DICHOTOMY SURROUNDING THE NEW AGRICULTURAL BILL, 2020

“Jai Jawaan, Jai Kisaan!”

 

This slogan by our second Prime Minister, Shri Lal Bhahadur Shasti in 1965 resonates and reverberates within every Indian, not only our farmers. This article discusses whether the new Farm Bills will do justice to this slogan.

 

Agriculture is the primary source of livelihood for about 58 per cent of India’s population. Gross Value Added (GVA) by agriculture, forestry and fishing was estimated at Rs 19.48 lakh crore in FY20. Growth in GVA in agriculture and allied sectors stood at 4 per cent in FY20.

 
The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.

 

Agricultural markets in India are mainly regulated by state Agriculture Produce Marketing Committee (APMC) laws.  APMCs were set up with the objective of ensuring fair trade between buyers and sellers for effective price discovery of farmers’ produce. Each state which operates APMC markets geographically divide the state. Markets (mandis) are established at different places within the state. Farmers are required to sell their produce via auction at the mandi in their region. Traders require a license to operate within a mandi. Wholesale and retail traders and food processing companies cannot buy produce directly from a farmer. Also, if any farmer is unable to sell their produce, the Government buys that at MSP (minimum support price) so that the farmers do not incur losses. This also gives farmers the incentive to produce. APMCs can: (i) regulate the trade of farmers’ produce by providing licenses to buyers, commission agents, and private markets, (ii) levy market fees or any other charges on such trade, and (iii) provide necessary infrastructure within their markets to facilitate the trade.

 

But the Standing Committee on Agriculture, in 2018-2019, observed certain drawbacks in the implementation of the APMC laws like, (i) cartelization, and (ii) undue deductions in the form of commission charges and market fees.

 

To tackle the drawbacks and ensure agriculture growth along with growth of farmers of India, the Central Government, on June 5, 2020, promulgated three Ordinances:

 

(i) the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020,

 

The farmers’ produce trade and commerce (promotion and felicitation) ordinance, 2020 allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets.  State governments are prohibited from levying any market fee, tax, or levy outside APMC areas. 

 

(ii) the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020,

 

The Farmers Agreement Ordinance creates a framework for contract farming through an agreement between a farmer and a buyer prior to the production or rearing of any farm produce.  It provides for a three-level dispute settlement mechanism: the conciliation board, Sub-Divisional Magistrate and Appellate Authority.

 

(iii) the Essential Commodities (Amendment) Ordinance, 2020.

 

The Essential Commodities (Amendment) Ordinance, 2020 allows the central government to regulate the supply of certain food items only under extraordinary circumstances (such as war and famine).  Stock limits may be imposed on agricultural produce only if there is a steep price rise. 

 

The Government believes that these Bills would transform the agricultural sector and will make the farmer independent of the government-controlled markets and fetch them better prices for their produce. The Centre also assures to double the income of the farmers by the year 2022.

 

But the farmers have not welcomed this new change with open arms. They are apprehensive about the minimum support price (MSP) since selling their produce out of mandis might mean they cannot claim the MSP from the government. They are also skeptical about the agri-businesses and big retailers, who might have an upper hand in negotiations. Another point of concern is that this will not be beneficial for the small farmers.

 

In the year 2006, Bihar repealed its APMC Act with a similar objective to attract private investment in the sector and gave charge of the markets to the concerned sub-divisional officers in that area.  This resulted in a lack of required marketing infrastructure as the existing infrastructure eroded over time due to poor upkeep.  In unregulated markets, farmers faced issues such as high transaction charges and lack of information on prices and arrival of produce.  The Committee of State Ministers, constituted in 2010 for agricultural marketing reforms, observed that complete deregulation of markets did not help in attracting any private investment. The Committee noted that there is a need for an appropriate legal and institutional structure with a progressive type of regulation to ensure orderly functioning of markets and to attract investment for infrastructure development.

 

Now the question is, will the Indian Government be able to achieve the goals that were set by this bill or will it struggle to find its footing?

 

Author: Ms. Aditi Narayan