Analysis of farm bill

This article is written by Purva Tambe currently pursuing BA. LLB from IILS Law College (Pune).

Credits: Srihari Jaddu

Introduction

The foundation of our society is farmers and they are the ones who provide us with all the food we consume. As a result, the country's entire population relies on farmers. Be it the smallest nation or the biggest, we are only able to survive on the planet because of them. Farmers are, thus, the world's most valuable citizens. While farmers are so important, they still do not have a proper life.


Farmers in India have been protesting vehemently ever since three controversial farm bills were passed without much debate in the Parliament. President Ram Nath Kovind gave his assent for the three contentious bills despite the intense protests across the country by farmers and opposition political parties.


What is a bill?

A bill is proposed legislation under consideration by the legislature. A bill does not become law until it is passed by the legislature and, in most cases, approved by the executive. Once a bill has been enacted into law, it is called an act of the legislature, or a statute. Bills are introduced in the legislature and are discussed, debated, and voted upon.


What are the three farm bills passed?


The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:

It aims to permit the sale of agricultural produce outside the mandis regulated by the Agricultural Produce Marketing Committees (APMC) constituted by different state legislations.


The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020:

It provides for contract farming.


Essential Commodities (Amendment) Bill, 2020:

It deregulates the production, supply, and distribution of food items like cereals, pulses, potatoes, onion, and edible oilseeds.


History of Indian system of agriculture

When India got independence, the moneylenders and the traders were the ones who dominated the distribution system of the agricultural sector. The farmers could not sell their produce directly in the markets, they had no means available to do so, and as a result, they were completely dependent on the moneylenders and the traders.


The moneylenders and the farmers exploited the farmers, and as a result, all the farmers had huge debts on their backs to repay. This agricultural system was not an efficient one and was exploitative towards the farmers. Thus the government came with a way to solve the problem through APMC-Agriculture Produce Market Committee.


The government set up special areas in the state and declared them as market areas. These market areas would be subject to the jurisdiction of the market committees. No farmers or traders would be able to freely buy or sell products in the market areas. If a trader wishes to buy any of the produce from the farmers they will have to use the license, this license system helps to bring a little control over the traders.


The government also assured that the MSP (minimum support price) will be granted to the farmers in these markets, that means a minimum price based on which, farmers will be able to sell their produce. APMC was a huge reason behind the success of the GREEN REVOLUTION. Later these areas were regulated under the state APMC act.

But over the years some defaults were seen in this APMC act:

  1. The market committee had extraordinary powers to grant a license to the traders

  2. The licensed commission agents that procured produce from the farmers started forming cartels and formulating deals with each other to collectively not buy produce from the farmers at a specified rate.

Why was the bill passed?

The newly adopted farm bills would grant farmers the right to trade through states and enable them to turn themselves into merchants with their goods and regulate the process. The goal of these three bills is that the new legislation will create an environment where farmers and traders will enjoy the freedom to choose agro-based-product sales and purchases and encourage barrier-free trade and trade within the state and outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.


The drawback of the new method was that in the late 1800s, farmers faced many problems. Overproduction, low crop prices, high transportation costs, high-interest rates, and rising debt were among these concerns.


To mitigate these concerns, the farmers worked relentlessly. The working reliance on intermediaries, commission employees, and red-tapism of the APMC (Agriculture Produce Marketing Committee) officials is another big problem with the new MSP-based procurement method. An average farmer finds it difficult to get access to these mandis and usually depends on the market to sell farm produce.


Over 90% of farmers are beyond the control of the MSP-based procurement method. For farmer-based policies also, MSP has remained a highly emotional issue. The latest figures indicate that only 6% of farmers have access to the procurement system based on MSP. The MSP-based method of procurement is highly balanced.


The new regulation will create an environment where farmers and traders will enjoy the freedom to choose agri-produce sales and purchases and encourage barrier-free inter and intra-state exchange and also the exchange outside the physical premises of markets notified under the laws of the State Agricultural Produce Marketing.


Why are farmers unhappy?

The primary problem is that how this is going to play out in practice is unknown. For one thing, farmers in several states can already sell to private actors, but what these bills do is provide a national structure.


Farmers, however, are largely worried that this would potentially lead to the end of wholesale markets and guaranteed rates, leaving them with no choice for back-up. That is, they will not return to the mandi or use it as a bargaining chip during negotiations if they are not happy with the price offered by a private buyer.


Framers are also afraid of the fact that they will feel drawn towards the private players who will provide them with better prices for the products and on the other hand the government mandis will pack up and farmers will be abused by these private agencies for low prices for these farmers.


The government has said that the mandi scheme will continue, and the minimum support price (MSP) they are currently providing will not be withdrawn. Farmers are sceptical, however, the cons are:

  • Farmers' organizations are worried that the new Farm Act 2020 will expose them to businesses with more bargaining power and capital than small or marginal farmers.

  • Indian farmers would be permitted to sell their products across India at the best possible rates. This sounds fine. But look at the facts, if in Pune, a farmer from Kerala gets the best offer, how is he going to travel? Oh, by train? How is he going to manage to change trains with his goods on the journey? Is he going to recruit labour? How can a small, marginal farmer afford to pay for their labour?

It will, however, take two or three days to reach Pune. In the method, agricultural products will either rot or decay. Therefore, something that sounds amazing does not necessarily suit virtually or practically.

  • A monopoly has been established by the current APMC scheme and the newly implemented proposal does not eliminate the monopoly principle either. The likelihood of a monopoly ecosystem under these large corporate entities is much greater.

The Pros are:

  • The Farmers Produce Exchange and Commerce (Promotion and Facilitation) Act makes an intra and inter-state exchange in farm products free of restrictions.

  • The new Farm Bill 2020, therefore, indicated that it would grant farmers freedom of choice. Without putting it into APMCs, they can sell it freely across the country.

  • The new Farm Bill 2020 requires farmers to circumvent intermediaries to directly to the market, all agricultural goods to institutional buyers.

  • The new farm bill sets out a standard structure for agreements that would help farmers connect directly with agribusiness firms, retailers, and exporters, while small and marginal farmers have access to modern technology.

Conclusion

The easiest response to the farmers’ protests against farm bills could be to provide legislative funding for minimum selling prices and procurement, in the new bill to eliminate farmers' fears. It would only be of great use to give farmers, the option to sell without the aid of intermediaries if there are roads connecting villages to markets, climate-controlled storage facilities, the supply of electricity is made reliable and available for powering those facilities, and food processing companies who compete to buy their produce.

The demands of the farmers include revocation of all three ordinances, that the mandi system to remain intact, and that their loans are cleared.


The reforms would stimulate agricultural growth by investing in the private sector in the development of agricultural infrastructure and supply chains for Indian farms in the global domestic markets, creating job opportunities, and strengthening the economy. Farmers will be liberated from the grasp of selling their goods at specified locations. MSP procurement will continue and 'mandis' set up under state legislation will also continue to run. It will inspire and nurture farmers and reshape the economy.


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