There have been protests against the three ordinances that were promulgated by the government in June 2020. In this Monsoon Session, the government put forth these ordinances before the parliamentary debate, and now these ordinances have been replaced as bills. These three bills are collectively known as Agricultural Reform Bills, 2020.
The Agricultural Reform Bills, 2020, do introduce some important changes in marketing regulations, and the government, by the way of this bill, tried to solve some long ongoing flaws in the APMC (Agricultural Produce Market Committee). Farmers and traders are strongly opposing to the recent amendments implemented by the central government, arguing that the government intends to end the minimum support price (MSP) system in the name of reforms. Experts say that the reforms introduced by the way of this bill are corporateizing India’s food production, procurement and food industry.
The author in this paper will try to answer the question that whether these reforms (introduced by the way of this bill) really in the favor of the farmers w.r.t restrictions and monolpoly.
AGRICULTURAL REFORM BILLS, 2020-
The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020– The key features of this ordinance are that it abolished the market fee, i.e., State government will not be able to levy any market fees on the farmers, it permitted Electronic trading (in the specific trade area) of the farmers produce and this ordinance allowed the inter and intra state trade of the farmers produce.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020- This ordinance particularly focuses on the Farming agreement, i.e., an agreement between a buyer and the farmer which is prior to the rearing or production of any farm produce, pricing of the product by the farmer and the how the dispute of a farming agreement should be resolved.
The Essential Commodities (Amendment) Ordinance, 2020– By the virtue of this ordinance, Central government is now empowered to designate certain commodities as essential commodities (for example, fertilizers, food items, etc.). Also, this ordinance allows the government to regulate the supply of certain food items (only under exceptional circumstances, i.e., famine, war, etc.). The ordinance also requires that if there is any imposition of stock limit, then it must be based strictly based on the price rise.
ABOUT APMC AND ITS FLAWS-
Agricultural markets are regulated by the APMC (Agriculture Produce Marketing Committee). They were set up with the objective of ensuring that the trade which happens between buyers and sellers is fair and the farmers can discover effective prices for their produce. Its main purpose is-
- Regulating the farmer’s trade by proving license to buyers, private markets, and the commission agents,
- levy charges and market fees on such trades,
- to facilitate the trade by proving necessary infrastructure within the markets.
There were some flaws in the APMCs, which were recognized by the Standing Committee on Agriculture (2018-19). Some of those issues are that most operating APMC’s have a very limited number of traders who are operating hence leading to cartelization and low competition; the commission agents, traders, and other functionaries use to categorize themselves as one association, which leads to uneasy entry of new traders in the market and hence stifling competition; these APMCs are highly restrictive in the field of promotion multiple channel marketing (private markets, buyers, retail consumers and direct sale to business) and the competition in the market, etc.
REASONS FOR THE NATIONAWIDE DISSENT-
There are various reasons with regards to this bill, which have caused a nationwide dissent. The first reason can be stated as- there was no consultation with the stakeholders. This bill was passed without apt consultation, which adds to mistrust, and also, this bill is looked at in a way that it was introduced so as to weaken up the APMCs and eventually to withdraw the MSP (Minimum support price). The second is the issue of trade and the MSP guarantee. The third one is the legacy concerns, i.e., the bills do not give any assurance to small and poor marginal farmers for protection of their livelihoods and the future, and the last one is the fear of food insecurity.
Several experts have argued that the bill may inflict havoc on farmers because it eases the control of food products. As a result, there is a high probability that traders will store the produce by farmers during the harvest season (when prices are usually low) and release it when the price of the produce is generally higher.
The Author in this paper will try to answer two questions-
Can the amendments implemented by this bill work to free farmers from limitations on the selling of their produce?
Can this bill bring an end to the business hegemony of traders?
ANSWER TO THE QUESTION-
No, the proposed reforms will not free farmers from the limitations on sale of their produce. This bill particularly stated that the farmers will now be able to sell their produce outside APMC ‘mandis’. They are now able to directly sell to private players without any restrictions of fees or taxes. The Government, adding to the statement above, said that this will make the ecosystem a free market. The reason which the Government gave for farmers selling their produce outside the APMC was that in a bigger market, the farmers will have more opportunities (as against being limited to that of APMC) to attract more buyers. Hence by applying the law of demand and supply, it can be stated that the farmers will get a much better price.
But if we see the situation, then we can opine that the issue of lower prices was never linked with the size of the market. This problem was so because of the difference between the contracting powers of the parties. So, no matter how large the business area is, the poor farmer (with low contracting power) in front of the big traders would be at the same disadvantage as he is today. He will not be able to get a relatively higher price. But because of this process, i.e., enabling them to deal with private traders directly, will make them lose whatever security they have today (These securities are getting MSP (minimum selling price) twice a year, purchasing food crops at MSP through the PDS (public distribution system), and move in to save the price crashes of market control schemes).
The repercussion of the above scenario will be that all the trade of the farmers will go outside of the farm markets, which can be termed as imperfect markets (Any market that does not agree with the expectations of a perfectly competitive market) and needs so many corrections. This is like a situation that a person has a boil in his leg, so instead of treating it, let’s just cut off the leg. Instead of correcting the APMC’s, the government is trying to take all the trade outside of the APMC. Because of this process, there will be a lack of regulations, reporting, and regulatory oversight because the process of price discovery will not exist.
Today we still have sources to get knowledge or keep track of the trade in a particular mandi, but after the introduction of this bill, all the trading will overpass the regulatory oversight. Take the example of “Agnamarket.” This is a government website of State of Karnataka, where we can see that how much chana is getting sold below the MSP in a particular mandi of the state. But now, the trade has moved into open, which can be termed as an unknown or uncontrolled market, and hence there will be no information with regards to any product as the farmers will able to sell directly to the private players. This creates a huge problem because if there is any case of exploitation towards the farmer, then it will go unreported and hence will make the purpose of this bill redundant.
The Government enlarged their trading area, which was never the issue with the farmers. The primary concerns of the farmers were to look into the market prices that were sluggish because of the reason that the demand is sluggish; their income is going through a period of stagnation, growing input costs, getting squeezed between cultivation’s rising cost and the slothful prices, etc. These demands were completely ignored in this difficult economic situation. Now the main question which arises here is that what will be the result of enlarging the trading area and taking trade away from the APMC. Because of this bill, now there will be facilitation to the big players in the farm sector only, and they will be the only one to get benefitted from this bill. The small farmers will get exploited by the private players. The importance of APMC and the system of procurement will become redundant over time (which is one of the main concerns). APMC does have flaws, but there is some form of recording, and the option of grievance redressal is still present. The new legislation leaves too much to the generosity of private players to ensure fair conditions to farmers. Hence, it can be stated that proposed reforms will not free farmers from the restrictions on sale of their products and will ultimately lead to their exploitation.
Now, moving towards the next question, i.e., will this bill genuinely act towards ending the monopoly of the traders in the market?
Agricultural marketing policy in India continues to be driven by state involvement in the procurement and sale of agricultural products. Most states have adopted Acts of the Agricultural Produce Marketing Committee (APMC) to govern, monitor and monopolise the operation of markets. The initial concept behind the creation of APMCs was to shield farmers from commission agents and intermediaries. It was assumed that these markets would be equitable, productive and would give farmers better value. The Evidence indicates, though, that the legislative system can be counter-productive to the claimed intent of the above Actions. Empirical research shows that the APMCs have fallen victim to the same behaviours they were meant to mend, and this is a clear argument for systemic change. But instead of solving the flaws, the government is taking the trade outside in the name of ending the monolpoly of the APMC, hence making the farmer more vulnerable to exploitation.
The answer to the question of monopoly will be no. This can be supported by the looking at the future prospects of the bill. Say A, a small farmer, who used to go to APMC for selling his farm produce. He used to sell his produce at the MSP (as was set by the government). By the introduction of this bill, he is now able to sell his produce directly to the private players without paying any fees and taxes. So he started selling his produce outside the APMC as he thinks that it may be profitable for him. But he does not know that he is at disadvantage if he goes outside the APMC because all the securities which the government gives to the farmer do not exist after moving outside the APMC.
The bill does not only remove the monopoly of the APMC but also works toward making it redundant because the government is luring the farmers to transact with private players directly by removing the fees and taxes which were levied on them before. What will happen is that the small farmers (because of this lure) will go towards the private players rather than the APMC. After some time, the structure of APMC will completely fall because no one will go there to transact, and also, the private players (for some time) will give them great deals so that the farmers will sell their produce to them only. After the falling of the APMC, the private players will start exploiting farmers by making them sell their produce for a very minimal price (as the farmers will not have any security outside the APMCs and the exploitation will also go unreported) and hence will shift the monopoly from the APMC to the private players.
By the way of the above discussion, it is clear that there are lots of discrepancies related to this bill. The farmers have been protesting against the bill since they were first promulgated as ordinances. The government, instead of correcting the actual flaws, is moving in a direction that has a serious potential to harm the interest of the farmers. They are bringing in such a framework which in lieu of fewer restrictions is making a farmer’s way to the exploitation.
It can be opined that the government has two fold intention while introducing the bill i.e. first, the abrogation of the government’s duty to be responsible to farmers for equal prices. Second, our suspicions will be proved true if they continue with this “nonsense” that the competition will be captured and monopolised by very large business houses.
The Government has a responsibility to ensure that the farmer or producer receives a reasonable price and has a similar obligation to ensure that those who could not afford that price receive food at the rates they can afford and that the gap between them is subsidised by the Government. What farmers demand is just legally assured remunerative rates. If the intention of the government is perceived by good intent, then they should not shy away with the details and should do proper parliamentary scrutiny of the bill.
Nandini Saxena (1st year law student)
College name- Symbiosis Law School, NOIDA