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All you need to know about Modi Govt’s “Farm Bills”

5 min read


By Rounak Doshi

In India, farming is considered as one of the most imperative occupations for the country’s economy. Agriculture is known as the source of livelihood for around 70% of India’s rural population.

Agriculture further makes a great contribution to the economy as it alone stands for around 17% of India’s GDP.

Since the monsoon season of parliament has started working in full throttle, the present government has been making some efforts to make a few changes in the agriculture-related law of the country. In the recent past, three farmer related bills, namely

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill 2020

Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020

Essential Commodities (Amendment) Bill 2020 

have been introduced before the Lok Sabha (lower house of parliament), out of which, two are also presented before the Rajya Sabha (upper house of parliament). These three bills and their salient features along with criticism relating to these bills have been analysed and assessed by the author in the latter part of the article.

(A) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

This Bill replaces the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Ordinance, 2020.

This bill has already been passed by both- the Lok Sabha and the Rajya Sabha.

Key features of the Bill:

Farming agreement: The given bill provides for a farming agreement between a farmer and a buyer prior to the production of any produce.

Minimum Period – One crop season, or one production cycle of livestock.  

Maximum Period – Five years, unless the production cycle is more than five years.

Pricing of farming produce: The price of farming produce is required to be mentioned in the agreement.  For prices subjected to changes, a guaranteed price for the produce and a clear reference for any additional amount above the guaranteed price must be specified in the agreement.  Further, the process of price determination must be mentioned in the agreement.

Dispute Settlement: A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes.  The Board should have a fair and balanced representation of parties to the agreement.  

Process of Dispute Resolution –

i) Board for resolution (required to resolve within thirty days)  

ii) Sub-divisional Magistrate (required to resolve within thirty days)  

iii) Appellate Authority (presided by collector or additional collector) (required to resolve within thirty days)  

* No action can be taken against the agricultural land of a farmer for recovery of any dues.

Criticism of the Bill:

Farmers Vulnerability: Farmers will be at a weaker position in contract farming agreements because of their inability to negotiate, and big private companies’ expertise in fighting legal disputes.

Sponsors’ Problem: Questions have been raised with the implication that sponsors may not like to deal with a multitude of small & marginalized farmers.

(B) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

This Bill replaces the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020.

This bill has already been passed by both- the Lok Sabha and the Rajya Sabha.

Key features of the Bill:

Trade Relaxations: The given bill allows the barrier-free inter-state and intra-state trade of farming products outside the premises of markets formed in each state under the state APMC (Agriculture Produce Marketing Committee) Acts. This trade can be conducted in an outside trade area which includes farm gates, factory premises, warehouses, cold storages, and silos. It focuses on reducing transportation costs and help farmers in getting better prices.

Electronic trading: The bill permits the electronic trading of scheduled farmers’ produce (agricultural produce regulated under any state APMC Act) in the specified trade area.  An electronic trading and transaction platform may be set up to facilitate the direct and online buying and selling of such produce through electronic devices and the internet.  Entities such as companies, partnership firms, or registered societies, having permanent account number under the Income Tax Act, 1961, and a farmer producer organisation or agricultural cooperative society may establish and operate such platforms.

Market fee abolished: The bill prohibits state governments from levying any market fee on farmers, traders, and electronic trading platforms for the trade of farmers’ produce conducted in an ‘outside trade area’.

Criticism of the Bill:

States’ Revenue: It would cause loss to the states as they would not be able to collect “mandi fees” from the farmers if they start selling their produce outside the APMC markets.

Loss to Commission Agents: In these APMC markets, there are a lot of agents who earn their livelihood by taking commissions. However, once the farmers start selling their products outside the market, it would end up harming these agents’ employment.

Futility of Electronic Trading: Electronic trading like in e-NAM uses a physical ‘mandi’ structure. Questions have been raised that what would happen if these ‘mandis’ are destroyed in absence of trading.

(C) The Essential Commodities (Amendment) Bill, 2020

This Bill replaces the Essential Commodities (Amendment) Ordinance, 2020.

This bill has been passed by the Lok Sabha, but is yet to be passed by the Rajya Sabha.

Key features of the Bill:

Regulation of Essential Commodities: The Essential Commodities Act, 1955 empowers the central government to designate certain commodities as essential commodities. The bill provides that the central government may regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, but only under extraordinary circumstances. These extraordinary circumstances may include: (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature.

Stock Limit: The bill requires that the imposition of any stock limit on agricultural produce must be based on price rise.  A stock limit must be imposed only if there is a 100% increase in the retail price of horticultural produce, or if there is a 50% increase in the retail price of non-perishable agricultural food items.

Criticism of the Bill:

High Price Limits: The price limits for extraordinary circumstances are so high that they are unlikely to be triggered.

Advantage to Big Companies: Since big companies would be given the freedom to stock commodities, it will give them an opportunity to dictate the terms to the framers which might lead to fewer prices for the cultivators.

Implementations: Questions have been raised that the export ban on onion creates doubt on its implementation.

To this date, the Rajya Sabha has not passed the third bill, however, there are huge possibilities that when this bill would be put on a vote, the result would be the same as it was during the presentation of the other two bills.

Nonetheless, the author hopes that issues relating to these bills are resolved at the earliest, and this move of the parliament turns out to be a watershed moment for Indian agricultural practices.