On 20th September, 2020, two of the most crucial yet controversial bills were approved and passed in the Rajya Sabha. Surprisingly both the laws were in relation to Agriculture and farmers of India. These bills are known as the ‘Farm bills’ previously approved and passed on by the Lok Sabha.
The two bills — Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 — will now be sent to the President for his assent.
Along with these two reforms, on 21st September 2020, The Essential Commodities (Amendment) Bill was put in the Rajya Sabha.
Parliament of India comprises President, Lok Sabha (Lower House) and Rajya Sabha (Upper House.) Lok Sabha is called House of People while Rajya Sabha is called the Council of States.
The names, ‘Lok Sabha’ &’ ‘Rajya Sabha’ were adopted in 1954 by the Indian Parliament. Article 79-122 in the Indian Constitution deals with the Indian Parliament.
Lok Sabha and Rajya Sabha along with President together make up the Parliament. Both the houses have been conferred with powers.
Lok Sabha is more powerful than Rajya Sabha on specific matters.
But it’s not as simple as it looks. The Rajya Sabha was a chaotic mess. The bills received a massive criticism and opposition. Most of the opposition was regarding some misunderstanding of the technicalities of the law being passed. Let us look at all the aspects and if the impacts are negative or positive.
Overall Features of these New Bills:
The more the protests rose, it really intrigued many as to what exactly is in the bill. Some were opposing it just to follow the ‘trend’. But a strong opposition is only formed on the basis of true facts. Let us look at the features one by one and educate ourselves first.
The new reform allows farmers to sell their agricultural produce to buyers directly. These buyers can range from manufacturing companies that make Potato chips to textile industries that need cotton and also you and me who wants vegetables and fruits for our homes.
But what does directly mean? How were they selling it till now?
The farmers in every state were selling their produce through ‘Mandis’ or ‘markets’ where their produces were purchased by some people in wholesale. These men used to later sell these vegetables and other agricultural products to the private buyers.
Now, what do you think the catch here was?
The farmers use to sell their products at amount as less as Rs.2 per kilo. These poor farmers had no idea how to value their produces. Taking advantage of this financial and marketing illiteracy of framers, the middle men added their own value to it and sold the same one kilo (costing Rs. 2) for Rs.44 to Rs.50.
Who exactly regulated these middle men?
The middle men at the ‘mandis’ and local markets are regulated by Agricultural Produce Market Committee (APMC).
An Agricultural Produce Market Committee (APMC) is a marketing board established by State government in India to ensure farmers are ‘safeguarded’ from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels.
However, it was only in theory, in reality it was rather miss-communicating and misleading the farmers.
A friend of rhe author who owns an agricultural land recently shared this with me when I asked him regarding his thoughts on the APMC and the New Farm Bills.
I only own one farm land, so I am sort of a farmer (I don’t farm it myself), plus I have some business knowledge through my education. When I took over our farm from my father for the first time and came to know about the restrictions enforced by APMC and the state, I was shocked. Any authority opposing this bill should never call themselves protector of farmers.
Until September 2020, the first sale of agriculture produce could occur only at the market yards (mandis) of APMC. However, after the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 came into force a few days ago, it allows farmers to sell outside APMC mandis and all over India.
The second and one of the most exciting feature is that now the farmers can sell their products intra-state as well as inter-state. In simple terms, a farmer from Tamil Nadu can now sell directly to buyers from Maharashtra.
But how will the farmers travel so much?
The government of India made a reform for the above mentioned query as well.
On 7th August 2020, Indian Railways inaugurated the first ever ‘Kisan Rail’ from Maharashtra’s Devlali to Bihar’s Danapur disttrict.
The train was given the green signal on a video conference call attended by Indian Union Minister of Agriculture and Farmers Welfare, Rural Development and Panchyati Raj- Mr. Narendra Singh Tomar and Minister of Railways and Commerce & Industry- CA Mr. Piyush Goyal.
The train runs on a weekly basis from various parts of the country. Kisan Rail translating to Farmer’s Train will makes sure that agro products reach from one corner to another corner of our Nation.
This farmers’ exclusive train carries fruits and vegetables and makes stoppages at several stations, pick-up the produces and deliver them.
Read more about the Kisan Rail here- published exclusively at The Indian Wire.
The third and the most apt feature of this bill in the current era is that, the farmers can now sell their products through ‘electronic trading’.
The government had introduced – ‘E-Nam’- Electronic National Agricultural Market, an online portal wherein their vision was to promote uniformity in agriculture marketing by streamlining of procedures across the integrated markets, removing information asymmetry between buyers and sellers and promoting real time price discovery based on actual demand and supply.
Currently there are 1000 markets that are linked to the e-NAM network from 18 states and 3 Union Territories.
Very surprisingly it also undertakes the mission of Integration of APMCs across the country through a common online market platform to facilitate Pan-India trade in agriculture commodities, providing better price discovery through transparent auction process based on quality of produce along with timely online payment.
The last and the most important feature:
The bill prohibits State Governments from imposing market fee on “farmers, traders and electronic trading platforms” for trading outside the ‘trade area’ or with any other buyer who is not a part of the state-wise APMC.
So does that mean the State used to ‘tax’ the poor farmers?
Yes. The income of these State Market Committees is derived from the collection of market fee on the sale and purchase of agricultural produce which is levied @ 2% ad-valorem basis except on some 21 items on which the rate of market fee is @ 1% ad-valorem basis.
In simple words, if a farmer from Punjab wants to trade to buyers from Haryana, the states charged a ‘fee’ to these farmers. So even if a farmer was getting a higher price in a different state due to the lifestyle and commercial economy, he would have to pay ‘tax’ from his hard earned money to the state government.
It is to be noted that, in Income tax (Direct tax), income from agricultural activities and produces sale is exempted from taxation. Capital gain on sale of agricultural land is also exempt from Income tax.
In a nation which is 70% into agriculture sector and earns the least has to pay ‘fees’ to the politicians and higher authorities.
These were the features of the Framers produce trade and commerce bill let’s call it Bill No.1.
Now let’s look at the features of Bill no.2- The farmers (Empowerment and Protection) agreement on price Assurance and Farm services Bill.
This Bill adding on to the previous one say that, the farmers can get in agreement with the buyers even before the production. Farmers can lock in prices and buyers for their produce even before the harvest, and intermediaries can be assured of supply and price at the time of harvest.
In addition, under this bill, a price can be fixed before the production for the produce to be sold at. Price of a commodity refers to the price at which govt. procures the commodity from producers/manufactures for maintaining the buffer stock or the public distribution system.
These prices are announced by the govt. of India on the recommendations of the Commission for Agricultural Costs and Prices before the harvest season of the crop. At these announced prices, govt. procures the food grains (wheat, paddy and coarse grains) in the needed quantity either for maintaining the buffer stock or for the distribution through fair price shops.
Now let’s look at the features of the Bill no.3 i.e. The Essential commodities (Amendment) Bill.
The bills remove cereals, pulses, oilseeds, onions, potatoes, etc. From the list of essential commodities. The decision has been taken on the grounds that it will ensure better price for farmers’ produce and also remove fears of private investors of excessive regulatory interference.
Secondly it removes restrictions on storing –earlier, trader could be prosecuted for “hoarding “essential items.
The government will intervene only in case of famine, war or any extraordinary calamity.
The Impact of these Bills on Farmers & Economy:
The farmers would be free from the middlemen who would lose ‘commission fees’ if the former move outside APMC. There is even a reduction in marketing prices for farmers. The reforms transfer the risk of market volatility from farmers to buyers and sponsors.
Apart from the prices even the legality has been changed, made more legit. There is an increase in contract farming with a proper legal network. 86% of “land holdings” by farmers are less than 2 hectares according to the agriculture census (2015-16). These farmers with small lands’ end up as ‘net buyers’ of food and essential crops- MSP hikes distress these farmers the most.
Farmers will have more options for selling-provisions to sell to private sectors if better price is offered. Farmers would be free from ‘mandi tax’ levied by the state. APMC mandis wold not be shut. Only the farmers have an option weather to sell in mandis or directly to private sectors.
The clarification by the PMO regarding the misconceptions:
Farmers will have more options for selling – provision to sell to private sectors if better price offered. Farmers would be free from ‘mandi tax’ levied by the state.
PM Modi clarified on Twitter that the Minimum support price (MSP) and Government procurement would continue.
https://twitter.com/narendramodi/status/1307620437447208960?s=20
Well what is this MSP?
Minimum Support Price is a form of market intervention by the Government of India to insure i.e safeguard agricultural producers against any uncertain/sudden fall in farm prices.
He further went on making two separate videos on YouTube to clarify and educate the farmers about the reforms. He also mentioned how the poor are being misled by the politicians.
Farmers are getting too less; Consumers are paying a lot. The middlemen are making the balance.
The 1991 moment for agriculture saw a very basic shift in the legal approach to the agricultural industry and services. A whole host of laws of the licence, permit and inspection raj were withdrawn, and more freedom was given to the participants. Today, we can see the benefits of freedom.
Sadly, the agricultural sector did not get those freedoms in actual nature. The participants in this sector still live in the old legal regime. The ordinances are a welcome step in giving freedom to farmers to sell their produce without restrictions.
If a certain kind of potato was needed for potato chips, or a specific variety of oranges was more suited to making juice, or a restaurant chain needed a large quantity of mushrooms or asparagus, the company needed to go through a trader.
It could not get into a contract with farmers to grow that particular item and buy it later at prices already agreed upon. This framework left the farmer at the mercy of the trader, who wanted to increase his own margins.
These protests are largely fuelled by politically connected strong middlemen. They benefit from the extant status quo, by controlling all the aspects of farm business cycle, and consequently the lives of farmers.
Farmers have been disempowered at the hands of lowly middlemen, urea manufacturers etc. It’s high time we care about farmer’s business model, and not flood him with (nonsensical) subsidies.
Nice one well elaborated.
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