Agriculture Reforms and Issues

• Parliament has recently passed three legislations related to Agriculture Sector Reforms. These reforms have led to the widespread farmer protest particularly in northern India. 

• The farmers are of the apprehension that the laws could corporatise agriculture, threaten the current mandi network and State revenues and dilute the system of government procurement at guaranteed prices.

• The three laws that are passed by Parliament 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

• Essential Commodities (Amendment) Act, 2020

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

• The key features of the act are:

• Trade outside APMC market: It allows intra-state and inter-state trade of farmers’ produce outside the physical premises market committees formed under the state Agricultural Produce Market Committee (APMC) Acts.

• An APMC is a state-operated market where farmers are allowed to sell their produce to traders or middlemen. These middlemen then sell their produce to consumers throughout the country.

• Electronic trading: It permits the electronic trading of agricultural produce regulated under any state APMC Act in the specified trade area.    

• Abolishment of market fees: It prohibits state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for trade of farmers’ produce conducted in an ‘outside trade area’.

• Benefit for farmers: It will open more choices for farmers, reduce marketing costs, and help them get better prices. It will also help farmers of regions with surplus produce to get better prices and consumers in areas with shortages at lower prices.

• One nation, one market: The Act will help create One India, One Agriculture Market and will lay the foundation for ensuring golden harvests for our hard working farmers.

• Concerns of farmers: States will lose revenue as they will not be able to collect ‘mandi fees’ if farmers sell their produce outside registered Agricultural Produce Market Committee (APMC) markets.

• Also, commission agents stand to lose if the entire farm trade moves out of mandis.

• But, more importantly, farmers fear it may eventually lead to the end of the minimum support price (MSP) -based procurement system and may lead to exploitation by private companies.

• Government stand: The new bill however does not do away with APMC. If the farmers still want to, they can go ahead and sell their produce at APMC and avail the MSP support.

Minimum Support Price (MSP)

• Fixation of MSP: The MSP is fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

• The MSP is the rate at which the government buys grains from farmers. The Centre currently fixes MSPs for 23 farm commodities — 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley), 5 pulses (chana, arhar/tur, urad, moong and masoor), 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and niger seed) and 4 commercial crops (cotton, sugarcane, copra and raw jute).

• Reason behind the idea of MSP is to counter price volatility of agricultural commodities due to the factors like variation in their supply, lack of market integration and information asymmetry.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020

• The key features of the act are:

• Prior agreement: It ensures that farmers are allowed to enter into contracts with buyers. Here farming is carried out on the basis of the agreement between the buyers and the producers. 

• One of the greatest advantages that farmers receive through this bill is the price assurance even before sowing his crops. 

• Pricing of farming produce: The price of farming produce should be mentioned in the agreement. For prices subject to variation, a guaranteed price for the product and a clear reference for any additional amount above the guaranteed price must be specified in the agreement. Further, the process of price determination must be mentioned in the agreement.

• Dispute Settlement: There is a provision to the conciliation board as well as a conciliation process for settlement of disputes. At first, all disputes must be referred to the board for resolution. 

• If the dispute remains unresolved by the Board after thirty days, parties may approach the Sub-divisional Magistrate for resolution. 

• Parties will have a right to appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the Magistrate.  

• Benefits for farmers: It seeks to transfer the risk of market unpredictability from farmers to sponsors. Besides giving them access to modern tech and better inputs, it also seeks to boost farmer income by reducing the cost of marketing.

• Farmers will engage in direct marketing thereby eliminating intermediaries resulting in full realization of price.

• Concern of farmers: Farmer bodies have raised a concern that the law is framed to suit big corporates. It will weaken the negotiating power of farmers. Also, big private companies, exporters, wholesalers, and processors may get an edge.

• Contract farming is looked upon as privatization of farming, two major concerns here are that farmers will never be able to negotiate with the corporate sector. The Act does not prescribe or specify that the contract price of the crop should be at least equivalent or above the MSP. It means the contractor/companies can pay whatever price they want to the farmer.

The Essential Commodities (Amendment) Act, 2020

• The key features of the act are:

• Regulation of food items: It provides that the central government may regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances.   

• These include: war, famine, extraordinary price rise and natural calamity of grave nature.

• Stock limit: It requires that imposition of any stock limit on agricultural produce must be based on price rise.  

• Benefits: It is aimed at attracting private investment/FDI into the farm sector as well as bringing price stability.

• Concern raised: The new amendments to the Act erodes the Constitutional rights of the states since it is a highly centralising Act. According to them, the new law will only help hoarders and black-marketeers.

Federalism Debate:

• Right to enact legislation on agricultural marketing: The state government has raised a concern over the Centre’s power to legislate over State subject under seventh schedule.

• Article 246 of the Constitution places “agriculture” in entry 14 and “markets and fairs” in entry 28 of the State List. 

• But entry 42 of the Union List empowers the Centre to regulate “inter-State trade and commerce”. 

• While trade and commerce “within the State” is under entry 26 of the State List, it is subject to the provisions of entry 33 of the Concurrent List, under which the Centre can make laws that would prevail over those enacted by the states.

• Entry 33 of the Concurrent List covers trade and commerce in “foodstuffs, including edible oilseeds and oils”, fodder, cotton and jute. 

• The Centre, in other words, can very pass any law that removes all impediments to both inter- and intra-state trade in farm produce, while also overriding the existing state APMC Acts.

WAY FORWARD

• Reform in APMC's: There are many flaws in the decades old APMC Act, that the need was to plug the loopholes instead of introducing a new system altogether.

• Agriculture infrastructure: Govt should start spending in strengthening the infrastructure to realise the ambitious target of doubling the farmers income.

• Proper consultation: A consultation mechanism should be developed and held periodically with the representative of farmers and state government before bringing any reforms in the sector.

• Legal backing to MSP: Though, none of the legislation affects the Minimum Support Price in any way, as the MSP is an administrative decision not a law. But giving a legal backing to MSP will give assurance to the aggrieved farmers.