New Farm Bills: A Watershed for Indian Agriculture?

According to the 38th Round of the National Sample Survey (NSS) report in 1983, around 77 percent of rural households depend on the agricultural sector to sustain their livelihoods. Over the years, rural households’ dependency on agriculture has declined to 50 percent as per the latest round of the Periodic Labour Force Survey (PLFS) for 2018-19.

Policies formulated by Governments to uplift the farm sector seem unable to penetrate up to the grass-root level, hence the expected development in Agriculture Sector and increasing farmer’s income could achieve so far.

With the vision to change the way agricultural produce is marketed, traded and stored across the country, the Government of India promulgated new bills in the form of ordinances in June; namely The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020. These bills were later passed in delayed Monsoon Session in Lok Sabha, Rajya Sabha and got the assent of the President, which converted these bills into acts. With these two new bills, the government has amended one existing act with The Essential Commodities (Amendment) Act, 2020.

What these Acts say?

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:This proposed legislation seeks to give freedom to farmers to sell their produce outside the notified APMC market yards (mandis).

Alternate trading channels will open more choices for farmers, reduce marketing costs, and help them get better prices. A farmer from the region of surplus produce can directly sell the consumers at the region of deficit and can reap better prices. Farmers will not be charged any cess or levy for the sale of their produce under this Act.

 

On the other side, states will lose revenue of ‘mandi fees’ if farmers will sell their produce outside registered mandis. Commission agents will also stand to lose, if the entire farm trade moves out of mandis, while these commission agents have obtained the license from the government.

 

Before moving ahead, it is pertinent to mention that an online platform named eNAM (National Agriculture Market) portal was introduced by current government in 2016 with a vision to allow farmers to sell their produce anywhere in the country by linking mandis on a single online platform. In the last 4 years, (As per e-NAM portal) 1000 APMCs are linked to the eNAM network from 18 states & 3 UT’s and 175 commodities are being traded in this online platform.

 

2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020:This act encourages Contract Farming and seeks to give farmers an option to enter into a contract with any agribusiness firm, processor, wholesaler, exporter or large retailers to sell their produce at a pre-agreed price with these stakeholders. Selling the produce on pre-agreed rates will transfer the risk of market unpredictability or uncertainty from farmers to the firm. This act may suit to the farmers who have large landholdings and have bargaining power. In India, the majority of the farmers are small to marginal farmers (with less than 2 hectares of landholding), they may not be able to bargain with big corporates. In such situation, the negotiating power of such farmers may weaken.

 

3. The Essential Commodities (Amendment) Act, 2020: This act seeks to remove commodities like cereals, pulses, oilseeds, onion, and potatoes from the list of essential commodities and Centre will not impose stock holding limits unless there are extraordinary circumstances such as drought, floods, natural calamity or exceptional spike in prices.It is aimed to attract private investment/ Foreign Direct Investment into Agriculture sector as well as bringing price stability.

On the other hand, the installed capacity of a value chain participant and the export demand of an exporter will remain exempted, so the big companies will have the freedom to stock commodities, which may help them dictate terms to farmers.

What is the stand of the Government?

The MSP mechanism for farmers will continue. The proposed laws would not encroach upon the Agriculture Produce Marketing Committee (APMC) Acts of the states. These Bills are to ensure that farmers get better prices for their produce without being subject to the regulations of mandis.

Adding the Acts will increase competition and promote private investment which will help in the development of farm infrastructure and generate employment. The idea behind all three bills is to liberalise the farm markets in the hope that doing so will make the system more efficient and allow for better price realisations for all stakeholders, especially the farmers. The central concern of the Bills is to make Indian farming a more remunerative enterprise than it is right now.

Why Farmers and state governments are in Fear?

Farmers and few state governments are opposing these farm bills and protesting to roll them back, few of the points are as follows:

• The biggest fear of farmers is – abolishment of the old concept of market yards or mandis with time. In mandis, farmers negotiate on their own terms, and in case of any dispute, there is a scope of dialogue. But in an open market, there is less or no scope of dialogue thus dispute resolution.
• As trade will take place outside the APMCs, farmers will no longer get the Minimum Support Price for their produce.
• The Essential Commodities (Amendment) Act will hurt farmers, especially small farmers, and the safeguards provided by the original Act, will be removed.
• As of now, only 6% of farmers are selling their commodities on Minimum Support Price. It means the remaining 94% of farmers are selling their produce in the open market. Are these 94% of farmers getting a better price for their produce? In this context, how these new farm bills of open markets for farmers will help them.
• In the current system of APMC; small farmers are dependent on commission agents (Adhatiya) for money (Credit) to purchase farm inputs like seed, fertilizers etc or in case of need of money for any household requirement. which the farmer pays back after selling his produce. How these farmers will get money to buy farm inputs in the new regime.
• Data is not available in the public domain on how many farmers were benefitted by which means so far by the new initiatives like e-NAM.
• A new farm bill named Agriculture produce and Livestock Marketing (APLM) Act was introduced by the current government in 2017. This act is somewhat similar to The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020. APLM act was aimed to set up a wholesale market at every 80 km. APLM Act was made with the vision to end the monopoly of APMC and allow more players to set up markets and create competition so that farmers can discover prices and sell their produce accordingly. How many wholesale markets were opened so far, how farmers were benefitted from this law and how much farm income of farmers was increased with these initiatives?

All together these farm bills are largely aimed at 23 commodities for which MSP is set by the central government, but to a better price realisation and for the benefit of all the farmers, we should focus on all the farm produce e.g. pulses, cereals, vegetables, fruits, spices, livestock etc. We should also encourage small, marginal and large farmers towards zero budget farming and to diversify them towards other options like food processing, horticulture, poultry, fisheries, floriculture which may add to the better realisation of prices.