Three Farm Bills and Issues

Three Farm Bills and Controversy

The union government introduced three farm bills as part of Agricultural Reforms in September 2020.

The Bills include:

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation)
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services
The Essential Commodities (Amendment) Act

Let us see the key provisions of each Law and farmers opposition in brief.

It aims to create alternate marketing channels where farmers and traders (big business companies or exporters) have the freedom to sell and purchase farm produce outside the registered 'mandis' understates' APMCs.
Promotes barrier-free inter-state and intra-state trade of farmers' produce.
Reduces marketing/transportation costs and help farmers in getting better prices
Prices of the produce also become competitive.
Provides a facilitative framework for electronic trading.

Opposition

In mandis, State governments levy fees and taxes and middlemen collect a lot of charges from farmers.
States worry that they would lose revenue as they won't be able to collect 'mandi fees' if farmers sell their produce outside registered APMC markets.
Farmers fear it may eventually end the MSP-based procurement system, but nowhere bill says anything about ending or phasing out of MSP.
Electronic trading like in e-NAM uses physical 'mandi' structure. What will happen to e-NAM if 'mandis' are destroyed in absence of trading?

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act:

Allows farmers and buyers (agribusiness firms, processors, wholesalers, exporters or large retailers) can enter into a written contract prior to production for the sale and purchase of the produce at a fixed price in future.
The contract must include the guaranteed price agreed to the farmer and any other additional price.
In India, marginal and small farmers account for 86% of total farmers. Marginal and small farmers, with land less than five hectare
to gain via aggregation and contract.
Transfers the risk of market unpredictability from farmers to sponsors (buyers).
Enables farmers to access modern technology and get better inputs.
Reduces the risk of fluctuating market price and demand for the farmer.
Buyer can reduce the risk of non-availability of quality produce.
Reduce the cost of marketing and boost farmer's income.
Farmers have the freedom in direct marketing by eliminating intermediaries for maximum price realisation.
Effective dispute resolution mechanism with redressal timelines.

Opposition

In the contract farming System, the farmer will be the weaker player in terms of his ability to negotiate what he needs.
The sponsors may not show interest to deal with a multitude of small and marginal farmers
The sponsors, who are big private companies, exporters, wholesalers and processors, will have an edge in disputes.
The conciliation system would leave farmers at the mercy of civil servant, who heads the conciliatory board.

The act seeks to impose stock limits only if there is:
- a 100% increase in the retail price of horticultural produce;
- a 50% increase in the retail price of non-perishable agricultural food items.
Removes commodities like cereals, pulses, oilseeds, onion and potatoes from the list of essential commodities. The act will do away with the imposition of stock limits on such items except under "extraordinary circumstances" like war, famine, extraordinary price rise and natural calamity of grave nature.
Attracts FDI in the agriculture sector as it will remove fears of private investors of excessive regulatory interference in business operations
It will boost investment in cold storages and modernization of the food supply chain.
To help both farmers and consumers by bringing in price stability.
To create a competitive market environment by preventing wastage of the produce.

Opposition

Price limits for "extraordinary circumstances" are so high that they are likely to be never triggered.
Big companies will have the liberty to stock commodities. It means they will dictate terms to farmers which may lead to less prices for the cultivators.
The recent decision on export ban on onion creates doubt on its implementation.

There is a critical need for alleviating the fears of farmers as regards the continuation of the MSP system and procurement of food grains in case of distress and also make them aware of the options of selling the produce other than at the mandis is a boon to them.
Government declares Minimum Support Price (MSP) for 22 crops before the sowing season based on the recommendations of the Commission for Agricultural Costs and Prices (CACP), the Department of Agriculture and Co-operation. Hence the Government should give legal backing to MSP rather than just continuing it as an administrative exercise or a government policy.
Effective legal recourse shall be available to the farmers.