Explained: Indian farmers' big concern -- and what the government could negotiate

Date:12-01-2020

Even as the farmer protests against the three new agriculture-related laws have gathered momentum, one thing seems obvious: Much of the opposition really is just to one of the three laws. Even in that one — the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act — there are only some contentious provisions, which, although key, can still leave doors open for negotiation.

The other two laws 

Consider first the two laws that ought not to be serious cause for farmer angst.

The Essential Commodities (Amendment) Act is about doing away with the Centre’s powers to impose stockholding limits on foodstuffs, except under “extraordinary conditions”. These could be war, famine, other natural calamities of grave nature and annual retail price rise exceeding 100% in horticultural produce (basically onions and potato) and 50% for non-perishables (cereals, pulses and edible oils).

Given that stock limits apply only to traders — the amendment exempts processors, exporters and other “value chain participants” as long as they don’t keep quantities beyond their installed capacity/demand requirements — it shouldn’t concern farmers at all. Farmers, if anything, would gain from removal of stocking restrictions on the trade, as it potentially translates into unlimited buying and demand for their produce.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act has to do with providing a regulatory framework for contract cultivation. This specifically concerns agreements entered into by farmers with agri-business firms (processors, large retailers or exporters) ahead of any planting/rearing season for supplying produce of predetermined quality at minimum guaranteed prices.

Again, there is little rationale for objecting to an Act that merely enables contract farming. Such exclusive agreements between companies and farmers are already operational in crops of particular processing grades (the potatoes used by beverages and snacks giant PepsiCo for its Lay’s and Uncle Chipps wafers) or dedicated for exports (gherkins). The processors/exporters in these cases typically not only undertake assured buyback at pre-agreed prices, but also provide farmers seeds/planting material and extension support to ensure that only produce of desired standard is grown.

The point to note is that contract cultivation is voluntary in nature and largely for crops not amenable to trading in regular APMC (agricultural produce market committee) mandis. There is hardly any domestic market for gherkins, just as the high dry matter and low sugar content potato that PepsiCo needs for its chips is different from the table aloo used in kitchens. Farmers don’t sell sugarcane and milk in mandis either. The produce sugar mills and dairy plants source from them is practically contract farming. An Act that formalises contract cultivation through a “national framework” and explicitly prohibits any sponsor firm from acquiring the land of farmers – whether through purchase, lease or mortgage – should actually be welcomed.

The contentious one

That leaves the only law – the FPTC Act, for short – which is a bone of contention. It permits sale and purchase of farm produce outside the premises of APMC mandis. Such trades (including on electronic platforms) shall attract no market fee, cess or levy “under any State APMC Act or any other State law”.

At issue here is the very right of the Centre to enact legislation on agricultural marketing. Article 246 of the Constitution places “agriculture” in entry 14 and “markets and fairs” in entry 28 of the State List. But entry 42 of the Union List empowers the Centre to regulate “inter-State trade and commerce”. While trade and commerce “within the State” is under entry 26 of the State List, it is subject to the provisions of entry 33 of the Concurrent List – under which the Centre can make laws that would prevail over those enacted by the states.

Entry 33 of the Concurrent List covers trade and commerce in “foodstuffs, including edible oilseeds and oils”, fodder, cotton and jute. The Centre, in other words, can very pass any law that removes all impediments to both inter- and intra-state trade in farm produce, while also overriding the existing state APMC Acts. The FPTC Act does precisely that.

However, some experts make a distinction between agricultural “marketing” and “trade”. Agriculture per se would deal with everything that a farmer does — right from field preparation and cultivation to also sale of his/her own produce. The act of primary sale at a mandi by the farmer is as much “agriculture” as production in the field. “Trade” begins only after the produce has been “marketed” by the farmer.

Going by this interpretation, the Centre is within its rights to frame laws that promote barrier-free trade of farm produce (inter- as well as intra-state) and do not allow stockholding or export restrictions. But these can be only after the farmer has sold. Regulation of first sale of agricultural produce is a “marketing” responsibility of the states, not the Centre.

Farmers, for their part, would want no restrictions on the movement, stocking and export of their produce. Maharashtra’s onion growers have vehemently opposed the Centre’s resort to ban on exports and imposition of stock limits whenever retail prices have tended to go up. But these restrictions relate to “trade”. When it comes to “marketing” — especially dismantling of the monopoly of APMCs — farmers, especially in Punjab and Haryana, aren’t very convinced about the “freedom of choice to sell to anyone and anywhere” argument.

The reason for this is simple: Much of government procurement at minimum support prices (MSP) — of paddy, wheat and increasingly pulses, cotton, groundnut and mustard — happens in APMC mandis. In a scenario where more and more trading moves out of the APMCs, these regulated market yards will lose revenues. “They may not formally shut, but it would become like BSNL versus Jio. And if the government stops buying, we will be left with only the big corporates to sell to,” said a Panipat (Haryana)-based farmer. 

What could be negotiated

If the protesting farmer union leaders were to sit down at the negotiating table, the government can possibly get them to agree to drop the demand on repealing all the three laws. Their problem is essentially about the FPTC Act and its provisions that they see as weakening the APMC mandis. There is also disquiet on the dispute resolution mechanism for transactions outside the mandis. The Act proposes these to be referred to offices of the sub-divisional magistrate and district collector. “They aren’t independent courts and cannot deliver us justice, leave alone guarantee timely payment,” alleged the same farmer.

These may be just fears, but they aren’t small. From the government’s standpoint, the elephant in the room would be if the farmers insist on an additional demand: Making MSP a legal right. That would be impossible to meet, even if the three farm laws were to be put on hold.