Farm Bills, 2020 – Provisions, Concerns, Way Forward

Amidst protest from the opposition and a section of farmer’s organizations, the Monsoon Session of the Lok Sabha passed three agriculture sector bills which will replace the existing ordinances. The bills have led to intensifying protests by farmers in states like Punjab, Haryana, and Madhya Pradesh despite COVID-19. Recently, three bills were introduced in the Punjab legislative assembly to negate the Centre’s agriculture laws provide for imprisonment of not less than three years and fine for the sale-purchase of wheat or paddy under a farming agreement below the Minimum Support Price. In this context, let’s examine the Farm bills, 2020 in a detailed manner.

What are the Three Bills?

• The three bills include

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to sell their harvest outside the notified Agricultural Produce Market Committee (APMC) mandis without paying any State taxes or fees.
2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, facilitates contract farming and direct marketing
3. The Essential Commodities (Amendment) Bill, 2020, deregulate the production, storage, movement and sale of several major foodstuffs, including cereals, pulses, edible oils and onion, except in the case of extraordinary circumstances.

When was the bill introduced in the parliament?

• The Bills which aim to change the way agricultural produce is marketed, sold and stored across the country were initially issued in the form of ordinances in June 2020.

How was it passed in the parliament?

• They were then passed by voice vote in both the Lok Sabha and the Rajya Sabha during the delayed monsoon session of this year, despite vociferous Opposition protest.

What are the three bills aims to?

• In general, the three Farm bills seek to

1. Break the monopoly of government-regulated mandis and allow farmers to sell directly to private buyers.
2. Provide a legal framework for farmers to enter into written contracts with companies and produce for them.
3. Allow agribusinesses to stock food articles and remove the government’s ability to impose restrictions arbitrarily.

What are the major provisions included and concerns associated with these three bills?

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

• The major provisions included in this bill are the following

1. Farmers can enter into a contract with agribusiness firms, processors, wholesalers, exporters or large retailers for the sale of future farm produce at a pre-agreed price.
2. Marginal and small farmers, with the land less than five hectares, to gain via aggregation and contract.
3. To transfer the risk of market unpredictability from farmers to sponsors.
4. To enable farmers to access modern tech and get better inputs.
5. To reduce the cost of marketing and boost farmer’s income.
6. Farmers can engage in direct marketing by eliminating intermediaries for full price realization.
7. Effective dispute resolution mechanism with Redressal timelines.

• The major concerns include

1. Farmers in contract farming arrangements will be the weaker players in terms of their ability to negotiate what they need.
2. The sponsors may not like to deal with a multitude of small and marginal farmers.
3. Being big private companies, exporters, wholesalers and processors, the sponsors will have an edge in disputes.

The Essential Commodities (Amendment) Bill, 2020

• The major provisions included in this bill are the following

1. To remove commodities like cereals, pulses, oilseeds, onion and potatoes from the list of essential commodities. It will do away with the imposition of stock holding limits on such items except under “extraordinary circumstances” like war.
2. This provision will attract private sector/FDI in the farm sector as it will remove fears of private investors of excessive regulatory interference in business operations.
3. To bring investment for farm infrastructure like cold storages, and modernizing food supply chain.
4. To help both farmers and consumers by bringing in price stability.
5. To create a competitive market environment and cut wastage of farm produce.

• The major concerns include

1. Price limits for “extraordinary circumstances” are so high that they are likely to be never triggered.
2. Big companies will have the freedom to stock commodities. It means that they will dictate terms to farmers, which may lead to less prices for the cultivators.

Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

• The major provisions included in this bill are the following

1. To create an ecosystem where farmers and traders enjoy the freedom to sell and purchase farm produce outside registered ‘mandis’ under state’ APMC.
2. To promote barrier-free interstate and intrastate trade of farmers’ produce.
3. To reduce marketing/transportation costs and help farmers in getting better prices.
4. To provide a facilitating framework for electronic trading.

• The major concerns include

1. States will lose revenue as they won’t be able to collect ‘mandi fees’ if farmers sell their produce outside registered APMC markets.
2. The ‘commission agents’ in the states will get affected if the entire farm trade moves out of mandis.
3. It may eventually end the MSP-based procurement system.
4. Electronic trading like in e-NAM uses physical ‘Mandi’ structure. If ‘mandis’ are destroyed in the absence of trading, it may affect the e-NAM.

What are the demands of farmers?

• The demands of the farmers include
  1. Revocation of all of these three bills.
  2. They want the mandi system to remain intact and their loans to be cleared.
  3. They want the National Commission on Farmers’ law to promulgate an MSP of at least 50% more than the weighted average cost of production (In line with the 2006 Swaminathan report) and if the MSP is not paid, it must be a penalized.
  4. A law should be put in place that will guarantee payments from the buyers through middlemen. Middlemen also make money by selling the product for more than its purchase price.

What can be the way forward?

• The simplest solution against the protest of the farmers concerning the farm bills can be a statutory backing to the minimum selling prices and procurement. The inclusion of these two in the new bill will help to eradicate the fear of the farmers.
• Giving farmers the choice to sell without the help of middlemen will be of great use only if there are roads that link villages to markets, climate-controlled storage facilities, the electricity supply is made reliable and available to power those facilities, and food processing companies who compete to buy their produce. Therefore, before such a move, there should be all efforts to develop and enhance the required facilities.

Conclusion

• Though the newly passed farm bills intend to give farmers the freedom to trade across states and empower them to turn into traders of their own products and be in control of the process, Without strong institutional arrangements and infrastructural developments, the provided free market will be counterproductive and harms the small unorganized farmers.

Practice Question for Mains

1. The future of Indian agriculture cannot be salvaged by simply allowing greater freedom to farmers. Critically Comment. (250 Words)