All is Not That Bad With Farm Bills

Amidst agitations by farmers, particularly from the states of Punjab and Haryana, the President has given his assent to all the three farm bills—The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, and The Essential Commodities (Amendment) Bill, 2020—and thus they have come into force as Acts.

 The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 grants freedom to farmers to sell their agricultural produce wherever they feel they can realize good price, which means, they can now sell their produce anywhere in India. They can also sell in the Mandis regulated by the Agricultural Produce Marketing Committees (APMC) constituted by their respective state legislations. Over it, there would be no market fee, cess, or levy on these transactions. Thus, today farmers have more choices to sell their produce to realize a better price. The Act also prescribes that the farmer has to be paid in cash or by electronic transfer on the same day and before delivery of produce, or within maximum of three working days if procedurally so required subject to the condition that the receipt of delivery mentioning the due payment amount shall be given to the farmer on the same day. In fact, many have been asking all along for such freeing of the agricultural trade—several Parliament committees have earlier recommended removing the restrictive regime governing the agriculture sector—for, many flaws were found to be in the extant APMC system. So, one likely benefit of this free trade could be improvement in the management of APMCs due to competition. All this could cumulatively result in farmers’ realizing a better return on their produce. 

However, there is also a downside to the Act: lack of regulation, regulatory oversight and reporting, which tend to make these transactions outside the Mandis non-transparent. Farmers also fear that powerful traders forming cartels—which are of course, not that uncommon world-over—may send price signals of their own undermining farmers’ interests. Thirdly, as the market price of any product in a free market is dictated by supply and demand position, the price quoted by large traders, particularly in times like what we are today witnessing, may not be remunerative to the farmers vis-à-vis their rising input costs from season to season. Indeed, farmers’ main worry is that in course of time, as the Mandis become defunct, the very reference price may get vanquished and the flow of the envisaged benefits under the Act might as well depend on the benevolent behaviour of traders. This risk gets further accentuated if once the procurement by government at the Minimum Support Price (MSP) withers away over time. It is this threat that is obviously making farmers agitate against these reforms. 

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 provides a uniform legal basis to the existing practice of contract farming in agriculture and allied sectors all over India. All such contracts entered into by farmers must be registered with a state level authority to be set up by state governments. It also offers a well-defined dispute settlement mechanism with appellate bodies. The real benefit out of this Act for farmers is the price assurance well before sowing the crops. Secondly, as corporates engaged in food trade enter the market, there is a likelihood of better storage facilities being offered by these corporates. Similarly, farmers may also be provided with better seed and production technology by the corporates. 

Of the three game-changing Acts, the most critical is the “The Essential Commodities (Amendment) Act, 2020”, for it specifies and defines the conditions under which the government will be empowered to issue regulations under the Act. In a way, perhaps, taking a cue from this year’s Economic Survey, which states, “blanket stock limits on commodities under Essential Commodities Act (ECA) neither brings down prices nor reduces price volatility”, the government came up with the Act, which states that only under extraordinary circumstances such as war, famine, extraordinary price rise and grave natural calamity, the governments can impose stock limits on agricultural commodities such as cereals, edible oils, oilseeds, onions, potatoes, etc. Now, to identify if there is any extraordinary price rise, the government needs information about the stocks held by the traders, estimated production and availability of crops, and the prices prevailing across the country. There is, however, no such information-gathering mechanism in existence today, particularly from the private traders about their stock holding etc. The Act certainly grants freedom to buyers to buy and store any amount of quantity at the very beginning of the harvesting season for fetching better sale-price at a later date. It is therefore feared that the Act may help the hoarders more than the farmers in realizing remunerative prices. Although there is an argument that the Act is likely to bring more private investment into warehouses, cold storage, processing and post-agricultural infrastructure, which caters to the interests of farmers, there is a question mark on the extent to which it would help farmers in realizing a better price.  

Over it, meaningful implementation of these reforms calls for a consensus between the Center and States— more so when the revenues of the States such as Punjab and Haryana are likely to be adversely affected—which currently appears to be missing. In view of all these apprehensions, many argue that these laws warrant corrections, if they are to be more farmer-friendly. Maybe, as we progress with their implementation, effective amendments can be envisaged.