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Agriculture Reform Bills, 2020

Written by Ramandeep Kaur

Class 11, Vivek High School, Chandigarh


Source: The Business Line

Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.


Abstract


The recently passed Agriculture Reform Bills sought to bring changes in the structure of the agriculture sector of our country. Over 60% of the population of India works in the primary sector and it also contributes about 18% of the GDP of the country.[1] It is only after considering these facts that we can understand the importance of these reforms.[2] These new laws are being opposed by the farmers almost all over Northern India.

In the following article, the author discusses exactly what these bills entail , what the major loopholes are and what is making all the farmers protest the Acts.


Keywords: Farm bills 2020, MSP, Essential Commodities, Trade, Production


Introduction


Three Farm Acts - Farmers’ Produce Trade and Commerce (Production and Facilitation) Act, 2020, Farmers’ (Empowerment and Production) Agreement of Price Assurance and Farm Services Act, 2020 and the Essential Commodities (Amendment) Act, 2020 - were introduced in the Lok Sabha on 14th September 2020. They were passed in the Lok Sabha on 17th September 2020 and in the Rajya Sabha on 20th September 2020. [3] On September 27th, 2020, the President, Ram Nath Kovind gave his assent regarding the implementation of the three bills thus, making them Acts.[4] All the three farm bills were deemed to have come into force on 5th of June 2020. [5]


Farmers’ Produce Trade and Commerce (Production and Facilitation) Act, 2020


This Act offers to create an ecosystem where farmers and traders are free to sell and buy the farmers’ produce through different trading channels and on the price, which suits both of the parties.


Key features


Barrier-free inter-State and intra-State trade and commerce of farmers’ produce


Under this Act, farmers have the free will of selling their produce to any trader within their own State or outside their own State. This basically means that the farmers are free to sell their produce outside the APMC. They can sell their produce to the trade areas mentioned in the draft which includes farm gates, factory premises, warehouses and cold storages. [6]


Framework for electronic trading and transaction platforms


Any individual other than the ones who have a PAN card allotted under the Income Tax, 1961 have the right to become a trader and establish an electronic trading and transaction platforms for facilitating inter-State trade and help to deliver farmers’ produce in a trade area. Delivery can be made through an online platform. This process can be termed as online trading. Farmer-Producer organizations and agricultural societies also have the right to create such platforms.

The government under this Act has the right to ask any person owning electronic trading for the information regarding such transactions if needed. [7]

Dispute Resolution and Penalties


Clause 8 of the Act says that in case of any dispute between the trader and the farmer, a settlement can be done by filing an application to the Sub Divisional Magistrate who will take the dispute to the Conciliation Board selected by the Magistrate himself to do the binding settlement of the dispute. The chairperson will be serving under the supervision of the Sub Divisional Magistrate and the other members of the board will be selected in such an order that equal representation is given to both the sides. If the dispute is not solved by the Conciliation Board within 30 days then, the Sub- Divisional Magistrate will act as the Sub Divisional Authority and solve the matter on his own. [8]


If the traders violate Section 4 of the bill i.e. payment to farmers, they shall get a penalty of Rs. 25,000 and if the violation continues, the traders shall pay a penalty up to Rs. 5,00,000. If a person owning the electronic trading platforms violates Section 5 (regarding the trading platform) or Section 7 (government’s right to ask for transactions) of the Act, they shall pay a penalty of Rs. 50,000 and if the violation continues, the penalty charged will be Rs. 1,00,000. [9]


Major Loopholes


● According to the new act, any person who has a PAN card can become a trader whereas in Mandis, a trader has a trade license and registration. This can lead to farmers at a risk of frauds.


● The main thing due to which farmers are protesting is the fear that the concept of Minimum Support Price (MSP) will not be there in future if the importance and use of mandis is reduced. And their reason for protesting is fair too as in the draft of the Act, nothing is particularly written about the concern of the MSP.


● Talking about the AMPCs, their importance and the tax which the state government receives from them might reduce in the future as farmers will be selling their produce outside the Mandis.


Suggestions


The main concern of the farmers is around the concept of MSP. In the draft law, there is no clear mention of whether the government will still hold on to providing MSP or not, even if they say the concept of minimum support price will still be there. The protest is mainly due to this issue. A written part of this in the law could help the farmers to believe the government.

● Just a PAN card to become a trader in the agriculture industry sounds unsafe. A few more qualifications like experience in trading work, a certain level of education, criminal record etc will be better.


The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020


The Act aims at providing a national framework on farming agreements that protects and empowers the farmers to deal with agri-business firms, processors, wholesalers, and exporters at a mutually agreed contract which would be fair and transparent.[10]


Key factors


Farming agreement


A farmer may enter in a written contract which can provide the terms and conditions for the supply of produce including time of supply, quality, grade and other matters and can also provide the terms related to the supply of farm services. No agreement shall be signed by a farmer under this Section in violation of any of the rights of a sharecropper. The term for the contract is for one crop season or one production cycle of a livestock. The maximum term is that of 5 years. [11]


Quality, grade and standards of Farming produce and pricing of produce


The quality, grade, and standard of the farming produce shall be mutually divided by both the parties and shall be specially mentioned in the agreement. The price of the produce which will be given to the farmer after the produce is received by the company shall also be mentioned in the agreement and in case of variation in the price, the agreement shall provide a guaranteed price which will be definitely paid for the produce and a clear price reference for any additional amount over and above the guaranteed price like bonus to ensure the best prices for the farmers and such references can be linked to the ones in the APMC mandis or electronic trading. The method of deciding the stated price shall be mentioned in the agreement. [12]


Ownership rights


Clause 8 of this Act says that no agreement shall be made by the company for the transfer of ownership or to make any permanent changes in the farmer’s premises. These provisions apply unless the sponsor agrees to remove some structure or restore the land, at his own cost once the agreement expires and if the land is not changed in any way then the ownership lies with the farmers after the conclusion of the agreement.[13]


Dispute Settlement


In case of a dispute in the farming agreement, a conciliation board would handle the dispute. If the conciliation board is not able to solve the dispute within the period of 30 days, then the Sub divisional Magistrate will act as the Sub Divisional Authority and handle the dispute. [14]


Major loopholes


● A big company has its own legal team which can easily make the contract one sided as not all the farmers have legal knowledge and know the bases of a good contract.


● For small farmers, contract farming with big companies is an opportunity which is not in their hands and is almost impossible to achieve. 78% of the country’s farmers are small farmers. [15]


● The dispute system given is the draft of the act is not practical. The Sub Divisional Magistrate will have difficulty in focusing on the soul problem of a farmer. A Sub Magistrate has a lot of other responsibilities. Taking out time to resolve issues of the farmers will be hard.


The major loophole is that farms cannot go to the court with their problem, the decision made by the magistrate will be the final one. The farmers argue that this takes their fundamental right of taking their matters to the court for a solution.

Suggestions


● The agricultural industry contains a large percentage of smaller farmers and contract farming is a new concept to them. The creation of a body which is able to explain the points of the contracts will lead to less frauds for these small-scale farmers.


● The concept of dispute system mentioned in the draft of the law is not applicable. Not many farmers will get justice as the private sector has immersive power and they may get their hands around the Magistrate. A more secure system of dispute settlement is needed.


The Essential Commodities (Amendment) Act, 2020


This Act amends The Essential Commodities Act, 1955. The Act empowers the government to control the production, supply, trade, and distribution of certain commodities.[16]


Key factors


Regulation of food items


Under the Act of 1955, the government of India declared a few items as essential commodities. Total of 7 items are termed as essential commodities- Drugs; fertilizers include organic, inorganic, and mixed, raw jute and jute products, seeds of food crops and vegetables, hank yarn from cotton and oil and oilseeds. Transportation and hoarding of these commodities were considered illegal. [17] The Amendment Act seeks that the government also regulate the supply of some food items including cereals, pulses, potatoes, oilseeds, oil and onions under extraordinary circumstances only. The circumstances may include war, famine, price rise and nature calamity. [18]


Stock Limit


According to the law, the stock limit can only be imposed on a commodity in a situation of a price rise. It can be imposed in 2 situations: if there is a 100% increase in the retail price (cost paid for the product at retail stores) and if there is a 50% increase in the retail price of non-perishable agricultural products. The increase in the retail price will be calculated with the help of the price prevailing in the stores for the past 12 months or over the past 5 years. [19]


Major Loopholes


● Hoarding, in any measures, is generally considered risky. The private hoarders can collect large amounts of food grains from the farmers, for less capital, and will sell it when the demand for the food items increases. Thus, it may lead to farmers again being exploited. [20]


● The stock limit given in the law is unrealistic. A retail price cannot increase at that high rate. Last year, in 2020, the consumer price index which is also known as the standard retail price index shows an increase of only 4.92% in December 2020. [21]


Suggestion


● Hoarding generally can lead to everyone being exploited by the private collectors. And the fact that there are not many restrictions to the collectors makes it even worse. A few restrictions on the hoarders are necessary.


Conclusion


The solution to every single problem is communication. And there is nothing which can be so complicated that it cannot be solved. The government made the laws for the betterment of the agricultural sector and the farmers in totality. If they think that there is something wrong with the law, then hearing them out should not sound like a burden. Taking back the laws is a bit difficult for the government, then maybe trying to make some amendments keeping in mind the major concerns of the farmers is another solution. As the author said before, talking about the problems properly will lead to some usable solutions, making amendments is just one of those.


[1] Statista Research Department, Agriculture in India- statistics & facts, statista.com, (January 8, 2021), https://www.statista.com/topics/4868/agricultural-sector-in-india/https://www.statista.com/topics/4868/agricultural-sector-in-india/ [2] Aron Almedia, Farm bills 2020 Explained- Are farmers winning or losing?, Trade Brains, (September 30, 2020), https://tradebrains.in/farm-bill-2020-explained/ [3] The Farmers’ Produce Trade and Commerce (Production and Facilitation) Bill, 2020, prsindia, https://www.prsindia.org/billtrack/farmers-produce-trade-and-commerce-promotion-and-facilitation-bill-2020 [4] Everything you need to know about the new farm laws, The Economic Times, (December 10, 2020 09:45 AM), https://economictimes.indiatimes.com/news/economy/agriculture/everything-you-need-to-know-about-the-new-agriculture-bills-passed-in-lok-sabha/articleshow/78183539.cms [5] Farming & Agriculture Laws, ShreeRam [6] The Farmers’ Produce Trade and Commerce (Production and Facilitation) Bill, 2020, prsindia, https://www.prsindia.org/billtrack/farmers-produce-trade-and-commerce-promotion-and-facilitation-bill-2020 [7] Ministry of Law and Justice, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, ruralindiaonline, (September 27, 2020), https://ruralindiaonline.org/library/resource/the-farmers-produce-trade-and-commerce-promotion-and-facilitation-act-2020/ [8] Farming & Agriculture Laws, ShreeRam

[9] Ministry of Law and Justice, The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, ruralindiaonline, (September 27, 2020), https://ruralindiaonline.org/library/resource/the-farmers-produce-trade-and-commerce-promotion-and-facilitation-act-2020/

[10] Alpha Partners, One page summary- The farmers (Empowerment and Protection) Agreement on Price Assurances and Farm Services Bill, 2020, Mondaq, (November 2, 2020), https://www.mondaq.com/india/arbitration-dispute-resolution/1000572/one-page-summary-the-farmers-empowerment-and-protection-agreement-on-price-assurance-and-farm-services-bill-2020

[11] Farming & Agriculture Laws, ShreeRam [12] Devika, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020|Will farming agreement help in eliminating intermediaries? Decoded, scconline, (September 28, 2020), https://www.scconline.com/blog/post/2020/09/28/farmers-empowerment-and-protection-agreement-on-price-assurance-and-farm-services-act-2020-will-farming-agreement-help-in-eliminating-intermediaries-decoded/ [13] Ministry of law and justice, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services, Act, 2020, ruralindiaonline, (September 27, 2020), https://ruralindiaonline.org/library/resource/the-farmers-empowerment-and-protection-agreement-on-price-assurance-and-farm-services-act-2020/ [14] Farming & Agriculture Laws, ShreeRam [15] Smallholder farmers in India: food security and agricultural policy, coin.fao.org, https://coin.fao.org/coin-static/cms/media/9/13170962616430/2002_03_high.pdf [16] Essential Commodities (Amendment) Ordinance, 2020, lastestlaws.com, https://www.latestlaws.com/bare-acts/central-acts-rules/essential-commodities-amendment-ordinance-2020/ [17] What constitutes essential services and how the govt. responds, The Economic Times, https://economictimes.indiatimes.com/news/politics-and-nation/what-constitutes-essential-services-and-how-govt-responds/what-can-you-do-during-a-shutdown-situation/slideshow/74772217.cms [18] The Essential Commodities (Amendment) Bill, 2020, prsindia.org, https://www.prsindia.org/billtrack/essential-commodities-amendment-bill-2020 [19] The Essential Commodities (Amendment) Bill, 2020, prsindia.org, https://www.prsindia.org/billtrack/essential-commodities-amendment-bill-2020 [20] Study IQ education, Esstenial Commodities Act Explained- What will be the impact of the amendments, Youtube, September 30, 2020, https://www.youtube.com/watch?v=MZ-qdgowMRM [21] Consumer Price Index Numbers on Bases 2010=100 for Rural, Urban and Combined for the month of December 2020, pib.gov.in, January 12, 2021 (5:30 PM), https://pib.gov.in/PressReleasePage.aspx?PRID=1687967


Bibliography


Books

  1. Farming & Agricultural Laws, ShreeRam

Articles

  1. Aron Almedia, Farm bills 2020 Explained- Are farmers winning or losing?, Trade Brains, September 30, 2020

  2. The Farmers’ Produce Trade and Commerce (Production and Facilitation) Bill, 2020, prsindia.

  3. Everything you need to know about the new farm laws, The Economic Times, December 10, 2020.

  4. Ministry of Law and Justice, The Farmers’ Produce Trade and Commerce (Promotion and facilitation) Act, 2020, ruralindiaonline, September 27, 2020.

  5. Alpha Partners, One page summary- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020, Mondaq, November 2, 2020.

  6. Devika, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; Will farmers agreement help in eliminating intermediaries? Decoded, scconline, September 27, 2020.

  7. Smallholder farmers in India: food security and agricultural policy, coin.fao.org.

  8. Essential Commodities (Amendment) Ordinance, 2020, latestlaws.com.

  9. What constitutes essential services and how the govt. responds, The Economic Times.

  10. The Essential Commodities (Amendment) Bill, 2020, prsindia.org.

  11. Consumer Price Index Numbers on Bases 2010=100 for Rural, Urban and Combined for the month of December 2020, pib.gov.in, January 12, 2021 (5:30PM).

Statues

  1. The Essential Commodities Act, 1955

  2. The Essential Commodities (Amendment) Act, 2020

  3. The Farmers’ Produce Trade and Commerce (Production and Facilitation), 2020

  4. The Farmers (Empowerment and Protection) Agreement on price Assurance and Farm Services Act, 2020

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