Explainer: New Farm Bill 2020, Who Are Protesting And Reason For Protests

In the ongoing Parliament Monsoon Session the Lok Sabha has passed three agriculture sector bills or the farm bill 2020, despite strong protest by the oppositions. Out of the Three bills, an amendment to establish the Essential Commodities Act was passed on Tuesday while the two other bills one on Agri market reforms and another on contract farming provision was passed on Thursdays. Once Rajya Sabha passes these bills, then they will replace the existing ordinance.

As a protest against the legislation that seeks to liberalise agricultural markets, Shiromani Akali Dal (SAD) leader Harsimrat Kaur Badal resigned from the Union Minister for Food Processing Industries last night. Her resignation came amid protests by farmers whom SAD, ruling BJP’s oldest ally, rely as its core support base in Punjab, a critical food bowl state, against the reforms even as economists have applauded them.

Here are all you need to know about the New Farm bill 2020 and why the protest is happening:

The main provision of the proposed legislation is intended to support small and marginal farmers (86 per cent of total farmers) who don’t have either bargaining power to get a better price for their produce or invest in technology to improve their farm’s productivity, according to TOI.

  • Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020: Permits intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets. The State Governments are prohibited from levying any market fees, cess or levy outside APMC areas. The bill free agricultural trade from all restrictions. Although ‘commission agents’ of the ‘mandis’ and states could lose ‘commissions’ and ‘mandi fees’ respectively, but the farmers will get better prices for their produce through competition and cost-cutting on transportation.
  • Essential Commodities (Amendment) Ordinance, 2020: To deregulate trading practices in agricultural markets (mandis).

The bill amends the Essential Commodities Act, 1955, by “deregulating” various agricultural commodities or removing commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from stock limits or the list of essential items, except in case of natural calamities or war. It means that legislation will eliminate the pressure of stock-holding limits on such things except under extraordinary circumstances, as mentioned above.

Now the farmers are allowed to sell their crops to anyone; thus removing the fear of private investors or excessive regulatory interference in their business operations. Also, this will attract private or foreign direct investment into the agriculture sector.

  • Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Ordinance: Provides a framework for farmers to enter direct contracts with anyone who wishes to buy farm produce. Till now, the farmer was not permitted to sell their products to consumers or food processing companies directly; they had to go through a licenced trader as per the APMC Act.

Now, a farmer may enter into a contract with any person, agri-business firms or large retailers on pre-agreed prices for their produce. Through this, the legislation has transferred the risk of market unpredictability from farmers to the sponsors, thus, helping small and marginal farmers.

In case of disputes, instead of using the regular judiciary for dispute resolution between parties, the ordinance delegates dispute resolution to the executive (sub-divisional magistrate), who will not be bound by rules of procedure.

The bill gives the Government more powers than the parties in the case. When the authority feels that contract has some flaws, they can make changes even if neither of the farming party does not raise any disputes, and this will fall under the Suo Motu cases.

Who are protesting?

Political parties as well as farm organisations such as the Bhartiya Kisan Union (BKU) and the All India Kisan Sangharsh Coordination Committee (AIKSCC), an umbrella body of several other organisations, are protesting, claiming that the farm bill 2020 is designed to help big corporate houses at the cost of farmers. Even several other groups such as Maharashtra-based Shetkari Sanghatana support such reforms.

Provisions bothering farmers/protestors:

The aim of farmers protesting farm bill 2020 is mainly due to the provision under the first bill. Though there is no uniform demand among the protesters or a unified leadership, their concerns are primarily about sections relating to “trade area”, “trader”, “dispute resolution” and “market fee” in the first ordinance.

What is a “trade area?”

Under the Section 2(m) of the first bill, any area or location, place of production, collection and aggregation including (a) farm gates; (b) factory premises; (c) warehouses; (d) silos; (e) cold storages; or (f) any other structures or places, from where trade of farmers’ produce may be undertaken in the territory of India.

However, this definition excludes the existing mandis established under the APMC Acts. The Government claims, creation of trade area outside of mandis will give farmers the freedom to sell their produce.

Nevertheless, farmers especially, the ‘commission agents‘ (known as ‘arhatiyas’ in Punjab and Haryana) states that provision will limit APMC mandis to their physical boundaries and give a free hand to big corporate buyers. The APMC mandi system has developed exceptionally well and has the ability to cater to 200-300 villages.

Define ‘trader’ and its association with protest:

According to Section 2(n) first ordinance, a ‘trader’ is a person who buys farmers’ produce through inter-State trade or intra-State trade or a combination. The procured produce can be either for self or on behalf of one or more persons for wholesale trade, retail, end-use, value addition, processing, manufacturing, export, consumption or for such other purpose. Thus, it comprises of processor, exporter, wholesaler, miller, and retailer.

According to the Ministry of the Agriculture and Farmers’ Welfare, “Any trader with a PAN card can buy the farmers’ produce in the trade area.”

The new ordinance allows a trader to operate both in an APMC mandi and a trade area. However, the traders would require a licence/registration as provided for in the State APMC Act for trading in the mandis.

In the present mandi system, arhatiyas have to get a licence to trade in a mandi. The protesters claim the credibility of arhatiyas is verified through their financial status during the process of licence approval. But how can a farmer trust a trader under the new ordinance?

Protestors concern over the ‘market fees’

As per Section 6 of the ordinance, “no market fee or cess or levy, under any State APMC Act or any other State law, shall be levied on any farmer or trader for trade and commerce in scheduled farmers’ produces in a trade area.”

Under the existing system, market fee charges in states like Punjab come to around 8.5 per cent which includes a market fee of 3 per cent, a rural development charge of 3 per cent and the arhatiya’s commission of about 2.5 per cent.

Government states this provision will reduce the cost of the transaction and will benefit both the farmers and the traders. Many states are not making transactions in mandis cost-efficient.

The protestors claim that by removing the fee on trade, the Government is indirectly incentivising big corporates as this provision does not provide a level playing field to APMC mandis.

Objective of Dispute resolution mechanism:

As per the protestors, the provisions on dispute resolution under Section 8 does not adequately safeguard farmers’ interests. They claim that the ordinance does not allow them to approach a civil court in case of any disputes.

Issues/fear raised – Farm bill 2020:

The arhatiyas fear that they will lose their grip over the farmers and might lose their businesses along with the commissions. The State Governments of Punjab and Haryana will be affected most because of the loss of ‘Mandi Tax’, a major source of revenue.

Other issues raised include: end of ‘minimum support price’ (MSP) regime in due course, the irrelevance of state-controlled Agricultural Produce Market Committee (APMC) ‘mandis’, risk of losing out land rights under contract farming rule, reduction in the price of farm produce due to market domination by big agribusiness and exploitation of farmers by big contractors through contract farming provision.

In their defence Centre says that it was urging states to implement the Model APMC Act, 2002-03. However, the states did not fully adopt it, and thus, the Centre had to adopt the ordinance route. It will lead to helping farmers realise a better price.

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