FARMS BILL 2020
You must have seen in the news that farmers in India have been protesting since three controversial bills have been passed in the parliament in the name of agriculture reform. They are:
1. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farms Services Bill, 2020.
2. The Farming Produce Trade and Commerce (Protection and Facilitation) Bill, 2020.
3. The Essential Commodities (Amendment) Bill, 2020.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farms Services Bill, 2020.
When you look at these words “Empowerment, protection, agreement” it is easy to understand that this bill has something to do with protecting the farmer's interest through a legal agreement.
Now, the question is “Protecting the farmers from what?.” If we look at the title of the bill it says “price assurance and farm services” that means if you are a farmer and I am a business owner and I want to buy your products it could be wheat, rice maize, pulses, vegetables, etc., for that I need to get into the legal agreement with you and this legal agreement is for farmers interest, so that the farmers are not cheated. A farmer can be cheated by a company in many ways. If an agreement is not formed between farmer and buyer, companies can change the conditions of deals made with farmers, which can exploit the farmers. So the legal agreement act as a Dispute Settlement Mechanism between a farmer and a buyer. We have understood what price assurance is, whatever a farmer and a buyer decides on an agreement that is what should be paid to the farmers.
Now, what is the context of “Farm Services”. It sounds like, a buyer can specifically tell the farmer what quantity or grade is required, when to deliver the products and there could be many more such demands, this is called Contract farming. The agreement will outline the conditions for the production of the farm's product and the delivery to buyer premises. The farmer then agrees to supply products based on the quality standards and delivery requirements of the purchaser. In return, the buyer, which is usually a company, agrees to buy the products often at a price that is established in advance.
That means the primary purpose of this Act is for contract farming and the secondary purpose of this Act is providing a nation wise legal framework. The farmers will produce crops as per the contract made between the farmer and the buyer for a mutually agreed remuneration. The government says that this act will transform the Indian agriculture and attracts the private investment, which actually does. Companies also agreed to help the farmers by supplying inputs, assisting with land preparation, providing production advice, and transporting produce to its premises.
However, if you look at the farmer's side their fear is that, a powerful corporate investor would legally dominate the farmers and put the liability clauses on them. As you know everything comes today with the conditions apply that many of the educated people found it difficult to follow up. So obviously there are chances where private companies can exploit the farmers very easily with the legal clauses. This is the major problem for farmers and even genuine ones.
The Farming Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020.
If you look at the title it says “Trade and commerce, promotion and facilitation” which means it is talking about the trading of farms good outside the physical premises of Mandi or APMC (Agricultural Produce Market Committee) Yards. Earlier the agricultural trade could be conducted only in the APMC Yards like warehouses, cold storages, mandi, etc. but this new Act will give farmers the freedom to sell their goods anywhere within the state or outside the state. If you all know all the subjects in India are divided into three lists (Union, State, and Concurrent). Agriculture comes into the state list. Because of this many states could lose the major source of state revenue, because these APMC’s are controlled by state governments. Earlier farmers are restricted from selling their products outside the Mandis, because the products that have an MSP (Minimum Support Price) force them to compulsorily go to the APMC. Otherwise, you see that small farmers can directly sell goods to consumers they are even doing it now. But if you are a large scale farmer and you want your product to be protected by the government then you have to notify APMC or trade with only APMC licensed trader. So anyhow this bill will allow barrier-free trade in agricultural produce outside the notified APMC Mandis. With the help of this bill, the state government will not impose taxes on the sale and purchase of farm produce outside the Mandis and give farmers the freedom to sell their produce at a good price. As you see this bill is beneficial to big farmers because they will have more choices and they can actually start selling to private players. On the other hand, this will hardly make a difference to the small farmers they are anyhow selling outside the Mandis plus due to transportation and logistics costs, small farmers don’t have any incentives to go long-distance or interstates to sell the goods.
Another perspective is that, this is also a way for the government to get out of the business of the agricultural business. Once the farmer gets an entry into the market they can sell to anyone and earn more however farmer’s income will depend upon the ups and downs of the market. Suppose the demand for the particular product in the market is low, due to low demand the prices will fall but the cost of cultivation was high. Now you can see that the farmers will be squeezed between the rising cost of cultivation and low prices due to low demand. In this situation, the government will not intervene by giving any subsidy or any help. So there is a tradeoff, you can’t have everything plus the private players are smart they function at a low cost. They will use every strategy to buy at less price and sell at a high price to earn a profit.
The Essential Commodities (Amendment) Bill, 2020.
There is an amendment in this bill, first of all, what the essential commodities bill is. Basically, it’s a law that controls the production, supply, and distribution of certain commodities. Now what are those commodities, these commodities are such things, suppose if you illegally store them for creating artificial demand or you do black marketing of such commodities it will affect the normal life of the people. For example certain essential foods, medicines, fuel- petroleum products, etc. With the help of this law, the central government can include the commodities as and when the need arises and they can also take them out of the list when the situation improves. Suppose there is a shortage of onion and there are some traders or wholesalers who kept a lot of onion in stock to create artificial demand, when the demand increases obviously the price will increase. So the whole idea behind creating artificial demand is to sell a product at a higher price. Now what the central government can do is, it can bring onions under the act to make sure onions are available to people at the right price. Recently during the Covid Pandemics the central government in March 2020, put the masks and sanitizers into the list of essential commodities but in July 2020, they take them out of the list.
Now the amendment that has been suggested and then added in this bill is regarding removing certain commodities as essential. So what the government of India did was it removes certain commodities as essential so that it will allow the government to regulate the supply and prices only in the cases of “War, Famine, Extraordinary price rises, or Natural calamities” and those commodities are food items including “Cereals, Pulses, Potatoes, Onions, Edible oils seeds and Oils”. As you can see these commodities are consumed on daily basis by you and me. Now that these commodities are removed from the essential list, that means obviously their prices will increase and the government is saying that these items will be added back into the essential list only during situations like war, famine, high price rises, or natural calamities.
So on one hand by removing these items from the essential commodities list the government has taken a good step towards boosting farmer’s income, but if you look at the foodstuffs like Pulses, Onions, and Edible Oil they are part of every household daily essential commodities. Now the government is not going to regulate the supply of such food items then there is a high chance of Hoarding (to collect and store a large quantity of something). That’s why right now if you go to the market you will find that the price of these commodities has increased.
The new amendment also states that the government will regulate the stocks of these items based on rising prices, now there are few more conditions to it. You can see that the “pulses, cereals, oilseeds, and edible oils” are non-perishable items, and “potatoes and onions” are perishable in nature. So the government is saying that it will only interfere and bring these items again in the essential commodities list if there is a 50% increase in the retail price of the non-perishable goods whereas in the case of perishable items government will interfere only if there is a 100% increase in the retail price of such perishable items.
So the case depicts that companies can sell the product at higher prices by putting the price in between the threshold limits and farmers can even charge high prices from companies. Ultimately it is going to pinch in yours and mine pockets.
So these are the three farms bill which I explained in detail. I hope you get the clarity of these bills.