Crop Laws or Crop the Laws? 2020

The latest

It is raining laws in the monsoon session of the Parliament! While the Labour Code 2020 is still being dissected and debated / discussed, another trio of laws has caused a stir, literally.

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) 2020
  • The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services 2020 and
  • The Essential Commodities (Amendment) Act 2020
    were passed by the Lok Sabha and Rajya Sabha in the third week of September 2020. It received the President’s assent on 27th September 2020 and collectively known as Farm Laws 2020.

Governments’ objective behind the initiative

The government stated that the objective behind these sweeping changes is to enable farmers get remunerative prices their produce thereby raising the bar of their income and livelihood.

The following are the key highlights of the legislations:

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020

  • This legislation seeks to promote interstate and intra state trade and commerce of agricultural produce outside physical markets such as ‘mandis’ and Agricultural Produce Market Committee (APMC) markets / yards and other markets notified under the State Agricultural laws.
  • By moving out of the ‘mandi’/ APMC yards, the farmers will have the liberty to sell their produce at farmgate, warehouse and cold storage as well. The idea behind this move is to enable farmers realize the full price by direct marketing without having to go through intermediaries.
  • The farmers will not have to pay cess or levy or conveyance charges for such sale.
  • The intention of the above provision is to eliminate middlemen / intermediaries and thereby enable farmers engage in direct marketing of their produce.
  • The Act will create an electronic trading platform for ensuring seamless trading.

The legislation has been primarily being opposed on grounds that more than 80% of the farmers   are infrastructurally challenged as they do not have access to storage until they directly sell their produce. Also, there were concerns of them earning their MSP- Minimum Support Price. The provisions implied that Mandis / APMC yards will altogether stop. Intermediaries would be wiped out.

The government has assured that procurement at Minimum Support Price (MSP) will very much continue. In fact, the government will continue fixing MSP to ensure that farmers get their due. The government further assured that Mandis / APMC yards will continue. The farmers will only be given additional option to sell through other sources / outlets. Doing away with intermediaries has been opposed by them. Currently, there are at least 5 layers of middlemen. Invariably they are affluent and end up earning more compared to the actual farmer who grows the produce. The abolition of intermediary system is only to ensure that the farmers directly sell and earn the entire revenue.

2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services 2020

  • This legislation seeks to empower farmers by creating a national framework for contract farming by way of agreement(s) between farmers and buyers before the production or rearing of any farm produce. Farmer(s) dealing with agri -business firms, processors, wholesalers, retailers and or exporters must get into mutually beneficial price agreements / contracts. This promotes transparency.
  • A minimum price is assured to farmer at the production / rearing stage itself. If higher prices prevail at the sale stage, then those prices shall prevail. The basic objective is to ensure protection of farmers from distress sale.
  • It will also enable the farmer to access modern technology, better seed and other inputs. It will reduce cost of marketing and improve income of farmers.
  • Emphasis on research of modern technology to be used in Agriculture.
  • Farmer Produce Organizations (FPOs) are proposed to be formed throughout the country to bring a collective group of farmers in ensuring their concerns are satisfied.
  • A 3-level dispute mechanism with express timelines for dispute redressal is being put in place to ensure farmers legal recourse through Courts. It can also be addressed locally through such conciliation boards.

The main concern in this legislation is about farmers being taken for a ride in the name of contract farming. The government though states that the contract will contain express terms and conditions governing the price and the timelines for payment.

3. The Essential Commodities Act 2020

The antique Essential Commodities Act, 1955 deals with the control of the production, supply and distribution of certain commodities which are essential including but not limited to rice, oil, cereals etc. It was amended in March 2020 to include masks and sanitizers when the country was reeling under the Covid19 pandemic.

  • The 2020 Act seeks to remove cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities.
  • Attract private investment in the value chain of commodities removed from the list of essentials, such as cereals, pulses, oilseeds, edible oils, onions and potatoes.
  • The government can regulate its supply only under “exceptional circumstances” when there is price rise of (i) 100 % in the retail price of horticultural produce, or (ii) 50 % increase in the retail price of non-perishable agricultural foodstuffs.
  • Stock holding limit on essential commodities will be imposed only under exceptional circumstances such as natural calamities, war, famines etc. which will increase the demand for essential commodities forcing to increase prices.

The amendments to the EC Act have been met with maximum protests with farmers and opposition political parties giving protesting alike. Farmer protests are mainly around removal of certain commodities from the EC list. Farmers view the amendments as actually increasing risk of hoarding and black marketing with the government regulation out of the window. Political parties are protesting the lack of discussion around such key legislations in a near empty monsoon session of parliament. State governments fear their powers curtailed as the central government has power to step in and regulate (only) under exceptional circumstances. For now, the government has assured that it is a win- win amendment for farmers and consumers.

Only time and implementation of the effective legislations will tell if the Farm laws reap the benefits.

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