- Need for the reforms
- The Farmers’ Produce Trade and Commerce Act 2020
- The Farmers Agreement on Price Assurance and Farm Services Act 2020
- How do these bills impact MSP?
Agriculture Reforms and Farmers Acts
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The President of India has given assent to the bills aimed at Agriculture Sector Reforms. The bills are: The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020. There has been a huge controversy and protests by farmers’ organisations over the new farm bills especially in the states of Punjab and Haryana where the middlemen (arhartiyas) have a strong-hold.
Need for the reforms:
- Till now, the Agricultural Produce and Livestock Market Committee Act governed the sale and purchase of the notified commodities in the states.
- As per the APMC Act, the farmer required to bring his produce to principal yards, sub-yards or any area declared by APMC as market for sale.
- The farmers could sell the notified commodities (importantly Wheat, Rice) only through APMC channels.
- The reforms remove all the commodities from the APMC Act and enable the farmers to sell their produce to any private entity, individual buyer, any other state or even the mandis (arhartiyas) as per the earlier model.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020:
- It allows intra-state and inter-state trade of farmers produce beyond the physical premises of Agricultural Produce and Livestock Market Committee (APMC) markets.
- State will be now prohibited from levying any market fees or cess outside APMC areas.
Myth- Procurement at Minimum Support Price will stop:
- If selling in mandis are optional will the mandis exist? What will happen to the government electronic trading portal like e-NAM?
- The farmers and the opposition political parties are protesting against the above fears.
Reality- Farmers can sell their produce at MSP:
- Mandis will be open as before but farmers will have the option to sell at other places too. The e-NAM trading method will be functional in the mandis.
- Electronic platforms trading would increase which would raise transparency and augment time-saving.
- Under this, agri-business companies and traders will be allowed to open their own markets to purchase from farmers. However, this will destroy the level playing field between the APMC markets and other traders. Under it, the trade outside the APMC Mandis is virtually unregulated.
- Farmers were demanding that in case the government is allowing, new set of farm markets to come up; the state and local government should be given power to oversee their functioning.
- Presently if the farmers feel the traders working inside the APMC Mandis are involved in any unfair practices, they could complaint to the APMC Officers.
- However, new act, in case of any disputes, farmers would be required to go to a sub-divisional magistrate court – which is beyond the capacity of small farmers to pursue given their financial constraints.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020:
- Provides for contract farming, under which farmers will produce crops as per contracts with corporate investors for a mutually agreed remuneration.
- Under contract farming, farmers will be dictated by corporates and the former will not be able to fix prices according to their free will.
- How will small farmers be able to do contract farming, sponsors will not finance them.
- In case of dispute, big companies will have their say. The farmers and the opposition political parties are protesting against the above fears.
- Under contract farming, farmers will have full power to determine prices for their produce. They will receive a payment within a maximum of 3 days.
- 10000 Farmer Producer organizations are coming to existence across the country. These FPOs will bring together small farmers and work to enforce a remunerative pricing mechanism for farm produce.
- After signing the contract, farmers will not have to seek out traders. The purchasing consumer will pick up the produce directly from the farm.
- In case of dispute, there will be no need to go to court time and again. There will be a local dispute redressal system.
- The protesting farmers fear that powerful investors would bind them to unfavourable contracts drafted by big corporate law firms, with liability clauses that would be beyond the understanding of poor farmers in most cases.
- Under this law it’s not mandatory for a company to make a written contract with the farmer for any contract farming. So, even if the company violates the terms of the contract, the farmer cannot prove it.
- Bill does not prescribe or specify that contract price of the crop should be at least equivalent or above the Minimum Support Price (MSP). It means the contractor/companies can pay whatever price they want to the farmer.
- It does not have any provision to penalize companies which do not register their contracts. For eg: Last year, Potato farmers from Gujarat witnessed a big issue where Pepsico attempted to penalize potato farmers for growing the same seed varieties.
- Gives wider selling option to farmers.
- Farmers can fix selling prices, as earlier the prices were dictated by the middlemen and they were price-takers.
- Provision of e-platform for farmers to sell their produce.
- So far, the farmers were only producers, but with the new act, they can become traders.
- They even have the options of APMC channels, which are not going to be abandoned.
- Contract farming by corporates implies that the corporate will provide technology to the farmers to improve their yield.
- This benefits both, the farmer through increased yield and the corporate, who can get higher production from suppliers.
How do these Acts impact MSP?
- Minimum Support Price is not a law but administrative decision of the government.
- The very existence of APMC does not guarantee MSP.
- Hence, the Acts are not going to impact Minimum Support Price.
- Hence, the new Farmers bill will be a boon for the economy and any loopholes will be addressed by the experts and the policymakers.