A Comprehensive Analysis of Three Controversial Farm Laws

 The Indian agriculture acts of 2020, often referred to as the Farm Acts are three acts initiated by the Parliament of India in September 2020. After having been approved by the Lok Sabha and the Rajya Sabha, the President of India gave his assent to the bills on 27 September 2020. In this article, you can read all about the farm acts of 2020, which are in the news very often. This is a part of the UPSC Syllabus under current affairs, economy, agriculture and polity.

 

 

Farm Acts, 2020 Background

• Agriculture comes under the state list of Schedule 7 of the Indian Constitution and to initiate reforms in the agricultural sector, in 2017, the central government had released model farming acts. However, several reforms suggested in the model acts had not been implemented by the states. The centre promulgated three ordinances in the first week of June 2020.
• In September 2020, the President gave assent to the three farm acts.
• There have been protests against the acts by farmers in Punjab, Haryana and other states. Some states have also opposed the new legislation. The Kerala legislative assembly passed a resolution against the farm reforms and sought their withdrawal.
• The Supreme Court stayed the implementation of the Farm Acts 2020 and constituted a four-member committee to make recommendations within two months.

Three Acts 

 

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:

• The act aims at opening up agricultural sale and marketing outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers, removes barriers to inter-State trade and provides a framework for electronic trading of agricultural produce. It expands the scope of trade areas of farmers’ produce from select areas to “any place of production, collection, aggregation”.
• It prohibits state governments from levying any market fee, cess, or levy on farmers, traders, and electronic trading platforms for the trade of farmers’ produce conducted in an ‘outside trade area’.
• The act seeks to break the monopoly of government-regulated mandis and allow farmers to sell directly to private buyers.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020:

• It creates a national framework for contract farming. It provides a legal framework for farmers to enter into written contracts with companies and produce for them.
• The written farming agreement, entered into prior to the production or rearing of any farm produce, lists the terms and conditions for supply, quality, grade, standards and price of farm produce and services.
• It defines a dispute resolution mechanism. The Act provides for a three-level dispute settlement mechanism– Conciliation Board, Sub-Divisional Magistrate and Appellate Authority.

Essential Commodities (Amendment) Act, 2020:

• It removes cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities. It will deregulate the production, storage, movement and distribution of these food commodities.
• It will also remove stockholding limits on such items except under “extraordinary circumstances”. The central government is allowed regulation of supply during war, famine, extraordinary price rise and natural calamity of grave nature and annual retail price rise exceeding 100% in horticultural produce (basically onions and potatoes) and 50% for non-perishables (cereals, pulses and edible oils), while providing exemptions for exporters and processors at such times as well.
• It requires that imposition of any stock limit on agricultural produce be based on price rise.
• It will allow agribusinesses to stock food articles and remove the government’s ability to impose restrictions arbitrarily.

 

Arguments in Favour of the Farm Acts

 1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:

Addressing the lacunae of APMC acts:

• The law related to the regulation of Indian agricultural markets like the Agricultural Produce Market Committees (APMC) act had led to centralization and was thought to be reducing competition and participation, with undue commissions, market fees, and monopoly of associations damaging the agricultural sector.
• The act seeks to break the monopoly of government-regulated mandis and allow farmers to sell directly to private buyers by circumventing the APMCs. The new laws provide full autonomy for farmers to sell their produce.

Higher price realization for farmers:

• The act is expected to increase the freedom of choice of sale of agri-produce for the farmers and this could help the farmers in getting a better price for their produce because of more choices of markets. This would allow small and marginal farmers to sell their produce at market and competitive prices.
• The act allows for private players to buy the farmers’ produce even at their farm gates. This will allow the farmers to get better prices through competition and cost-cutting on transportation.
• The farmers will be able to get a greater share of the price being paid by the customers, which currently stands at a lowly 15%.
• This would help raise rural incomes and subsequently provide an impetus to the economy at large due to the increased demand from the rural areas.

One India, one agricultural market:

• It is expected to pave the way for the creation of a ‘One India, One Agriculture Market’ by promoting barrier-free inter-state and intra-state trade with provisions of electronic trading as well. This could help correct the regional disparities in demand and supply of the agricultural produce. This could help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.

2.  Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020: 

• Contract farming will help small and marginal farmers transfer the risk of market unpredictability from the farmer to the sponsor.
• It reduces the risk of price and marketing costs on small and marginal farmers.

•  Contract farming will enable the farmer to access modern technology and better inputs. This would allow farmers to increase farm productivity and also reduce input costs.
• The act seeks to encourage private sector participation in procurement and reduce the government burden of procuring.
• Contract farming can ensure uninterrupted sources for their production and also secure the purchaser from market price fluctuations.
• Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.

 

  ARGUMENTS AGAINST THE ACTS 

 

• The Economic Survey 2019-20, which has extensively analyzed the Essential Commodities Act, notes that the government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in curbing inflation. 

• Since large stocks held by traders can be outlawed under the ECA 1955 anytime, they tend to buy far less than their usual capacity and farmers often suffer huge losses during surplus harvests of perishables. The threat of restrictions also acts as a disincentive for private investment into cold storage, warehouses, processing and export as entrepreneurs get discouraged by the regulatory mechanisms in the Essential Commodities Act, 1955

• The creation of private mandis will drive agriculture business towards private mandis, ending government markets, intermediary systems and APMCs. In a scenario where more and more trading moves out of the APMCs, these regulated market yards will lose revenues
  

•  Lack of statutory support in the acts for the MSP is a major point of concern, especially for farmers from Punjab and Haryana, where 65% of wheat (2019) is procured at MSP by the Food Corporation of India and state agencies.

• The deregulation of the sugar industry in 1998, which paved the way for private establishments, did not result in a significant improvement in farmers’ productivity or incomes.
• A state-led attempt in Bihar to deregulate the APMCs in 2006 has not resulted in an increase in farmers’ income or improved infrastructure

•  Mandis bring in revenue for state governments. The diversion of agricultural trade towards private mandis could lead to the loss of states’ revenues.

• The inability of the small and marginal farmers to understand the terms of the contract may lead to the exploitation of such farmers.
• The lack of bargaining power of farmers with big companies is also a major concern.

•  Critics anticipate that the easing of regulation of food items would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase. This could undermine food security