The Government of India promulgated three ordinances on Agricultural Reforms – The Essential Commodities (Amendment) Ordinance, 2020; The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020; and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, on 5th June 2020. On 14th September 2020, the bills were brought before the Parliament for discussion. However, the proceedings in the Parliament visibly represent the lack of discussion and constructive discourse leading to regretful ramifications for almost all the stakeholders. The bills received the Presidential assent on 27th September 2020 and were then notified in the official gazette.
The Central Government had invoked Entry 33 in List III ( Concurrent List ) of the Seventh Schedule to the Constitution of India, which essentially deals with trade and commerce. Agriculture is exclusively a state subject listed in Entry 14 in List-II (State List) along with Entry 26 in List-II (State List) of the Seventh Schedule to the Constitution of India which refers to “trade and commerce within the State”. Contract farming under the proposed laws is expected to lead a revolution in farming as farmers will have insurance to their crop before sowing the seeds i.e. guarantee of a buyer at a fixed price. Farmers will know the price at which they’ll be able to sell their crop after the harvest as they have already contracted with the buyer. This will eventually lead to cartelization which essentially takes away the freedom of choice of individual farmers subjecting them to the whims of ‘power-players’ within the cartel.
WHAT WERE THE LAWS
The three laws must be read together to understand the implications that the legislation shares. It essentially allows for private players to invest in the supply-food-chain in the agriculture sector, remove intermediaries, and passing of the benefits to the farmers.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
- Seeks to bypass all the State-level APMC Acts.
- Aims to implement changes to the current functioning system.
- It aims to create an ecosystem where farmers and traders would be ‘free to transact’ in ‘agriculture produce’ without any market fee or cess levied on them under any State Act and without the necessity of having a license.
- Promotes barrier-free intra-state and inter-state trade of farmer’s produce.
- Promoting ‘efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce’.
- Create an ‘electronic trading and transaction platform’.
The Essential Commodities (Amendment) Act, 2020
- Amends the provisions of the Essential Commodities Act, 1955 which controlled the production, supply and distribution of essential commodities.
- Attempts to remove commodities like cereals, pulses, potato, onions, edible oilseeds and oils from the list of ‘essential commodities’ specified in the ‘schedule’ of the 1955 Act.
- Specifies that the price of the mentioned commodities may only be regulated under ‘extraordinary circumstances’ including ‘war, famine, extraordinary price rise and natural calamity of grave nature’.
- The base price would be the price in the immediately preceding 12 months or the average retail price of the last five years, whichever is lower.
- It further provides that the government that imposes a stock limit unless there is a 100% increase in price of perishable goods, or 50% increase in price of non-perishable goods; the removal of the threat of stocking limits would invite large businesses that have till now found this as a major constraint.
- The act aims at removing fears of private investors of regulatory influence in their business operations.
- Gives freedom to produce, hold, move, distribute, and supply produce, leading to harnessing private sector/foreign direct investment in agricultural infrastructure.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
- Aims ‘to provide for a national framework on farming agreements’; so that the farmers can directly enter into contract with the buyers/sponsors cutting out the costs of the intermediaries and eventually adding to their income.
- Seeks to transfer the cost of market unpredictability from the farmers to the sponsors
- Provide dispute resolution mechanisms like ‘conciliation’ with effective redressal timelines.
- Protects farmers from exploitation by specifically prohibiting agreements of any ‘transfer, including sale, lease and mortgage of the land or premises of the farmer.
- Prohibiting the raising of any permanent structure on the farmer’s land or premises by the sponsor.
- There is no mention of minimum support price (MSP) that buyers need to offer to farmers.
CONCLUSION
The three Acts read together to promote a vision to bring in more participation from the private players including agri-business startups in the Indian agricultural sector. They have been held as historic and are poised to free the Indian farmers from the chains of the middlemen who are often blamed to garner unjust benefits out of farmers’ hard-earned produce. They also provide a legal framework for the protection of farmers from any foreseeable exploitation. The laws are envisioned to promote market forces to drive the dynamics of the agricultural sector in India thereby essentially driving the rural economy of India.
The essence of the laws is to promote direct trading between the farmer and the buyer. With the passing of the laws, buyers can also operate more freely which gradually leads to a wider market for the farmers to sell their produce.
After an uproar from opposition parties and farmers’ protests, the Farm Laws Repeal Bill, 2021 was introduced and passed on 29 November, 2021 to repeal all the three above-mentioned laws.
