Introducing Inquisitorial by Indianaut, a long-form newsletter where we explain and analyze important stories stemming out of the Indian entrepreneurial ecosystem & economy. New articles every Saturday & Sunday.
This year's Monsoon Session of Parliament has been short but quite controversial. The passage of 3 agriculture-related bills has led to thousands of farmers and numerous Farm Associations starting nation-wide protests and raising slogans of ‘KISAN BACHAO, MANDI BACHAO’.
The acts that have created havoc around the nation are The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020 and The Essential Commodities (Amendment) Act, 2020.
While the apparent intent behind these newly passed laws is the creation of a barrier-free ecosystem for farmers and traders, allowing them to engage in interstate and intrastate trade and commerce that creates ‘One Nation, One Market’, various farmers, political parties, and state governments have made representations against the laws. Farmers of several states, particularly in North India, expressed their satisfaction with the existing Mandi system and stated they wanted no change in it. On the other hand, some Southern states have been more welcoming of the new laws.
Farming System That Existed Till Now
The concept of Agricultural Produce Market Committees (‘APMC’) was established to ease various restrictions farmers face in selling their farm produce and to support farmers and traders in India by facilitating trade between them. The main objective of APMCs has been to ensure fair trade between farmers and buyers/middlemen. These APMCs used to provide licenses to buyers and other agents involved, they used to levy market fees and other charges on trade and ensured the necessary infrastructure to facilitate trade.
The state governments in India have set up APMCs to establish Mandis in various parts of the state. To govern the same, the states enacted their own APMC Acts. These acts govern the functioning of the committee and regulate the mandis in particular areas. Every Mandi has licensed middlemen who are responsible for buying produce from farmers at the price set in an auction and then, they sell it to retailers, traders, and other buyers.
Additionally, as per the system that existed until now, the government used to get a Minimum Support Price for their produce. It was done to ensure that the farmers are earning at least a minimum fixed profit for their produce. Further, the Essential Commodities Act, 1955 had made hoarding, black marketing of essential commodities an offense punishable under the law.
The three new laws enacted by the Parliament have changed the existing mechanism. There are new rules and regulations in place and it seems to have brought a paradigm shift in the farming system in India.
Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
This Act aims at removing interstate and intrastate barriers for Farmers by allowing them to sell and market outside their mandis, which are regulated by the APMCs. The State Governments have been prohibited to collect any fee or levy any cess for any trade outside the APMC markets. The Act has been enacted to provide farmers and traders the freedom of choice with respect to the sale and purchase of Farmers produce. According to the Preamble of the Act, this will facilitate remunerative prices by providing competitive alternative trading channels to the concerned. The Act also talks about providing a framework to facilitate the electronic trading of farmers' produce. This Act considers the framework of APMC laws as a hindrance to the freedom of choice based selling and marketing of produce.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020
This Act aims at regulating contract farming in India. Contract Farming can be referred to as an agreement between farmers and procession firms for the production and supply of farmers produced under forwarding agreements, frequently at predetermined prices. The act provides a framework on farming agreements to protect and empower farmers to engage and contract with wholesalers, exporters, processors, large retailers, etc. for the sale of farming produce. This would be done in a fair and transparent manner at a mutually agreed remunerative price. The Act also provides for a dispute resolution mechanism for the settlement of disputes that may arise between the two parties.
The Essential Commodities (Amendment) Act, 2020
This Act has been enacted to increase the number and availability of buyers for farmers’ produce. The Act has allowed farmers to trade freely without any license or stock limit. A stock limit can be imposed only if there is a steep price rise in a given year, according to the provisions of the act. The Act has further limited the government’s role to regulate certain food items like cereals, pulses, edible oilseeds, potatoes, onions, and oils.
Why are Farmers Protesting?
We have seen wide-scale protests throughout the country against these legislations, the most eye-catching one being the ‘Tractor Protest’ in Punjab and Haryana. Farmers want the Central Government to be considerate of their wishes and scrap these legislations and revert back to the existing system. Farmers did want certain amendments in the existing APMC framework as it has not yielded the desired results, however, scrapping the mandi system and moving to an entirely new system is definitely something they did not want. The farmers have made additional demands in terms of clearing their existing loans and enacting a law to guarantee them timely payments from middlemen and buyers.
Farmers are against these laws because they feel that they will have to directly negotiate with big retailers and corporates and the other side would be, more often than not, in a better position to bargain and manipulate the prices. Additionally, farmers also feel that the situation created by the new legislation will be more beneficial to big farmers who have better infrastructure and more resources. Even, due to the removal of stock limits on certain produce, the big farmers would be the ones who will be able to store these commodities in huge quantities without any fear of being prosecuted for hoarding. This will lead to artificial price fluctuations and ultimately, that would make the system more inefficient.
Farmers feel that the new laws will not benefit them. They will not even get the MSP, which was the last option that always existed for them. Farmers and Farmer Associations fear that the new legislation will open the Agricultural Sector to private players with a minimum level of Government say and control and this will ultimately impact farmers and other people belonging to low-income groups.
The legality of the legislations
Agriculture and all its ancillary subjects are a part of the State List. These new laws can be seen as a direct encroachment by the Central Government upon the functions of the State. This being one of the grounds, states such as Kerala and Punjab and even the Congress Government are planning to challenge the legal validity of this act before the Supreme Court. A case has already been filed by one Mr. Rakesh Vaishnav of Chhattisgarh Kisan Congress.
The Supreme Court will test the constitutional validity of these three legislations and the competence of the Union government to legislate on matters which are fundamentally state subjects. Additionally, the Court will also go into the aspect of the acts encroaching upon the Fundamental Rights of the citizens, as given under Part III of the Indian Constitution.
(Image Credits: Gurmeet Singh/IE)
Even though the apparent intention behind the legislation is praiseworthy, it is imperative to be mindful of what the farmers actually want. Given the current situation, India cannot allow income disparity between the rich and poor to increase any further. Several political leaders have said that through these laws, agriculture is being sold to the capitalists and the main purpose behind these acts is to serve the Industrialists.
Since the acts are primarily enacted to serve the farmers and make it easier for them to establish trade, the Legislature should consider the pleas of farmers and at the same time, should try to incorporate farmer-friendly provisions as much as possible. The law-making body as well as the farmers should fight the issues that are cropping up at this stage as one collective unit. The Central law-making body also needs to keep state governments in the loop as Agriculture is mainly a state subject and state governments will have an important role to play with respect to the implementation of any law concerning agriculture.
Harsh Kumra is a final year student at Amity Law School, New Delhi (GGS IP University). He has previously interned with various law firms including Anand & Anand, Kochhar & Co., and Desai & Dewanji.