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Saturday July 2, 2022

Three Farm Bills: Pros and Cons

farm bills

The ongoing battle between the central government and farmers is one of the biggest burning issues right now. Farmers, especially in Punjab and Haryana, are opposing the three agriculture laws, enacted by the central government. The farmers have been protesting the farm bills at different borders of the national capital since November 26 of 2020. The protesting farmers and the government, both are not ready to climb down a bit from their respective positions till date.

farmers protesting farm bills
The farmers’ protest has garnered international attention

The farmers’ agitation against Centre’s farm laws is not only a domestic issue any more. The farmers’ standpoint has gone internationally viral. The tweet war by renowned International and national celebrities have stirred up the movement.

In the following section I have discussed the farmers’ bill in detail and have tried to figure out the negative and positive consequences of the clause. 

indian farmer
Agriculture is a local phenomenon

The Farm Bill ,2020 is an amalgamation of 3 bills,

(a) Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, (b)Farmer’s (Empowerment and Protection) Agreement on Price Assurance, Farm Services Act 2020 and

(c) The Essential Commodities (Amendment) Act, 2020.

In my opinion, the issues that needed to be checked more rigorously, have been pointed out:

(A)Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, known as the ‘APMC Bypass Bill’.

The bill 

(i) allows farmers to engage in trade of their agricultural produce outside the physical markets (Mandis) notified under various state Agricultural Produce Marketing Committee laws (APMC acts). The bill wants to facilitate the inter-state and intra- state trading of agricultural produce.

(ii)  allows electronic trading and e-commerce of scheduled farmers’ produce.

(iii) prohibits state governments or APMCs from levying fees, cess, or any other charge on farmers’ produce.

(iv) provides a 3-level dispute settlement mechanism by the conciliation board, Sub-Divisional Magistrate, and Appellate Authority. 

To evaluate the pros and cons of the first bill, a comparison has been done between the situations, before and after implementation of the bill.

Before the bill, the farmers had three options:

(a)They could sell their product directly to the customers.

(b)They could sell their crops to any agent with a comfortable deal. 

(c)They could sell the agricultural produce to the licensed dealers, authorized by the local market committee and the dealer acted as an agent of the farmer. The commission of the agent was being fixed by the APMC or Mandi committee. The most certain thing about the APMCs is, the MSP (Minimum support price).

Though MSP tried to ensure a minimum ensured price, asymmetric information and malpractices of corrupt personnel sometimes spoiled the game. Still, Govt. Data shows the majority of farmers were getting benefits from MSP.

farm bills
The farm bills will affect small farmer adversely

It is quite surprising that before the law, the farmers were already free to sell their produce to private traders. But, if the deal was not good enough, the farmer had a second option to sell the product in local mandis at minimum assured price, set by the Government. 

So, it seems not a very rational policy as it expects a one or two acre farmer to behave like an entrepreneur and expect him to be efficient enough in forecasting demand. The farmer will have to bear the risk of loss by himself. 

It’s true that before the law, sometimes asymmetric information and malpractices of corrupt personnel spoiled the fair game. 

The Farmer producers Organisations (FPO), has expressed their concern about the risk of price fluctuations that has to be borne by the farmers. 

The APMCs, MSP and FCI have been lifelines for the farmers for many years. 

To give complete freedom to the farmers, better institutional and infrastructural support should be provided. The majority of farmer families are small and marginal, in terms of land holding, they neither have good storage facilities to procure nor they can afford huge shipping and transportation costs. Without any institutional and infrastructural back up, the clause will not be very useful, it seems. 

The first bill focuses on electronic trading and e-commerce of scheduled farmers’ produce. 

For successful implementation of the law, significant digitisation is required. Not a single village should be left out without an internet facility. Otherwise the farmers would not be able to enjoy the clarity of online trading.

It is quite surprising that before the law, the farmers were already free to sell their produce to private traders. But, if the deal was not good enough, the farmer had a second option to sell the product in local mandis at minimum assured price, set by the Government. 

The law prohibits state governments or APMCs from levying fees, cess, or any other charge on farmers’ produce. Agriculture is more or less a local phenomenon. Every state has a different environmental scenario. Different crops need different types of treatment, caring and nurturing. It would be easier to handle the agricultural issues, if local bodies like Gram Panchayats were allowed to intervene. In Indian constitution, agriculture lies in the state list. State revenue will also dwindle due to tax exemption. 

The law provides a 3-level dispute settlement mechanism by the conciliation board, Sub-Divisional Magistrate, and Appellate Authority. 

In this regard, Section 13 of The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 is taken as a reference here. This section states that “No suit, prosecution or other legal proceedings shall lie against the Central Government or the State Government, or any officer of the Central Government or the State Government or any other person in respect of anything which is in good faith done or intended to be done under this Act or of any rules or orders made there under.”

Surprisingly, the above law is not just about farmers. It’s applicable to all civilians. Phrases like ‘in respect of anything’, ‘in good faith,’ are ambiguous. 

Agricultural courts should be formed in every corner of the agricultural hub. And a few experts in agricultural activities should be appointed by the central Government, to address queries by farmers.

(B)The second bill is Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020. 

The bill  seeks to provide farmers with a framework to engage in contract farming, where farmers can enter into a direct agreement with a buyer (before sowing season) to sell the produce to them at predetermined prices. 

The act allows contract farming between farmers and sponsors. But, there is apprehension of misuse of power.

The fineprint of contracts can go against farmers. Moreover, it’s difficult to judge the quality of a farmer’s produce before harvest. Therefore, the farmer may fail to meet up the quality that was being assured by him at the time of deal. In remote areas, where literacy rate is very low, the farmers can be exploited in many ways. 

If the private houses delay the procurement of crops even by a week, it would have a massive impact on the price of the produce. Therefore, the shelter of the government is very much required for the smooth running of the system. 

(C) Essential Commodities (Amendment) Act, 2020

 (i) gives freedom to produce, hold, move, distribute, and supply produce, leading to harnessing private sector/foreign direct investment in agricultural infrastructure. 

(ii)  removes cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities. It’s an amendment to the Essential Commodities Act, 1955.  

It is stated that under this act that the government can impose stock holding limits and regulate prices for the above commodities –only under exceptional circumstances. These include war, famine, extraordinary price rise and natural calamity of grave nature. The phrase “extraordinary price rise” is very ambiguous. Secondly, the basis on which these commodities have been considered as non-essential, is not clear at all. 

And finally, few farmers have good storage facilities in a country like India. This act will empower  a handful who will enjoy the monopoly by stocking and holding. The chance of black marketing is very high here. 

In a nutshell, the following clause of the bills (three) should be reconsidered: 

1.There is no mention of minimum support price (MSP) that buyers need to offer to the farmers. Government is verbally saying that APMC MSP will work like the previous manner, but nothing is available in writing. 

2. The nature of the crop should be taken into consideration. Different policies should be prescribed for different types of crops (fresh/cash etc.)

3. Usually an FPO (Farmers producers organisation): an aggregator of small land holdings) is in a better position than a single farmer to negotiate with middlemen. If a farmer is not able to enrol himself under an FPO, he can be marginalised in many ways. The government should open a number of help desks to take care of these issues.

4. Different policies should be prescribed for different types of farmers. They all belong to different economic classes. A uniform law will increase the financial divide.

5. The role of middleman has to be addressed. Alternative employment schemes should be enhanced.

6. Infrastructure and institutional back up should be added to the supply chains.   

Special care for the states

One of the government reports says ‘rice is a water-intensive crop and farmers from areas with water shortage too grow it, as there is an MSP assured in the end. Continuous adoption of rice-wheat cropping system in North-Western plains of Punjab, Haryana and West Uttar Pradesh has resulted in depletion of groundwater and deterioration of soil quality, posing a serious threat to its sustainability.’ 

And unfortunately it’s true to some extent and the policy makers believe that the farmers of these states will be bound to grow other crops which have more market demand. 

farm bills

The protesters believe that most of the farmers are wheat producers in Punjab and Haryana and they have been getting MSP since 1966. If the farmers are suddenly told to cultivate other crops, it will not be very easy to adopt. There is an ecosystem, which takes years to put in place. Keeping in mind the ecosystem of soil, the change has to be gradual. Nothing can be changed abruptly. To make farmers switch from one cropping pattern to another, they must be provided with an alternative. But no alternative package has been announced in place of MSP. 

To conclude,amidst the international and national tweet war and prolonged political blame game, nobody is thinking about the proper solution. In India, Agriculture plays a vital role in the economy. In 2020, agriculture has contributed about 17 % (approx) to the total GDP and provided 41.49% (approx) employment to over half of the total population.

To cope up with global competitiveness and to make the agricultural sector more productive, the corporate houses and government, both have to work together. Private investments are welcome but public investments are also necessary as a safety net.  

It’s high time to prioritise the issues of the farm bills. The farmers are the backbone of our country. Every single matter has to be handled patiently and sympathetically. Internal peace of our country should not be compromised at any cost.

Image courtesy Pexels

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