Benefits and Drawbacks of AGRICULTURE BILLS 2020

By: Mr Rakesh Singh, Advocate, Bombay High Court & Senior Partner of Law Firm, RKS Associates

 

Introduction:

The Lok Sabha (Lower House of Indian Parliament) on Thursday (September 17, 2020) passed three legislations pertaining to the agriculture sector, ostensibly, to push agriculture marketing and commodities trade reforms in the country. The three bills that were passed are

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

2.   Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

3.   Essential Commodities (Amendment) Bill, 2020.

These bills were introduced in the Lok Sabha on day one of the Monsoon session (September 14, Monday). The bills will replace the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 promulgated by the President on June 5 this year once they are passed by the Rajya Sabha as well.

 

Bill on Agri market –   The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

 

Benefits:

1.   Create an ecosystem where farmers and traders enjoy the freedom to sell and purchase farm produce outside registered ‘mandis’ under states’ APMCs (Agricultural Produce Market Committees).

2.   Help farmers in getting better prices through competition, abolishment of market fees and cost-cutting on transportation.

Section 6 states that 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.

3.   Promote barrier-free inter-state and intra-state trade of farmers’ produce.

Section 3: 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.

4.   Provide a facilitative framework for electronic trading.

 

Section 5 provides framework for electronic trading and transaction platform. The Central Government shall by rules

(a) specify the procedure, norms, manner of registration; and

(b) specify the code of conduct, technical parameters including inter-operability with other platform and modalities of trade transaction including logistics arrangements and quality assessment of scheduled farmers’ produce and mode of payment, for facilitating fair inter-State and intra-State trade and commerce of scheduled farmers’ produce in a trade area.

Drawbacks:

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.           If entire farm trade moves out of mandis the commission agents in states will lose their businesses.

3.           Farmers are not trained electronic trading and thus, they shall be highly prone to frauds

 

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

 

Benefits:

1.           Farmers can enter into a contract with agribusiness firms, processors, wholesalers, exporters or large retailers for sale of future farming produce at a pre-agreed price. It is the responsibility of sponsors or the farm service provider for compliance of any legal requirement for providing such farm services.

Section 3 of the bill explains about farming agreement and its period. It also states that the responsibility for compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider, as the case may be. The minimum period of the farming agreement shall be for one crop season or one production cycle of livestock, as the case may be, and the maximum period shall be five years.

Section 4 of the bill states that the parties entering into a farming agreement may identify and require as a condition for the performance of such agreement compliance with mutually acceptable quality, grade and standards of a farming produce.

2.           Risk of market unpredictability is shifted from farmers to sponsors as the price of farming produce is predetermined at the time entering into agreement. Farming agreement may

Section 5 of the bill explains that the price to  be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself and  a guaranteed price to be paid for such produce.

3.           Ensure risk mitigation and flow of credit to farmer or Sponsor or both by linking farming agreement  with insurance and credit instrument.

Section 9: A farming agreement may be linked with insurance or credit instrument under any scheme of the Central Government or the State Government or any financial service provider to ensure risk mitigation and flow of credit to farmer or Sponsor or both.

4.           Effective dispute resolution mechanism with redressal timelines.

Section 13 states that every farming agreement shall explicitly provide for a conciliation process and formation of a conciliation board consisting of representatives of parties to the agreement.

Section 14 states that where, the farming agreement does not provide for conciliation process as required under sub-section (1) of section 13, or the parties to the farming agreement fail to settle their dispute under that section within a period of thirty days, then, any such party may approach the concerned Sub-Divisional Magistrate who shall be the Sub-Divisional Authority for deciding the disputes under farming agreements.

 

Drawbacks:

1.   Farmers in contract farming arrangements will be the weaker players in terms of their ability to negotiate what they need.

2.   It will affect the small farmers as many 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 entire dealing including in disputes.

4.   Farmers who don’t know to read and write, chances are there they might get exploited by the sponsors.

5.   If the dispute doesn’t get resolved within the timelines provided in this bill then it will be the farmers who will be most affected.

6.   It may give rise to cash crop and corporates will call the shots. Ultimately subsistence crops will take a beating.

 

Bill relating to commodities : The Essential Commodities (Amendment) Bill, 2020

A new sub-section 1A in Section 3 of the act stipulated control orders — with respect to the supply of certain foodstuffs was added.

It would be issued only under extraordinary circumstances that may include war, famine, extraordinary price rise and natural calamity of grave nature

Benefits:

1.   The amendment bill will remove commodities like cereals, pulses, oilseeds, onion and potatoes from the list of essential commodities.

2.   Allows the central government to regulate the supply of certain food items only under extraordinary circumstances (such as war and famine). Stock limits may be imposed on agricultural produce only if there is a steep price rise.

3.   It will remove fears of private investors of excessive regulatory interference in their business operations.

4.   It will help to bring investment for farm infrastructure like cold storages, and modernising food supply chain.

5.   Will help both farmers and consumers by bringing in price stability.

6.   Will create competitive market environment and cut wastage of farm produce.

 

Drawbacks:

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 they will dictate terms to farmers which may lead to less prices for the cultivators.

 

Conclusion:

No doubt, the Bills help farmers by giving them freedom to sell the goods as per their own choice. However, the biggest chunk of Indian farmers are small farmers having no great education or source of income. The Bills, if become Acts, may increase the income of farmers on short term basis, but on long term, the small famers may end up becoming labourers of big corporates. Certainly the bills contemplate corporatisation of farm sector and it has its own advantages as well as disadvantages.

 

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