The Whole Tell-tale: The Three Disputed Farm Bills, 2020

The Re-Beginnan | Vol.2 | Issue 18

What’s the Deal?

The government has passed three farm bills namely — Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, The Farmer’s (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 and The Essential Commodities (Amendment) Bill, 2020.

As per the government, these bills aim to liberalize & deregulate the trade and increase the number of buyers. The bills also aim to give farmers better prices by an increase in competition.

Many have opposed the bills including BJP’s oldest allies — Shiromani Akali Dal. Harsimrat Kaur Badal (Ex Minister of Food and Processing), the only Akali Dal member in the cabinet, quit her position in the cabinet, calling the bill “anti-farmer”.

Congress party has also critiqued the farmers’ bills, while the party had the same reforms in their 2019 election manifesto. Also, farmers in the northern region of the country — Punjab, Haryana & parts of Uttar Pradesh are protesting against the bills calling it ‘Kala Kanoon’ or ‘Black Law’.

Dissection of the 3 Bills; Pros & Cons

1. The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

Previously

- Farmers could only sell their farm produce to notified markets or mandis i.e. Agricultural Produce Marketing Committee (APMCs — 7000 in number).

- Licensed Middlemen were present at each APMC and would buy produce from farmers at prices set by auction which would then be sold by them to institutional buyers like retailers & big traders.

- Issues were identified by the standing committee in regards to APMC laws that weren’t implemented in their truest sense. Identified issues were — i) Limited number of traders in APMC which led to centralization and reduced competition, ii) Commission charges and market fees were charged that were undue deductions & iii) Barrier to entry to new traders in APMCs which led to a restrictive market and lack of multiple channels of marketing. This led to the formation of the new bill.

Key Highlights

- Allows for barrier-free intra-and-interstate trade (persons, company, or cooperatives) of farm produce. Farmers can now sell their produce directly to farm gates, factory premises, warehouses, silos and cold storages. Farmers can now sell their produce directly to institutional buyers, eliminating the middlemen at prices agreed between them.

- No government can levy any market fee, cess or levy on farmers, traders and electronic trading platforms under the bill.

- Online trading platforms can be set up by companies, partnership firms, registered societies, subject to having a pan card or it can be set up by agricultural cooperative societies and farmer producer organizations.

- Alternate private markets/madis can now be set up with no tax obligations on them.

Objections/Criticisms

- The bill would expose small marginal farmers to corporates with more bargaining power and resources. 85% of farmers in India own less than 2 hectares of land making it difficult for them to negotiate with large-scale buyers.

- The presence of alternate private mandis will lead to the ultimate closure of existing APMCs. This will leave farmers with no options open, but to sell their produce at a lower rate than the MSP (Minimum Support Price) to private players.

- Farmers may have difficulties in travel and storage in the quest to find better prices at further markets. There was no restriction on farmers to sell their produce in different markets (APMCs) other than their district, before too.

- State governments will lose out on tax revenues that are charged at APMC mandis if private buyers start directly purchasing from farmers.

- Millions who work at mandis would lose their jobs due to the potential scrapping of mandis.

2. The Farmer’s (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

Previously

- Farmers could only sell their produce to APMCs (mandis.)

Key Highlights

- This bill enables farmers to enter into agreements with agri-based firms, exporters or large buyers to produce a crop at a pre-agreed price.

- The minimum period of agreement will be one crop season or one production cycle or livestock. The maximum duration will be 5 years. For the agreement period beyond 5 years, the maximum duration will be decided by the farmer and sponsor.

Objections/Criticism

- Farmers are worried that MSP will be removed and there would be no government control over prices.

- Farmers are demanding that the contract prices must be linked to MSPs i.e. the contract prices should not go below MSPs decided by the government.

3. The Essential Commodities (Amendment) Bill, 2020

Previously

- The earlier act empowered the central government to decide certain commodities as essential and the government could control the production, supply, distribution, trade, and commerce of these commodities. The government had set ceilings on how much certain commodities could be stored by anyone.

Key Highlights

- This bill proposes that no stock limit will apply to a processor or value chain participant of agricultural produce if the stock held by such a person is less than; i) overall ceiling of installed capacity of processing or ii) demand for export in case of an exporter.

- Stock limit will be only imposed on the basis of price rise. The stock limit may be imposed only if there is; i) 100% increase in the retail price of horticultural produce; and ii) 50% increase in the retail price of non-perishable agricultural food items.

- The supply of certain foods including cereals, pulses, potato, onions, edible oilseeds, and oils may be regulated by the central government under extraordinary circumstances, that include; i) war, ii) famine, iii) extraordinary price rise and iv) natural calamity of grave nature.

Objections/Criticism

- Farmers worry that unlimited stocking could lead to artificial price fluctuations and they would have to sell their harvest at low prices.

Overall Criticisms/Demands of farmers

- The new bills are favoring companies and disempowering farmers.

- MSP must be made a legal right of farmers.

- APMCs must not be removed but reformed.

- Middlemen are not going. Even in the case of private buying, there will be middlemen just not with a government license.

- The government must invest in agriculture, not the private sector.

The Way Forward…

The three bills have been passed by both the upper and lower house; all they need now is the president’s approval to become acts. The opposition and farmer associations have requested the President to consider their demands/objections and not approve them. If the bills become acts it will be interesting to see where the agriculture sector heads.