the three farm bills. Protesting around the national capital border, the farmers have blocked several National Highways leading to the capital. The protests even took a violent turn during the Tractor Rally organised on Republic Day. These protests recently caught the international media’s eye as several international personalities, including Rihanna and Greta Thunberg, tweeted about this issue. 

Since these Farm Bills have impacted our country, capturing the news debates and headlines for the past few months, it is only apt that we delve a bit deeper into the Farm Bills to have a better understanding.

THE CURRENT MARKET SYSTEM

Let us first understand the farming market system in place before these Farm Bills came in. After the Green Revolution of the 1960s, there was a surge in rice and wheat production. To deal with this situation, a market structure was created, which can be simplified in the following manner. The farmers bring their crops to wholesale markets commonly known as ‘Mandis.’ The farmers here sell their produce to traders in open auctions with transparent pricing. These prices are regulated by the Minimum Support Price or MSP, which the government sets. For even the trade that happens outside of these Mandis, the government regulated MSP as the unofficial benchmark. From the Mandis, the traders send the crops to secondary markets or store them for future sale.

This system is not perfect and has its flaws. One would be that the local traders often collude, which results in the auction not being a competitive one. This means that the farmers may fail to get the best prices for their produce. However, some farmers are content with this system because some government oversight protects the farmers. It is a fair assumption that the farmers are the weakest link in this chain, and they can be exploited in the absence of oversight. 

THE THREE FARM BILLS AND THE CHANGES THEY BRING 

The Farm Bills constitute three acts that address different aspects. The three acts are:

  1. BILL ON AGRICULTURE MARKET - The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, FPTC Act

    This creates an ecosystem where farmers and traders can sell and purchase products outside the registered Mandis. This also allows inter-state and intra-state trade, thus giving the farmers freedom to sell at the best price. In no way, this means the closing of the APMC Mandi system and putting an end to the Minimum Support Prices (MSP). 

    This act also aims to provide a facilitative framework for electronic trading.
     
  2. BILL ON CONTRACT FARMING -  The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, FAPAF Act

    The FAPAFS bill provides a legal framework for farmers to enter into written contracts with companies and produce for them. Combined with the first bill, it leaves the market open for private players to join. It aims to transfer the risk of market unpredictability from the farmers to the sponsors. 

    Under this, farmers have the right to enter into contracts with agri-business firms, processors, wholesalers, exporters, or large retailers for the sale of future farming produces at a pre-agreed price. This act also gives the small and marginal farmers (with less than five hectares of land) a chance to gain via aggregation and contract.  With that, it promises an effective dispute resolution mechanism with redressal timelines. 
     
  3. BILL RELATING TO COMMODITIES - Essential Commodities (Amendment) Act, 2020, ECT Act

    It takes away cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities. Therefore, these commodities are now free of the Essential Commodities Act restrictions and stand deregulated. It does away with the imposition of stock holding limits on such items except “extraordinary circumstances.”

What led to these massive protests?

Right from the time the bills were brought on the Parliament's floor, they have kept a political storm spry and kicking. Farmers from essentially the states of Punjab, Haryana, and western Uttar Pradesh marched to the borders of our National Capital, New Delhi, with peaceful protest as their leading slogan. However, after the horrendous aftermath of the Republic Day tractor rally, it becomes imperative to deeply comprehend and analyse the demands and apprehensions of the farmers, who now seem to be ready to continue their sit-in till October (according to one of the leading farmers’ leaders Rakesh Tikait).

The farmers' pertinent demands have been a complete repeal of the three contentious farm laws and a legal guarantee of the Minimum Support Prices. They are ready to settle for no less (a primary reason why even after eleven rounds of talks between the government and the Farm Unions, no middle ground has been reached, even as the government proposed to uphold the laws for three years). 

In the sixth round of talks, the government side acceded to two of the demands of the farmers; to spare farmers hefty fines for crop-residue burning, as provided for in an anti-pollution ordinance (Commission for the Air Quality Management in National Capital Region and Adjoining Areas Ordinance 2020), and to continue the current mechanism of giving subsidised power for agricultural use, and not take draft Electricity Amendment Bill 2020 any further. 

The protesting farmers believe that the laws are a blatant misuse of the powers by the central government keen on privatising the agriculture sector, which will ultimately leave the farmers at the mercy of the bid and exploitative corporate. They fear that the laws attempt to weaken the APMC Mandis and do away with the MSP procurement system in the gradual course of time, thus snatching from the farmers their constant and infallible income source, even though the laws affirm that the mandi system will continue. Here, it is worthy to note that Shanta Kumar-headed High-Level Committee on Restructuring of Food Corporation of India (FCI) concluded that only 6% of the farmers get MSP benefits. Moreover, official data show that for paddy and wheat, respectively, only 29% and 44% of the harvest is sold in a mandi, while 49% and 36% are sold to either a local private trader or an input dealer.

A significant contention has been regarding the "strong and effective" redressal mechanism that the government promises to the farmers, who speculate that they, in every deals and dispute, will be the weaker players, given the size and might of big private corporates, exporters, wholesalers and processors. 

Concerning the FPTC Act, states are set to lose on the revenue front. They would no longer collect 'mandi fees' if the sale is outside the APMC Mandis. These are charged at 8.5% in Punjab and 6.5% in Haryana, more than any other state. Apart from this, the bill empowers the Centre government to issue orders to States to further the law’s objectives. Further, trade and agriculture matters are parts of the State List under Schedule VII of the Indian Constitution.

The commission agents or the middlemen ('Arthiyas') who charge hefty sums from the farmers will be at huge losses as, under the law, the farmers can directly do the selling.  

Amidst all this, excessive political interference has been fueling the fire. Almost every party, at one time or the other, had promised to end the monopoly of MSPs and Mandis as a part of their manifestos, and now the link between politics and hypocrisy is apparent. 

WAY FORWARD

The gap between the agri-income of a farmer and a non-agriculture worker increased from ₹25,398 in 1993–94 to ₹1.42 lakh in 2011-12. There is a widespread feeling of agrarian distress. Agriculture was the only sector that didn’t undergo any significant reform during the 1991 economic policy changes and hadn’t seen any revolutionary changes.

The onus surely is on the government to make the farmers understand how the laws will bring them out of the monopolistic and draconian regime and keep working towards ensuring that the laws mandated are implemented. They give the farmers the freedom of choice and trade and further strive for more comprehensive reforms.

Farmers, indeed, are the backbone of India. The sector employs almost 44% of the Indian population. But their income has been below par, as the field contributes just 17% of the GDP. It’s high time that the situations change in favour of farmers, and they enjoy all the rights they deserve. Peaceful discourse is the only way forward to resolve the issue.

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