Saturday

04


December , 2021
Legal approach to the three farm laws in India
22:13 pm

Dr. P K Agrawal


 

The three farm acts came in force in September, 2020 and was highly contested by a large section of Indian farmers. However, Narendra Modi, Prime Minister of India has recently announced to withdraw these acts very soon. Let us examine how these acts stand to legal scrutiny.The APMC Reforms Act

The ‘Objects and Statement’ of the main Act ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 says;

“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, it has been expressly excluded by item no14, Agriculture of the 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. In the meantime, the implementation of these Acts is kept in abeyance.

According to this Act, any trader can 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 the outside. They only provided their premises for 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 capitalised by these licensees by giving them advances during sowing and even in cases, of personal needs of the farmers. Thus, a bonding 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 section of Indian farmers will be able to reap the benefit. On the other hand, general farmers will come under the clutches of the so-called sponsors unless the licensees of mandis are provided level playing fields by the concerned state government by abolishing their license fees and realization of commission by them. How can financially deficit state governments run the existing APMCs without some income from them by way of tax/fee? The more serious problem will arise regarding how the Food Corporation of India will procure food grains for the Indian Public Distribution System which has saved India from famines and contingencies for about a century. 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 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 share cropper/bargadar in spite of their best intentions, authority and well-organized political apparatus during their thirty-four-year rule in West Bengal from 1977-2011.

The Contract Farming Act

Another Act ‘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 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 farmers as contract farming in practice operates in favour of the sponsors who have money, men and the legal battery with them. The sponsors, companies or firms are supposed to supply seed, agro-chemicals, machinery, technology, advice and 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;

“No farming agreement shall be entered into by a farmer in derogation of any rights of a share cropper.”

The Act defines the share cropper correctly. The section 7(2) of the Act exempts produces under contract farming from the control of limit of stock under the Essential Commodities Act, 1955. However, this provision can be further pursued by the government to protect the rights of share croppers in the country. This will prove a positive fall out of the Act and will be a boon to the landless and marginal farmers in the country.

The Essential Commodities Amendment Act

This Act has been amended and the amended 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;

(i)100% increase in the retail price of horticultural produce; or

(ii) 50% increase in the retail price of non-perishable agricultural foodstuffs.

Suggestions

It is suggested that the ‘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 provision 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. Traders within the APMC yard or mandi should be exempted from the Mandi Tax to provide a level playing field. Otherwise, the traders of APMC or mandi will form a cartel outside the mandi to escape regulations and detection by the 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 emergency.

It is therefore, essential that in India, the public and privates sector 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 is no need of interference by the Union Government on 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 has miserably failed in the field of pisci-culture in West Bengal for rearing 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 experimental basis on forest produce like Tendu leaves and Soyabin in Madhya Pradesh which have huge potential for export. 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 has been exported on a large scale. Oil, pulses, onion, sugarcane, cotton have been historically procured directly from farmers without much of a problem. 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 via electronic trading as envisaged in the new Acts by making robust electronic trading platforms and simplifying licensing procedures, tax and commission system in APMC/Mandis.

— The author 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.


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