When we talk about Farm Bills 2020 – we’re essentially talking about three separate legislations.

A collage of TNM reporter Paul Oommen and a picture of farmer protests over the three Farm Bills
news Explainer Friday, September 25, 2020 - 21:01

PANDEMONIUM IN PARLIAMENT! 8 MPs SUSPENDED! A UNION MINISTER RESIGNS! FARMERS PROTEST EVERYWHERE! You’ve seen the headlines and the visuals – and the debates, as usual, about whether the three Farm Bills in Parliament are good or bad. The three contentious Bills were passed recently, and the politics around this has been quite dramatic. But let’s back up a little bit. What are these Farm Bills? What are their provisions? What effects do they have on farmers? And why are some people supporting these draft laws, while others are opposing them? We're going to do now is break down everything in simple English. No random jargon, no mathematical equations, nothing.

When we talk about Farm Bills 2020 – we’re essentially talking about THREE SEPARATE legislations.

NUMBER 1: The Essential Commodities (Amendment) Bill, 2020. We will call this one – the Essential Commodities Amendment.

NUMBER 2: The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020. Let’s call this one, the Marketplace law.

NUMBER 3: The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020. We’ll call this, the Contract Farming law.

Now, the Essential Commodities Act was first brought in several decades back – in 1955. The Act basically controls the production, supply and distribution of certain commodities that are essential. So if an item comes under this Act – for instance a food item, or an important drug – then companies and supermarkets etc cannot hoard these items when there is shortage, they can’t artificially increase the price etc. The list of Essential Commodities As per the original Act, includes these things:

(1) drugs (medicines)

(2) fertilizer, whether inorganic, organic or mixed;

(3) foodstuffs, including edible oilseeds and oils;

(4) hank yarn made wholly from cotton;

(5) petroleum and petroleum products;

(6) raw jute HI jute textiles;

(7) (i) seeds of food-crops and seeds of fruits and vegetables;

(ii) seeds of cattle fodder; and

(iii) jute seeds.

The new Essential Commodities Amendment removes foodstuff such as cereals, pulses, potato, onions, edible oilseeds and oils, from the list of essential commodities – unless there are dire circumstances, like a war or famine, or an “extraordinary” price rise.

Further, the new Amendment says the government cannot impose a stock limit – that is, it cannot stop a supermarket chain or any other retailer from hoarding – unless there is a 100% increase in price of perishable goods, or 50% increase in price of non-perishable goods.

Critics say that this Amendment will lead to increased hoarding, and an artificial price rise of things that you and I – and people much, much poorer than us, need every day. Rice, wheat, potatoes, onions, oils.

Now, let’s move on to the second Food Bill – the Marketplace Bill. 

Before we get into what this Bill – or actually, Act – says, we need to understand how farmers currently sell their produce.

In every state in India, the state government – let me repeat, the STATE GOVERNMENT – can set up something called APMC: an Agriculture Produce Market Committee. The APMC sets up markets – or mandis or yards – in several places in the state, which is where farmers bring their produce, and wholesale and retail traders come to buy the produce via auctions. The APMCs across the country ensure that farmers get a fair price for their produce, and aren’t forced to make a distress sale. Plus, the idea is to get rid of middlemen. The buyers and commission agents are regulated by the APMCs by providing them licences, levying market fees and any such charges were always regulated.

Now, the new Marketplace law says that farmers can sell their produce anywhere – and not just in the APMC approved marketplace. And they can sell inter-state or intra-state or even online! According to the Union government – this law is being brought in to give Freedom of Choice to farmers. They will have a variety of marketplaces, the government says, and this is actually going to be good for the farmers. The idea is not to shut down APMCs but to expand a farmer’s choices, the government says.

Critics however point out a few things. Firstly, Agriculture Marketing is a State subject under Schedule 7 of the Constitution. Which means the Union government has no business making this law in the first place.

Secondly, the APMC markets currently ensure that farmers get the Minimum Support Price – or MSP – for their produce. MSP is the minimum price set by the government for a quintal of produce – and frankly, it’s not much. RIght now the MSP for Paddy – rice – is Rs 1868 per quintal. That’s 100 kg. Researchers, activists and actual farmers are worried that if they have to conduct trade outside of the APMC marketplace, they won’t even make this much – because the new Marketplace law does not mention MSP.

While some people say that setting the MSP in the law is problematic because the MSP will have to change frequently, and changing the law again and again is a pain – others point out that the law can at least say that the trade will have to be above MSP.

This can increase distress sale by farmers, and ultimately, Freedom of Choice means nothing if they cannot protect their interests, experts say.

And that brings us to the last of the three – The Contract Farming Law.

Now this law – also passed by the Parliament – says that farmers can enter into ‘written agreements’ with anyone, including a company, and sell them their produce for a set period of time, as per the contract. In other words, companies can now have contracts with farmers for buying produce. They can set the price for the produce, the standards and qualities, and other legalities beforehand.

The Union government says this will protect and empower farmers to sell to anyone – a wholesaler or retail giant or exporter. They will have written contracts which will protect them if the buyer tries to cheat them, and they can sell future produce today, the government says.

Critics however point out that this is wishful thinking. 82% of farmers in India are small and marginal farmers – that is, they farm on 2.5 to 5 acres of land. Is this farmer, who has 2.5 acres of land, going to be able to go to court against a massive supermarket chain? What happens if the buyer says the contract cannot be fulfilled because the quality of crop is not what was agreed – what protection does the farmer have then?

Interestingly, there is no mention of a mechanism of fixing a price. There is also an apprehension that the free-hand given to private corporate houses could lead to farmer exploitation.

So if we look at these three laws together – the worst case scenario that emerges is this: Corporate companies can now have contracts with farmers to buy their produce – but farmers will not have the protection of a Minimum Support Price. If a company decides at the end of the cycle that the produce is not ‘good enough’, then farmers may be forced to make a distress sale at prices much lower than the MSP, in marketplaces that are not regulated by APMCs. Basically, farmers can get exploited by corporates and the mechanisms proposed for their protection are impractical, say critics. Further, corporate retail chains can contract a whole bunch of farmers and hoard produce, and artificially increase prices for profit – and there will be little that consumers like you and me can do about it, say experts. 

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