June , 2021
Legal Approach to Recent Farm Laws in India
11:25 am

Dr. P K Agrawal


The President of India gave assent to three Acts passed by the Indian Parliament on September 24, 2020. These Acts created upheaval among farmers in India and people are very much concerned about the fall out of these legislative measures.


The APMC Reforms Act

The ‘Objects and Statement’ of the main ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020’ states, “The Act to provide for the creation of an ecosystem where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels - to promote efficient, transparent and barrier-free inter-state and intra-state trade and commerce of farmers ‘produce outside the physical premises of markets or deemed markets notified under various State agricultural produce market legislations.”


Though the ‘inter-state trade and commerce’ falls at item no.42 of the Union List of the Seventh Schedule of the Constitution of India but it has been expressly excluded by item no.14 - agriculture of State List and item no. 33 of the Concurrent List of the Seventh Schedule of the Constitution. However, this is a contentious issue involving the interpretation of the relevant provisions of the Constitution which the Supreme Court is considering.


According to this Act, any trader can now engage in the purchase and sale of farmer produce within a state and also outside the state without any restriction or payment of Mandi Tax /fee. Earlier the traders licensed by the concerned Mandi could only purchase produce on payment of Mandi Tax. Mandis in return took no initiative to sell farmers’ produce at higher prices by involving traders from outside. They only provided their premises for the farmers to bring their produce and sell by way of auction on payment of some commission to their licensees known as Adatia. The farmers were capitalized by these licensees by giving them advances during sowing and even in cases of the personal needs of the farmers. Thus, a bonding was developed between the farmer and the APMC licensee. However, the Act intends to break this chain. But in practice, this chain will be there without being transparent. However, some of the forward-looking big farmers will be able to sell their produce in bigger Mandis and will be able to even export. But in the present state of education and awareness among general farmers, only a minuscule number of farmers will be able to reap the benefit. On the other hand, general farmers will come under the clutches of so called sponsors unless the licensees of Mandis are provided level playing fields by the state concerned by abolishing their license fees and realisation of commission by them. How can financially deficient state governments run the existing APMCs without some income from them by way of tax/fee? The more serious problem will arise how the Food Corporation of India will procure food grains for the Public Distribution System which has saved India from famine for about a century. And the Prime Minister can always give free ration for two /three months to the vulnerable population of India during an emergency like the recent one. Who will ensure that the free trader will provide payment for the purchase of produce on the same day or maximum within three working days? It is also not practically feasible. Even state government mills cannot pay the sugarcane growers on the same day or even after three months. The Left Front government could not ensure delivery of a single written receipt by the land owner to the sharecropper/bargadar in spite of their best intentions, authority and well-organised political apparatus during their thirty-four year-long uninterrupted rule in West Bengal from 1977-2011. Sub-divisional magistrates delay disposal of cases more than the judicial officers except in cases which are referred to them by VIPs. The companies will run away after being declared insolvent or are wound up by law. Thus, the government has to set up a nodal agency at the state level which will guard and patronise the interests of the farmers.


It is good that a competition has to be created with APMCs so that they operate better and in the interests of farmers. It is also a fact that modern warehouses, silos and cold storages cannot be created by governments due lack of funds and expertise. The private sector can be associated to create such an infrastructure without handing over hapless farmers to the mercy of big landlords, moneylenders or now the corporates.


The Contract Farming Act


 The ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act’ intends to provide a national framework on agreements that protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers and promote sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner. This is popularly known as the ‘Contract Farming Act.’


This is one area which is very much doubted by the farmers as the contract farming in practice operates in favour of the sponsors who have money, men and legal battery with them. The sponsors, companies or firms are supposed to supply seed, agro-chemicals, machinery, technology, advice, agro-inputs for farming. The Act provides that the sponsor will bear the risk of output and will make payment to the farmer for the services rendered by such farmer - mainly his/her manual labour. Even the sponsor will have to pay two-third of the agreed amount at the time of delivery of seed produce and remaining within thirty days of delivery. Similarly, quality of produce cannot be dictated by the sponsor itself. It has to be monitored by third party qualified assayers during cultivation, rearing and at the time of delivery. A guaranteed price will have to be paid by the sponsor. Over and above the agreement will be generally for five years and can be extended only in exceptional circumstances. A very good protection has been provided in the Act to the cultivator-sharecropper in section 3(2) as below which states, “No farming agreement shall be entered into by a farmer in derogation of any rights of a sharecropper.”


The Act defines the sharecropper correctly. The section 7(2) of the Act exempts produce under the contract farming from the control of limit of stock under the Essential Commodities Act,1955.


The Essential Commodities Amendment Act


This is further cross reiterated through amendments in the Essential Commodities (AMENDMENT)Act, 2020 which includes cereals, pulses, potato, onions, edible oilseeds and oils and any other commodity in view of war, famine, extraordinary price rise and natural calamity of grave nature. However, price rise for the first time is defined through this Act which was always confusing as below;


· hundred per cent increase in the retail price of horticultural produce; or


· fifty per cent increase in the retail price of non-perishable agricultural foodstuffs.




It is suggested that any other financial service provider should be removed from section 9 of the Contract Farming Act. Secondly, the parties to the contract farming agreement should not be allowed to extend the duration of agreement under proviso of sub section (3) of the section 3 of the Contract Farming Act,2020.Under the Farmers’ Production Trade and Commerce Act, 2020,which may be known as APMC Reforms Act, 2020, the traders outside APMC or mandi should also be equally taxed or traders within the APMC yard or Mandi should be exempted from the Mandi Tax to provide both a level playing field - otherwise the traders of APMC or Mandi will form a cartel outside the mandi to escape regulation and detection by Mandi or local administration. And big houses will trade at the cost of small and middle-class agri-business traders and will form a cartel to blackmail the governments at the time of price rise or emergencies. It is therefore essential that in India the public sector and private sector should run concurrently. The farm sector has always saved the country with its ever-green growth rate of around 4% by ensuring adequate supply of food grains. Therefore, there seems to be no need for interference of the Union Government on the subjects exclusively entrusted to states unless states agree and request the central government to draft such legislations. Thirdly, contract farming has been very successful for produce like flowers, coffee, spices, fresh fruits, cashew, vegetables, and raisins in Karnataka. At the same time, it miserably failed in the field of pisci-culture in West Bengal for rearing the of prawn. Contract farming has not been a success in Punjab and Haryana and requires a nodal agency which can ensure implementation of processing, value addition and export of the contracted produce and can help the farmers in cases of gluts and price decline and in case the sponsor runs away, leaving the farmer in a lurch. Similarly, contract farming can be allowed on an experimental basis on forest produce like tendu leaves and soybean in Madhya Pradesh which have a huge potential for export. Similarly, tamarind can be brought under contract farming in Andhra Pradesh to fetch huge export earnings. In Rajasthan, there are some agri-produce like guar-gums used in propelling rockets which have been exported on a large scale. Oil, pulses, onion, sugarcane, cotton have been historically procured directly from farmers without much problems. However, main cereals like wheat, paddy, pulses, coarse grains may not be brought under the ambit of the Contract Farming Act at present. In the meantime, like in Karnataka, deep market reforms should be implemented by unifying markets through electronic trading as envisaged in the new acts by making robust electronic trading platforms and simplifying licensing procedures, tax and the commission system in APMC/Mandis.


-----------------------------------------------------------------------------------------------------------------------------Dr.P.K.Agrawal retired as Additional Chief Secretary and Commissioner General of Land Reforms in West Bengal after working for about a decade in the land reform administration of Govt. of West Bengal.Dr. Agrawal has five books on land reforms including one at the national level and the other with global perspective.Dr.Agrawal has been practicing law for more than a decade and is at present Managing Partner in a law firm at New Delhi.


The opinion/s expressed in the article are that of the author’s and do not necessarily represent or reflect the policy or position of this magazine.


Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.