Advocate Govind Bali on the new Farmers ordinance
The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets (Agricultural Produce & Livestock Market Committee established under the provisions of APLM Act.). State governments are prohibited from levying any market fee, cess, or levy outside APMC areas.
Though the government feels that the Farmers ordinance is a way to aid farmers but the farmer’s traders and middlemen feel otherwise, the new ordinance brings with itself some major changes like
- The Ordinance allows intra-state and inter-state trade of farmers’ produce outside:
- the physical premises of market yards run by market
committees formed under the state APMC Acts and
(ii) other markets notified under the state APMC Acts. Such trade can be conducted in a ‘trade area’, i.e., any place of production, collection, and aggregation of farmers’ produce including:
- farm gates,
- factory premises,
- silos, and
- cold storages.
But the definition is excluding “the premises, enclosures, and structures constituting the physical boundaries of
- principal market yards,
- sub-market yards and
- market sub-yards
managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act.
It also Excludes
- “private market yards,
- private-market sub-yards,
- direct marketing collection centers,
- and private farmer-consumer market yards managed by persons holding licenses or any warehouses, silos, cold storages, or other structures notified as markets or deemed markets under each State APMC Act in force in India”.
But what has led to the agitation is the exclusion of Mandis established under APMC from the definition of trade areas.
The government is firm on its stand that the conception of trade markets outside the Mandis would facilitate freedom of choice concerning their yield, while on the other hand farmers think that this provision will confine APMC mandis to their physical boundaries and give a free hand to big corporate buyers.
They are steadfast believers that the APMC mandi system has developed very well as every mandi caters to 200-300 villages. But the new ordinance has confined the mandis to their physical boundaries, which in turn reduces the choice of trade which the government is advocating.
Another amendment has been made to the characterization of trader which now stands as –
“trader” as “a person who buys farmers’ produce by
way of inter-State trade or intra-State trade or a combination thereof and so, it includes processor, exporter, wholesaler, miller, and retailer.
“Any trader with a PAN card can buy the farmers’ produce in the trade area.” this amendment abolishes the role of the commission agent or arhatiyas , who as per the previous system had to acquire a license which is no longer required as per the new ordinance the protesting farmers think that license system verified the financial status of the arhatiyas and the new ordinance takes away the accountability which was accompanied by a licence.
Without a licensing system, there should at least have been perseverance on registration to at least have a database of buyers, that too integrated across states. However, this ceases to be the case. In an unequal market setting where most farmers are anxious to dispose of their harvested produce so that cash flows can be managed, including in terms of debt management,
- will they be able to insist on same-day payment or document-based proof of delivery and payment that is due to them,
- or will they even be able to find entirely new buyers that they can trust and give their produce to?
- “may” legalese that was used in the Ordinance concerning registration requirements and compliance to some transaction modalities, it is not clear who will be monitoring or overseeing the trade transactions or at least be able to enumerate the players involved.
Incentivizing the Big corporates
The ordinance abolishes the fees which levied before and summed up around 8.5 % in the state of Punjab which was around a market fee of 3%, a rural development charge of 3%, and the arhatiya’s commission of about 2.5%. Protesting farmers think that the fees have been abolished to pass on the incentives to big corporate houses and are a step adding to the larger goal of facilitating crony capitalism.
Dispute resolution under section 8
Farmers have a legitimate reason to believe that dispute resolution mechanism as furnished under section 8 is arbitrary as it states that in case of a dispute arising out of a transaction between the farmer and a trader, the parties may seek a mutually acceptable solution through conciliation by filing an application to the Sub-Divisional Magistrate, who shall refer such dispute to a Conciliation Board to be appointed by him for facilitating the binding settlement of the dispute. Which the framers believe will be misused against them as the conciliation may end up being biased and corporate centric which in turn would abuse the dominant position held by the conciliator. the dispute resolution mechanism has been kept simple.
It visualizes that recovery of the amount and imposing of penalties will be possible by a 3-or 5-member Conciliation Board consisting of a Chairperson and equal representatives of both parties (farmer and trader). The fact that this has been restricted to a farmer and trader, is more practicable than all disputes arising out of the new trading transactions that have been allowed including between traders.
What is uncertain is if this SDM-led dispute resolution with this Conciliation Board with a 30-day time limit, followed by a Sub-Divisional Authority if needed with another 30-day time limit (with additional power to restrain the trader from undertaking further trade and commerce for any specified period), and an Appellate Authority consisting of the Collector or Additional Collector who are again expected to dispose of the appeal within 30 days, will be able to deal with the potential volume of litigation brought to their notice.
Certain questions arise on which the ordinance is not clear
- where is the dispute resolution application to be made, at the place of residence of farmers, or where the trade transaction took place?
- What kind of documentary evidence will be asked if unequal power relations result in the farmer not having any documentary proof of the transaction?
Prominently, it seems that justice to the farmer is conceptualized only as reimbursement to be made to the farmer at any amount that might have been fixed, depending on the power and relationships between the trader and farmer. Justice is not about any biased weighment for occurrence, or unfair classifying by the buyer, or unreasonably low prices that might have been fixed, etc.
The Ordinance documents the electronic trading of scheduled farmers’ produce (agricultural produce regulated under any state APMC Act) in the quantified trade area. An electronic trading and transaction platform may (may being speculation rather than being definite) be set up to facilitate the direct and online buying and selling of such products through electronic devices and the internet.
The following entities may establish and operate such platforms:
- partnership firms,
- or registered societies,
having permanent account number under the Income Tax Act, 1961 or any other document notified by the central government, and
- a farmer producer organization or agricultural cooperative society.
The ordinance is facilitating companies as the farmers are not acquainted with the idea of electronics trading.
Question about the Constitutional Validity of the Ordinance
The Constitutional decorum of the Ordinance is being debated. It is not just about the legal question whether it is a state subject or a concurrent subject. Entry 26 of the Seventh Schedule of the Constitution of India in the State List is about Trade and Commerce within the state, but subject to the provisions of Entry 33 of List III (Concurrent List). Similarly, Entry 27 of the State List is about Production, Supply, and Distribution of Goods subject to provisions of Entry 33 of List III. Entry 33 of the Concurrent List is about trade and commerce in, and the production, supply, and distribution of industrial products, foodstuffs including edible oilseeds and oils, cattle fodder including oilcake and other concentrates, raw cotton and cottonseed and raw jute.
The question that arises is that the law passed by the Parliament will prevail and not the Legislature of a State if any provision of the latter’s is repugnant to any provision of the law made by the Parliament. Having said that, it is clear that Entry 33 of the Concurrent List is not exhaustive in its coverage of all kinds of “farmers’ produce”. The debate about it being a state subject or subject of the concurrent list is of utmost importance as the regime has been hellbent to change the quasi-federal system towards a federal system as they have been centralizing most of the economic revenue and distribution of revenue.
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020
The Farmers Agreement Ordinance creates a framework for contract farming through an agreement between a farmer and a buyer before the production or rearing of any farm produces. It provides for a three-level dispute settlement mechanism: the conciliation board, Sub-Divisional Magistrate and Appellate Authority. This further bar the jurisdiction of civil courts. Which in turn is violative of the right to seek legal remedy and in turn gives the impression that the farmers should settle for whatever they are offered rather than asking for their legitimate remuneration due.
The ordinance also provides for Farming agreements which shall have a minimum tenure of one crop season or one production cycle of livestock. The maximum period is five years unless the production cycle is more than five years, corporates who have rampant legal support through the big lawyers and law firms can easily dupe the farmer of his rights who does not have access to qualitative legal support.
Price of the product to be mentioned in the Agreement
The price of farming produce should be mentioned in the agreement. For prices subject to variation, a guaranteed price for the product 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.
The Price Assurance Bill, although offering protection to farmers against price exploitation, does not prescribe the mechanism for price fixation. There is valid apprehension that the free hand given to private corporate houses would lead to farmer exploitation and result in abuse which in turn would affect the livelihoods of the farmers.
The Essential Commodities (Amendment) Ordinance, 2020
Essential Commodities Act (ECA), 1955, The ECA has been used by the Government to regulate the production, supply, and distribution of a whole host of commodities it declares “essential” to make them available to consumers at fair prices. It gives consumers protection against irrational spikes in prices of essential commodities.
But the 2020 ordinance has introduced
- The central government may regulate or prohibit the production, supply, distribution, trade, and commerce of such essential commodities. The Ordinance provides that the central government may regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances. These include:
- extraordinary price rise and
- natural calamity of grave nature
which otherwise had agriculture products as essential commodities but now it is specified that government can regulate supply only other extraordinary circumstance,
- Stock Limit the Ordinance requires that imposition of any stock limit on agricultural
produce must be based on price rise. A stock limit may be imposed only if there is:
- A 100% increase in the retail price of horticultural produce; and
- a 50% increase in the retail price of non-perishable agricultural food items. The increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.
The Essential Commodities (Amendment) Ordinance removes cereals, pulses, oilseeds, edible oils, onion, and potatoes from the list of essential commodities. The amendment will deregulate the production, storage, movement, and distribution of these food commodities. The central government is allowed regulation of supply during the war, famine, extraordinary price rise, and natural calamity while providing exemptions for exporters and processors at such times as well. Which would, in turn, give unchecked power to the corporate houses who would now be controlling the prices.
This would in turn adversely disturb food security and facilitate exporters, processors, and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase. It could undermine food security since the States would have no information about the availability of stocks within the State.
Special Thanks to Tushar Pancholi for the Research