Agri Business

Farm laws need more detailing, robust regulatory mechanism

Ritwik Bahuguna | Updated on July 18, 2021

Farmers' protest. File photo   -  REUTERS

Farmer protests must give way to serious dialogue between relevant stakeholders to resolve differences

The context of an event is sometimes more important than the event itself. The Centre’s farm laws, witnessing protests by farmers, need to be contextualised properly. Farmers have to be sensitised about the implications of the new laws. At present, there exist ambiguities and concerns that need clarification. Consequentially, there is a need to ensure that the transition is smooth and left to the discretion of the farmer. Farmers should be free to choose the buyer/market. Technology-based platforms and improved agro-logistics will play a critical role in providing them with requisite information and access, respectively. Additionally, the debates should be focussed on how the implementation of these laws will "actually" address the "real" challenges faced by farmers – low farm productivity, stagnant incomes, profiteering middlemen, depleting water resources, among others.

New Farm Laws

Agriculture is a State subject; implementation of the APMC Act was left to the States. Consequently, some States such as Punjab, Karnataka, Haryana, and Maharashtra implemented the Act, while others such Bihar and Kerala did not.

To do away with corruption and unfair practices, the Parliament’s Standing Committee on Agriculture (2018–19) recommended some amendments to the APMC Act of 2003. On June 5, 2020, the Centre promulgated three ordinances to modernise Indian agriculture. In September 2020, the bills were approved by Parliament.

The provisions

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows buyers to purchase farmers’ produce outside the APMC markets without any license or making any payments to the APMCs. It provides for intra and inter-state trade of farmers’ produce outside the mandis. Further, there are provisions for electronic trading platforms to connect farmers to markets.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, enables a contractual agreement between a farmer and a buyer before the production or rearing of any farm produce. The Law has provisions on price determination and dispute resolution.

The Essential Commodities (Amendment) Bill, 2020, provides that the central government may regulate the supply of certain food items only under circumstances such as war, famine, extraordinary price rise, and natural disasters. Additionally, stock limits for agricultural produce can be imposed only when their retail prices increase sharply.

The way ahead

The Government has hailed the bills as critical in enhancing competition and encouraging private players to invest in agriculture, leading to higher productivity and better prices to the farmer by creating a unified market for agriculture.

Critics say that these bills will result in untimely withdrawal of the Government from agriculture. Their main apprehensions are: mandi procurement system will be weakened and government will (eventually) do away with MSP; and without regulations, large corporate buyers will eventually assume monopsony power, reducing the farmers to price takers. Since transactions outside mandi will not be taxed, it will also shrink state government revenues.

Key questions that emerge from the current analysis are:

1. How will price discovery happen outside the mandi if there is no mandi to serve as the reference point? How does it affect the farmers?

2. How do the bills address the problem of farmers’ incomes not increasing because of depressed demand and high input costs?

3. It has been observed globally that to reduce costs, corporates always look to work with aggregators and not directly with farmers. Will private sector participation result in removal of intermediation or will it give impetus to intermediaries?

4. What will be the procurement policy and what will happen to MSP?

There cannot be an endless status quo. Farmer protests must give way to serious dialogue between relevant stakeholders to resolve the differences. The bills show the government’s positive intent but need more detailing and a robust supporting regulatory mechanism before commencement of amicable on-ground execution.

(The author is an Expert in Agriculture & Allied Sectors. He is a Partner at Wazir Advisors, and Founder, Roots Foundation.)

Published on July 18, 2021

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