Breaking Down the New Farming Laws of 2020
There are innumerable farmers who have laid siege to the Indian capital of New Delhi by protesting at the Singhu border, blocking all entry points to the city. Consequently, there is heavy police deployment alongside New Delhi’s borders. A nationwide strike was declared on December 8, 2020, in response to the new farming laws which are inimical to the interests of the farmers. The farmers, who are mostly from the North Indian states of Punjab, Haryana and Uttar Pradesh, seem like they will not accept anything less than the withdrawal of the three new farm laws.
The Two Laws of Benefit
The Essential Commodities (Amendment) Act is a law about taking away the Indian government's power to impose stock holding limits on food, except under the clause of “extraordinary conditions”, which imply situations of war, famine and other natural calamities that are grave. This also entails an annual retail price rise exceeding 100% in horticultural produce like onions and potato, and 50% for non-perishable produce like cereals, pulses, and edible oils.
Given that the stock limits mentioned in this law only apply towards traders, the amendment proposed especially exempts processors, exporters and another chain of value participants, as long as the quantities they keep don’t exceed their demands and requirements. It does not concern farmers at all. This law would only benefit farmers as it would remove the stocking restrictions from trade. This would grant them unlimited buying and demand for their products without having to worry about external restrictions on trade.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act provides a regulatory framework for contract cultivation. This directly concerns the agreements that farmers enter into with agri-business firms which include processors, large retailers or exporters. These agreements revolve around supplying produce of predetermined quality at the minimum guaranteed prices. The Act basically enables contract farming. In crops that have particular processing grades, these exclusive agreements between companies and farmers are already operational. For example, potatoes used by corporate food companies like PepsiCo for their brands Lays and Uncle Chipps. In such agreements, the processors or exporters undertake assured buyback at previously agreed prices and provide farmers seeds, material and extensive support to ensure that only a desired standard of produce is grown.
The important thing to understand is that contract cultivation is voluntary in nature, including only crops that are not amenable for trading in regular agriculture produce markets. There is seldom any domestic market for gherkins, as is for the low sugar content potato that PepsiCo requires. Neither can farmers sell sugarcane and milk in domestic agricultural produce markets. And the produce that these sugar mills and dairy makers source from them are also a type of contract farming. This Act only formalises contract cultivation within the national framework and clearly prohibits any sponsoring firm from acquiring farmers’ lands, be it through the means of purchase, lease or mortgage, making it a strong and welcoming law.
The Main Law of Contention
The Farmers’ Produce Trading and Commerce Act, 2020 (FPTC Act) is the real bone of contention aggravating the protests at the borders of New Delhi. It permits the sale and purchase of farm produce outside the premises of Agricultural Produce Market Committees (APMC) mandis. Under the State APMC Act or any other State law, these trades shall not gain any market fees, cess, or levy. The main issue is the very right of the Central government of India to enact legislation on agricultural marketing. Entry 33 of the Concurrent List of the Indian Constitution covers trade and commerce in “food, including edible oilseeds and oils, fodder, cotton, and jute”, implying that the Centre can pass any law that removes a hindrance in both inter-state and intra-state trade within farm produce, while automatically suspending the State APMC Acts. Therefore, making the 2020 Act the “APMC mandi bypass Act.”
There must be a distinction between agricultural marketing and agricultural trade. Agriculture marketing includes everything from field preparation and cultivation to the primary sale of that produce in the APMC mandis. The agricultural trade can only begin after the produce has been agriculturally marketed by the farmers themselves. Therefore the regulation of the first sale of agricultural produce is a responsibility of the Indian states and not the Centre. Farmers just don’t want any restrictions on the movement, stocking, and export of their produce. Their concerns for protesting are not to gravitate towards trade but towards agricultural marketing. They want to dismantle the monopoly of APMCs as the farmers of Punjab and Haryana are not convinced about the “freedom of choice to sell to anyone and anywhere” due to the law.
Their reasons are valid because the government procurement of paddy, wheat, pulses, cotton, groundnut, and mustard at the Minimum Support Prices happens only in APMC mandis. If trading moves out of these APMCs, the regulated markets will lose their revenues. They will not formally shut, but if the government stops buying, they will have no option but to sell their produce to big corporates even if they don’t want to. Their main problem is essentially the FPTC Act and its provisions which they know will weaken the APMC mandis. They are also now demanding for Minimum Support Price as a legal right, which is harmful to their selling market. Because if corporations refuse to pay at MSP and decide to import produce, the farmers will be left with no place to sell.
It is undoubtedly clear from some of the farmers’ concerns that they are confused about some aspects of all the new Acts that they are opposing. But it is important to examine the merits and feasibility of their new demands as the protests elongate, especially in the FPTC Act. We will have to wait to see how the government decides to further negotiate and handle the situation at hand as they confront the biggest challenge in their six and a half year tenure. Will the decision spin away on excessive sentimentality and result in distorted policymaking? Or will the agrarian sector finally see more inclusive changes? We will have to wait until there are answers.
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