Explaining the Farm Bills

  – Satyakam Ray

A lot of political humdrum had already happened over the issue; still, ordinary folks were clueless about what exactly was the case with the farm bills and why such a hue and cry went on. This article tries to demystify the farm bills for everyone. Let’s heed the issue with empathy and logic. 

The crux of the protest lies in the three farmer’s bills passed in the parliament’s upper and lower houses. Subsequently, it was signed by the president of India, making it a law.

What are the three farm bills?

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
  • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
  • The Essential Commodities (Amendment) Bill, 2020

Let’s analyze the farm bills/laws and their pros/cons. Relevant examples will be given to support the argument whenever necessary.

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

It ensures the creation of an ecosystem where the farmers and traders enjoy the freedom of choice for selling and purchasing farmers’ produce. The salient features are given below.

  • Subject to the provisions of this Act, any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the inter-state or intra-state trade and commerce in farmers’ produce in a trade area. (Chapter II, section 3)
  • No market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produce in a trade area. Here trade gate refers to any area, location, place of production, collection, and aggregation, including farm gates, factory premises, warehouses, silos, cold storages, or any other structure or area. (chapter II, section 6)
  • It provides a facilitative framework for electronic trading. 

In simplified terms, a parallel trading system will be available outside the APMC mandis. No tax will be levied upon the business with the private players, whereas the government-run mandis will still charge taxes to the farmers. A free-market concept will evolve in India where private players can engage with the farmers so that tough competition for better pricing increases farmers’ income. One nation-one farming system will ensure that the farmers can sell the produce anywhere in India with the optional government-run mandis as a backup. The intermediaries in the mandi system will be removed. That would be a win-win situation for everyone, according to the government. Yes, on paper!

If everything is so good, then why are the farmers still protesting? Are they misguided, or are they smart enough to know the ploy? Here’s the analysis.

  • There will be taxes levied in the government mandis as usual. A part of the taxes is spent on the maintenance of the mandis. The tax is 8.5% in Punjab, whereas the tax is 6.5% in Haryana. But there won’t be any taxes during the transactions with the private players. So, it implies the farmers will be more inclined to sell the produce outside the APMC mandis. There’s a growing fear among the farmer community that in this process, gradually, over 2-3 years, the mandi system will be redundant, and their future will be in the hands of the big corporations. Some can argue that the fear is pretty much far-fetched. But considering the cunning of the private players in other sectors like healthcare, telecom, and transportation, the fear is not that irrelevant, in my opinion. But who has seen the future?
  • The main contention is the lack of mention of MSP in the bill. The minimum support price (MSP) is the minimum price the government ensures the farmers get in the mandis on certain crops. But there is no provision for a law legalizing the MSP. PM Modi has often told it that the MSP wouldn’t be affected. The farmers are demanding to legalize the MSP in government mandis. Some are even requesting to make MSP legal outside the Mandis as well. But today, the government’s stand on MSP in written form needs to be clarified. Who would listen to the oral promise if any dispute occurred between the farmer and the private players?
  • According to the farmers, the so-called intermediaries who exploit farmers are service providers. They do various menial jobs for the farmers, like carrying and loading produce in the mandis for a commission. They even share a personal relationship with farmers and work as an instant credit system for farmers in emergencies. If these people are removed from the scene, there will be a huge job loss, and the farmers will lose a helping hand. The ‘exploiting’ middleman narrative is way too nuanced to comprehend. It doesn’t mean the system is perfect. It’s flawed to some extent and needs reformations to eliminate the problems, not just scraping it entirely altogether.
  • Price discovery is a sensitive topic for farmers. Usually, in mandis, this price discovery happens where the one-on-one interaction with the traders is possible for farmers organically. But with the private players, there’s no clear-cut mechanism set for price discovery. And it’s common sense if a deal is being done by a small-scale farmer and the representative of the big corporations, whose side is heavily focused on deciding the prices during the negotiations. It’s common knowledge that corporations work for their profits only. They do business, not charity. It’s like removing the traditional middlemen and engaging in more severe exploitation.
  • The whole barrier-free intrastate and interstate crop selling is too impractical. Considering the farmer’s suicides and their sorrowful financial state, it would be too optimistic to say that a farmer from Odisha would sell his produce in Bangalore, Karnataka. Who’s going to pay the transportation fee? Practically, intra-district crop selling becomes too much for a farmer in a rural economy. Forget about doing business all around the country!

2. The Farmer (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

The salient features of the bill are given below.

  • It will empower farmers to engage with processors, wholesalers, aggregators, wholesalers, large retailers, exporters, etc., on a level playing field—price assurance to farmers even before the sowing of crops. In case of higher market prices, farmers will be entitled to this price over and above the minimum cost.
  • It will reduce the cost of marketing and improve the income of farmers.
  • It will transfer the risk of market unpredictability from the farmer to the sponsor. Due to prior price determination, farmers will be shielded from the rise and fall of market prices.

Everything is good about the bill as per the farmer’s agreement. The only main concern of the bill is that there’s no provision for going to civil court in case of any dispute between the farmer and the private player. The farmer cannot go to court if they disagree with the authority’s decision. At best, they can go to the SDM or Additional collector for grievance, who has the power of a civil court. The law protects even the bureaucracy so that no action can be taken against them in case of any irregularity. In a way, it strengthened contract farming and the power of bureaucracy. 

Do specific valid questions come to mind regarding the dispute mechanism?

  • What if the bureaucrat is corrupt and favors the rich corporate lobby?
  • Is the farmer so well educated to deal with the nuisance of farm agreements, decide on a suitable price, and lobby before the SDM/AC for his rights in case of any dispute in the farm agreement?

3. The Essential Commodities (Amendment) Bill, 2020

The salient features of the bill are given below.

  • The supply of foodstuffs, including cereals, pulses, potatoes, onions, edible oilseeds, and oils, as the Central Government may, by notification in the Official Gazette, specify, may be regulated only under extraordinary circumstances, which may include war, famine, remarkable price rise and natural calamity of grave nature.
  • Increase the retail price of horticultural produce by fifty percent—increase the retail price of non-perishable agricultural foodstuffs. An order to regulate any farm produce’s stock limit may be issued under this Act only if there is a hundred percent. Any action imposing a stock limit shall be based on a price rise.

In simpler terms, there will be no limit on stocking the foodstuff. The government will come into the picture to regulate the price only in case of war, famine, or extraordinary price rise. 

There lies the main contention of the protest. Big, rich corporate houses will buy vegetables or fruits from farmers at a low price and indefinitely store them in their cold storage. It will lead to hoarding and artificial demand-supply imbalance. If the big corporate players control the price, it will easily affect the pockets of ordinary middle-class people. One who has the stock controls the price. One who holds the price does have a monopoly of the market.

The last bill is not dangerous for farmers; it harms middle-class folks like you and me. In short, foodstuff prices will be high if the laws are implemented.

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