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Why in the news?

Recently, three Bills related to agriculture received the President’s assent and hence became acts. Two of the three bills were approved on the 27th of September 2020.

What are the three Bills?

  • The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Service Bill, 2020
  • The Essential Commodities (Amendment) Bill, 2020.

Implications of passed acts: –

Many controversies, and arguments were going on against the recent enacted farm bills. Some farmers were protesting out of fear that the new acts had paved the way for anti-farmer and corporatized agricultural system.

NDA’s oldest ally Shiromani Akali Dal (SAD) has parted ways on the issue of these farm bills as farmers in Punjab and Haryana to strengthen the protest.

Three Acts in Detail 

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

  • This act intended to ease the inter-state and intra state trade of agricultural products as well as trade and commerce outside the premises of markets that are under the State agricultural produce marketing legislations APMC Mandis and to facilitate a ‘one India one Agri-market’.
  • Farmers may now trade directly with private cold storage facilities, warehouses, processing units etc.
  • An act intended to expand and open the agricultural market to private investors.
  • No tax or cess shall be levied for the sale of agricultural product outside the APMC market premises, in any private markets or outside the state where it was produced. Hence this act prohibits state governments from levying on traders, e-commerce sites from charging market fees or cess on farmers’ products.
  • The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any State law for the time being in force including the APMC act of each state.
  • State Governments shall comply with the directions given by the union government in order to implement the provisions of this act.

 Dispute-resolution mechanism: –

  1. Sets up a dispute-resolution mechanism for buyers and farmers to be operated by a sub-divisional magistrate who shall refer such dispute to a Conciliation Board to be appointed by him for facilitating the binding settlement of the dispute.
  2. Every Board of Conciliation appointed by the Sub-Divisional Magistrate under sub-section (1), shall consist of a chairperson and such members not less than two and not more than four, as the Sub-Divisional Magistrate may deem fit.

Recent Info: – PM Narendra Modi informed that Minimum Support Price (MSP) for farm products will be continued under the new legislations, relieving farmers concerns. But this information is not included in any of the current passed bills.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act –

  • An Act to provide for a national framework on farming agreements (contract farming), for farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce.
  • The contract between the farmers and the buyers before production or rearing of any agricultural products may enter into a written farming agreement in respect of any farming products and such agreement may provide for—the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters.
  • Agreed price of purchase of the agricultural produce can be determined and mentioned in the contract is subject to variation, then, such agreement shall explicitly provide for— (a) a guaranteed price to be paid for such produce(b) a clear price reference for any additional amount over and above the guaranteed price, and such price reference may be linked to the prevailing prices in specified APMC yard or other suitable benchmark prices.
  • Where a farming agreement has been entered into in respect of any farming produce under this Act, such produce shall be exempt from the application of any State Act, established for the purpose of regulation of sale and purchase of such farming produce.
  • Any obligation related to stockpiling limit shall not be applicable to the farming produce purchased under a farming agreement, including the provisions of the Essential Commodities Act.
  • A farming agreement may be linked with insurance or credit instrument under any scheme of the Central Government or the State Government or any financial service provider.
  • State governments may establish a registration authority to provide for the electronic registry of farming agreements.

Dispute Settlement:

 A conciliation board consisting of representatives of parties to the agreement shall be formed. Any dispute arising out of the agreement shall first be referred to this board.

  • In case of failure of the board to settle the dispute, then any of the parties may approach the concerned Sub-Divisional Magistrate who shall act as the Sub-Divisional Authority for deciding on the dispute.
  • Appeal against the Sub-divisional authorities’ decision shall be taken to the Appellate authority, which shall be presided over by a District Collector or an Additional collector nominated by the Collector.
  • It is to be noted that the aggrieved parties may not approach a civil court to settle their dispute. Civil courts shall no longer entertain disputes related to farming agreements.
  • The Central Government may give such directions, as it may consider necessary, to the State Governments for effective implementation of the provisions of this Act and the state government is required to comply.

Essential Commodities (Amendment) Ordinance 2020

  • The ordinance of Essential Commodities (Amendment) 2020 amends the Essential Commodities Act,1955 by clause (1) of Article 123.The Act empowers the central government to control the production, supply, distribution, trade, and commerce in certain commodities (such as food items, fertilizers, and petroleum products).
  • Provision (1A) has been inserted under Section (3) – sub-section (1) of the act. The provision removes regulation on the supply of foodstuff including cereals, pulses, potato, onions, edible oil seeds, and some other products from the essential commodities list, and thereby the restrictions on the storage of these items will be removed.
  • The Ordinance provides that the central government may regulate or prohibit the supply of certain food items including cereals, pulses, potato, onions, edible oilseeds, and oils, only under extraordinary circumstances which include: (i) war, (ii) famine, (iii) extraordinary price rise and (iv) natural calamity of grave nature.
  • Imposing stocking limit to prevent hoarding and malpractice shall be imposed only if there is:
    – 100% increase in the retail price of horticultural produce
    – 50% increase in the retail price in the case of non-perishable agricultural produce.

Background: –
The ECA has its roots in WW2 where laws were implemented by the British to exploit the supply within the country. The bill places restrictions on the storage of essential commodities like pulses, oilseeds, onions, etc.
Now the foodstuff including cereals, pulses, potato, onions, edible oilseeds and etc have been removed.

Overview of cons & pros and other factors of all bills

  • The new bills have not brought any major drastic changes, only a parallel system working with the existing system. Prior to these bills, farmers can sell their products to the whole world, but through the e- NAM system.
  • Selling produces outside mandis to other states will be an added marketing channel for the farmers.
  • Majority of Farmers, approximately 86%, are marginal and small-scale farmers with land holdings less than 5 acres. In Farming Agreements or Contract, farmers will be the weaker side in terms of their ability in negotiation of what they need.So Corporates or private parties can play a strong role and get the products at low rates.
  • There is no provision in the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, linking the minimum guaranteed price in a farming contract with the MSP.
  • Removing the restrictions on the storage of some food grains may lead to more imports at cheaper prices affecting the domestic farmers. And big businesses may store the food grains to increase the prices artificially.
  • For any disputes, farmers or buyers need to reach civil representatives instead of appeal in court.

State Autonomy

  • Constitutionally, items relating to agriculture come under the state list (List 2). Each state also has its own APMC act. But, the three new acts shall have effect notwithstanding anything inconsistent therewith contained in any State law. This is perceived as a dent to cooperative federalism and state autonomy by many state governments.
  • Certain states with a strong APMC network and infrastructure along with higher taxation imposed on transactions generate significant revenues from the operation of APMC Mandis. For example: Punjab earned annual revenue of ~3500 Crores from the charges collected in their state APMC mandis. These states might now suffer a loss of revenue as a result of the shift in market towards private operators encouraged by the new Agri Acts.

Way Forward –

  • The existing APMCs system along with the MSP mechanism and government procurement has issues of its own. But these issues could be sorted out wherever feasible instead of reorganising the entire system which was constructed over a long period.
  • MSP mechanism could be strengthened and MSP could be made a legal entitlement. Guaranteed prices agreed upon in farming contracts must be linked to MSPs.
  • Cartel formation by middlemen/agents in APMCs must be dealt with.
    Local small-scale farmers could be included in the marketing committee of their region in order to make them accountable to fellow farmers and check monopolisation and cartel formation.

National Commission on Farmers (2004) Recommendations

  • In its report, the commission had recommended that MSP be majorly extended to crops other than paddy and wheat and also suggested that millets and other nutritious cereals be procured by the government and permanently included in the PDS (Public Distribution System).
  • The commission strongly recommended that MSP should be at least 50% more than the weighted average cost of production. This proposal was summarily rejected by the government.

What is APMC?

APMC means the Agricultural Produce & Livestock Market Committee established under the provisions of the Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act (APLM), 2017. Markets are linked to the National Agriculture Market or eNAM. There are about 2477 principal regulated markets based on geography (the APMCs) and 4843 sub-market yards regulated by the respective APMCs in India.

  •  An Agricultural Produce Marketing Committees (APMC) is a marketing board run by state Government in its state where farmers are allowed to sell their agricultural products to traders or middlemen. These middlemen can sell the products to consumers throughout the country. These APMCs were initially set up to protect farmers from big retailers and ensure that prices do not falls on high.
  • APMC’s provides MSP for an agricultural product. MSP (Minimum Support Price) is the minimum price that farmers can be sold.

MSP (Minimum Support Price): –

The MSPs are set by the government. It helps farmers not to fall on private retailers at low rates. The government declares MSPs for crops, but there’s no law mandating their implementation. Indian government sets the price for 23 commodities twice a year.

  • MSPs are announced at the beginning of the sowing season on the basis of recommendations of the Commission for agricultural costs and Prices (CACP). The MSP is determined considering factors such as; the cost of production, changes in input prices, trends in market prices, effect on the cost of living etc.
  • 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 masur), 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and 4 commercial crops (cotton, sugarcane, copra and raw jute) — based on the CACP’s recommendations.
  • The only crop where MSP payment has legislative implementation is sugarcane for which FRP (Fair and Remunerative Price ) is determined. This is due to its pricing being governed by the sugarcane (control) order, 1966 issued under the Essential Commodities Act.
  • In total, 19 states have already amended their APMC Acts (Agriculture Produce Markets Act) to provide for contract farming. The states of Bihar, Kerala and Manipur along with the Union territories (except Chandigarh) have no APMC acts. In Sikkim, the APMC Act is not implemented.

 Concern Surrounding MSP –

  • Since the market has been opened for farmers to trade directly with large-scale private operators including direct farmgate trading and trading with private cold storage facilities and warehouses, the private market will start playing a larger role in determining prices of agricultural produce.
  • In theory this could result in farmers obtaining greater than MSP prices from private traders for their produce.
  • But the marginal and small-scale farmers have very little negotiation power. Large scale private traders could easily obtain produce from the marginal farmers at much lower costs than the government announced MSP rates, since approaching the scarcely located APMC mandis to sell their product is not always an economically viable option for such farmers considering the logistic costs.
  • The Farmer’s Produce Trade and Commerce (Promotion and facilitation) Bill does not give any statutory backing to MSP. There is no law mandating the implementation of MSP.
  • There is no provision in the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, linking the minimum guaranteed price in a farming contract with the MSP
  • It is to be noted that, MSP is not a legal entitlement but rather a government administrative decision. Hence, farmers cannot approach the court citing that they did not receive MSP.

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