R Srinivasan

From competitive to combative federalism

| Updated on October 28, 2020

Fuelling anger | The farmers of Punjab and Haryana are leading the protests   -  REUTERS

The ‘We know best’ attitude of the union Government threatens to derail crucial reforms

So Chhattisgarh has become the latest State government to lock horns with the Centre over the latter’s bid to push through reforms in the agricultural sector through Central legislation, notwithstanding the fact that the Constitution expressly demarcates agriculture as a State subject, meaning the Centre does not have the power to pass legislation on the subject.

The Centre managed to do so by using Entry 33(b) in the Concurrent List, which concerns trade and commerce in, and production, supply and distribution of, “foodstuffs”. By elastically stretching the definition of “foodstuffs” to all agricultural output, it managed to ramrod them through Parliament during the recently concluded Monsoon Session (including a controversial voice vote in the Rajya Sabha) and immediately got them rubber-stamped by the President, thus formally inducting them on to the statute books.

This has invited a major pushback from States, particularly Congress-ruled ones like Punjab, Rajasthan and Chhattisgarh. In Punjab, given the importance of the farm vote and the strong opposition to the Centre’s “reforms”, even the BJP’s long-term ally the Akali Dal pulled its Minister Harsimrat Kaur Badal out of the government.

On October 27, the Chhattisgarh Assembly passed, in a special session, the Chhattisgarh Krishi Upaj Mandi (Amendment) Bill 2020 that declared the entire State as a market for selling agriculture produce. By doing so, it effectively negates the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 that allows farmers to sell their crop outside the Agricultural Produce Market Committee (APMC) mandis.

By declaring the entire State as a mandi, the Chhattisgarh government has simply knocked the ground out from under the Central Bill. In fact, Chhattisgarh has gone one up on Rajasthan, which had earlier declared all FCI and State godowns and warehouses as deemed mandis, which meant any trade taking place there can be taxed by the State government.

Chhattisgarh’s Agriculture Minister says the move was to help small and marginal farmers — more that 86 per cent of the State’s farmers fall under this category — to have better price discovery and protection. The State also plans to launch its own electronic market and trading platform for agricultural produce, thereby nixing another major farm reform initiative of the Centre — the Electronic National Agriculture Marketplace (eNAM).

Punjab has already passed three new agriculture-related laws on its own, to counter the Centre’s laws. The Punjab Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services (Special Provisions and Punjab Amendment) Bill, 2020 bans any sale or purchase of agricultural produce below the Minimum Support Price declared by the government. The Bill (although passed by the State legislature, it will need the assent of the President before becoming law, which looks a slim possibility at the moment) provides for stiff punishment, including prison terms, for violations.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) (Special Provisions and Punjab Amendment) Bill, 2020 amends sections of the Centre’s Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 to ensure that sale or purchase of wheat or paddy in the State is not allowed below the MSP. Another Bill that essentially stymies the amendments to the Essential Commodities Act piloted by the Centre.

In fact, a fourth Bill was also passed by the Punjab legislature, which promises to be a major stumbling block for future enforcement of financial contracts with farmers in the State. The Code of Civil Procedure (Punjab Amendment) Bill, 2020 bars agricultural land up to 2.5 acres (bulk of small farm holdings fall under this limit) from Section 60 of The Code of Civil Procedure, 1908, which means the land cannot be attached even if a creditor obtains a court decree for the attachment of a farmer’s property against dues owed. Bye-bye, collateral security!

Meanwhile, amidst this flurry of legislative action, several States have also said that they would challenge the constitutionality of the Central laws in the Supreme Court. This can be pretty serious, as there is a fair bit of informed legal opinion going around to the effect that stretching the definition of “foodstuffs” to cover agriculture flies in the face of the spirit of the Constitutional partitioning of lawmaking powers between the Centre and the States.

The MSP genie

Another genie which is now out of the bottle thanks to all this is the MSP genie. In fact, most of the farmer opposition to the Central laws — and crucially, most of this opposition is in States where the procurement programme works best, like Punjab, Haryana, Rajasthan and Madhya Pradesh — has stemmed from the fact that farmers fear that allowing private trade open access to farm produce will help the government do away with the MSP, or the Minimum Support Price, which the Centre now fixes for 23 agricultural crops.

Although the Centre is not legally or Constitutionally bound to pay the MSP, it is nevertheless the price paid by Central and State procurement agencies. Where such procurement takes place in sufficient quantum, it automatically becomes the floor price for private buyers as well, although this does not work in States where government procurement is low or absent. With the Centre announcing that it will never do away with MSP, another market-distorting mechanism has become politically untouchable.

The thing is, most of this anger, confusion and confrontation could have been avoided if the Centre had first talked to the States about its proposed reforms. If it had done so, and the MSP issue had been done away with by including a suitable provision to the effect that the Act will not prevent the government from fixing and procuring at MSP, might have defanged most of the opposition.

Similarly, some sort of deal on compensation for potential revenue loss of States from outside mandi trade (cess and fees on mandi-traded produce is an important revenue item for agricultural States) could have allowed most of these reforms — and they are reforms — to have actually gone through. In fact ideally, the Centre should have passed model legislations and encouraged the States to pass their own laws, thereby ensuring the desired reform outcome while avoiding Centre-State conflict.

But whether it is GST compensation or agricultural reform, the Modi government has shown little patience and even less regard for dialogue and discussion with the States. Its “my way or the highway” attitude, however, threatens to derail serious and long overdue reform measures, whether it is the idea of “one nation, one tax” or finally empowering the Indian farmer.

Published on October 28, 2020

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