Today a big problem lies before the world and that is Corona pandemic but in India there is another contentious issue that is on news headlines these days- The Farm Laws 2020. With protests going on around in different states, it is essential for us to understand why is it so? So we in this article tend to understand what these Farm Laws mean and signify. We shall discuss their constitutional validity and look at an in-depth study of the three main Acts that make up these Laws. It is also important to understand that we will not take into consideration the individual views of the politicians, the opposition leaders, or the protesting farmers or the news analysts. This is because it can deflect us from the actual study and the purpose of the topic.

We shall begin with checking whether these laws are constitutionally valid or not.

Constitutional Validity of Farm Laws

We will look at the validity of these laws from three different aspects:

• According to the Subject Matter
• According to the Legislative Powers

Firstly we shall consider the validity check according to the subject matter. For the subject matter of any Act to be valid it should not infringe upon the Fundamental Rights of the Citizens and it should not violate the Basic Structure Doctrine given in the Kesavananda Bharti Case of 1973. For the test of the Fundamental Rights, we shall have a look at Article 13 of the Indian Constitution. Article 13 states that:

Laws inconsistent with or in derogation of the fundamental rights

(1) All laws in force in the territory of India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of this Part, shall, to the extent of such inconsistency, be void

(2) The State shall not make any law which takes away or abridges the rights conferred by this Part and any law made in contravention of this clause shall, to the extent of the contravention, be void

With this we clearly understand that if any Act whether before the enforcement of the Constitution or after the enforcement infringes or abridges or takes away the Fundamental Rights then, that particular Act, to that extent is void or is not constitutionally valid. In the present scenario, no Act out of the three seems to be infringing upon the Fundamental Rights.  A farmer can proceed to the Court claiming an infringement on Right to Life and Personal Liberty as enshrined in Article 21 because it is the only occupation from where he gets money and can sustain his family and himself but there are little chances of the Farm Laws being overturned on the basis of predicted bad future of events. Courts accept hard evidence and not future bad effects of corporatization on Agriculture.

• Under the subject matter validity the second test is whether there is any violation to the Basic Structure Doctrine or not. The three Acts passed by the Parliament do not violate the Basic Structure Doctrine in any scenario. They are neither against the principles of justice and liberty nor against the principles of equality or fraternity.
• Now we shall consider the second aspect of validity- Validity as per the State Legislative Powers. Before moving into the detail of the topic, let’s first consider two articles- 246 and 254.
• Article 246 talks about the subject matter of laws given to the Parliament and to the State Legislatures. In crux it talks about the three lists of the 7^th Schedule of the Indian Constitution.

1. The Union List – laws on these subjects can only be made by the Parliament or the Union. This list contains 97 subjects.
2. The State List- subjects enshrined in this list are under the sole jurisdiction of the respective state(s). There are total 66 subjects in this list.
3. The Concurrent List- the subjects in this list is under the jurisdiction of both the Centre and the State. This implies that both the Union as well as the States can make laws on the subjects given in this list. There are a total of 47 subjects in this list.

Now if there are two laws made on the same topic of the Concurrent List- one by the Centre and another by any State then the law made the Centre will prevail and not the one made by the States. This is given under Article 254. In an issue of disharmony between the Centre and the State, the supremacy of the Centre will always be considered primary in comparison to the State. But it should be kept in mind that on the issue of conflict, the validity according to the Constitution lies with the Centre. With reference to the legislative powers and the three Acts that we are taking about we shall consider two lists for the time being. These are- the State List and the Concurrent List.

Subject of Agriculture in the Constitution

• Entry 14 of the State List deals with the Agriculture. Supreme Court already mentions this that any other subjects related to one subject shall be under the jurisdiction of the same organ and spelled out in the same list. Thus in accordance with Entry 14, reading of entry 26 and 27 becomes essential. Both the entries- 26 and 27 talks about Trade and Commerce within the state and Production, Supply and Distribution of Goods and Services (related to agriculture) respectively.
• Thus to legislate on the matters of agriculture and activities related to it becomes the prerogative of the respective States.
• But with the 3^rd Constitutional Amendment came in a catch in the situation and that was addition of Entry 33 to the Concurrent List. This entry talked about the Trade, Commerce, Production, Supply and Distribution of Goods and Services with respect to Agriculture.
• Now if there any dispute or disharmony between the Centre and the State then one of the provisions is article 254 but in this context there is another provision. Before Entry 26 and 27, few words were added with the 3^rd Amendment and that are, ‘Subject to the provisions mentioned in Entry 33 of the Concurrent List’.
• Thus it clearly indicates that the Centre was in full power and within its jurisdiction to make the laws on the subjects related to agriculture according to the test of validity as per legislative powers.

Conclusion:- The passage of these Acts was under the jurisdiction of the Union.

Three Main Farm Laws

After understanding that the Acts are constitutionally valid, we shall have a look at all the three Acts in detail one by one. The three Acts are:

1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.
3. The Essential Commodities Amendment Act, 2020. 

 

• The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.

To understand the provisions of this Act, we need to be clear with the APMC system that is currently in use and which according to this Act will have another alternative present.

What is APMC?

An Agricultural Produce Market Committee (APMC) is a marketing board established by state governments in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels. APMCs are regulated by states through their adoption of Agriculture Produce Marketing Regulation (APMR) Act.  The first sale of agriculture produce could occur only at the market yards (mandis) of APMC.

What was the need of APMCs?

After the independence in 1947, it came to the notice of the government that several large moneylenders were exploiting the farmers. They used to take the farmer’s produce at very low prices in exchange of the repayment of loans. Thus, Government decided to chalk out a plan and set up some institutions to stop or at least prevent the exploitation of the farmer. In this regard, APMC was set up. So, during the 1960s and 1970s, most of the states enacted and enforced Agricultural Produce Markets Regulation (APMR) Acts. 

What are the provisions or salient features of APMR Act?

Under the ambit of this Act, wholesale markets were brought along with establishment of the well-laid out market yards and sub yards. APMCs were formed to regulate these yards or markets and enforce the rules. Some of the salient features under this Act were

1. Single Market Fee
2. Relaxation of Licensing Norms
3. Facilitating Contract Farming
4. Special Market for Perishables
5. Allowing farmers and private persons to set up their own market

Benefits of APMCs.

1. Auctioning: There are several big industrialists or landowners or retailers which take part in this auctioning of the material. With this auction the farmer can get a desired value or at least a good value for his crop. This is beneficial for him to rather sell on a lower price to the wholesalers directly.
2. APMCs are of a benefit for the farmers to get their soils tested. APMCs test soil for the farmers free of cost. Thus a farmer doesn’t have to shed extra money out of his pocket.
3. The auction done is completely recorded and the record has to be maintained. Thus, a farmer cannot be deceived on the context that price promised or auction price was low.
4. The fourth benefit of the APMCs was the feature of Commission Agent, these agents were given due licenses to buy the farmer’s produce and give money to them. They helped the farmers in establishing their lorries in the mandis in urban areas. They were generally fixed for a specific farmer.

Problems with the APMCs:

1. Market facilities not adequate: The facilities provided by the APMCs could not keep pace with the increasing crop output. The previous regulations didn’t allowed farmers to go outside APMC to sell the output and thus farmers resorted to middlemen. Here, the farmers didn’t get adequate price for their produce but they didn’t have any other option.
2. Poor regulating infrastructure: Due to the inefficient regulating structure, more produce is sold out of the APMC mandis. The net result of this was a system of interlocked transactions that devoid farmer’s of their choice to decide whom to sell and where to sell.
3. Cartels effect: Cartels means when an organization is created by a formal agreement between groups of producers of a good or service to regulate supply in order to manipulate prices. Now this effect becomes profound when producers or retailers form cartels in the auctioning stage and farmers are not paid a fair price of the produce.
4. Monopoly: Wherever, there is monopoly there are definitely problems levied in. As with the monopoly of APMCs in place. There is no competition, thus the prices fixed are solely by them.

Now that we have understood what APMC is and what are its benefits and problems, we look at the provisions of the first Act

Provisions of this Act:

1. Intra-State and Inter-State Trade: the first provision of this Act under Chapter II, gives freedom to the farmers to carry out their trade or sell the produce anywhere in their own state and in other states as well. Thus, it grants freedom to conduct trade and commerce in a trade area.
2. No Taxes: under section 6 of the Chapter II, it is hereby informed to the states that no fee, cess, tax or any other name related to this, cannot be levied by the State APMC Act or any other State Law. This will help the farmers’ to carry out trade without any fear of the taxes or other monetary expenses.

• Online Trading: under this Act, the farmer is allowed to sell his/her produce through online platforms. In this transaction too, no fee or taxes can be levied and no State governments can stop any trading or regulate it.
• If there is any breach of the procedures, norms, code of conduct or any breach of the guidelines of fair trade then the Agricultural Marketing Adviser, Directorate of Marketing and Inspection, Government of India or an officer of the State Government to whom such powers are delegated by the Central Government in consultation with the respective State Government may take up the matter and can suspend or cancel the right to operate in electronic trading.

1. Trade Areas outside APMCs: under the current Act, the farmers have full right and choice to go outside the present APMC structure to sell their produce. The farmers can directly sell to big multinational companies or retailers or industrialists.
2. Dispute Resolution Mechanism: under Chapter III of this Act, the Dispute Resolution Mechanism is spelled out. It is given in section 8 that the disputing parties, in this case the farmer and the trader, shall by an application of conciliation appear before the Sub- District Magistrate.

• The SDM will appoint a Conciliation Board for facilitating the binding settlement of the dispute.
• The Board shall contain a chairperson and members not less than two and not more than four, as the SDM may deem fit.
• When a settlement is arrived at during the conciliation period, then a memorandum of settlement must be signed by both the parties.

Merits of the Act:

1. New Avenue: The farmers have been provided with a new avenue to sell their produce outside the APMCs and that too without any fee or tax, which will enable the farmer to get a higher price for his/her, produce that was earlier not possible.
2. No New Licenses: There is no need of new licenses by the traders to sell the produce outside APMC mandis. In addition to this anyone, holding a PAN card or any other document by the Central Government can join this trade. This provides more selling options to the farmers.
3. Quick Dispute Resolution: In case of any dispute related to sale and purchase of these agricultural produce, the matter will be settled within 30 days by the Sub-Divisional Magistrate. This will enable farmers to not waste their resources in attending the proceedings and can sell the produce before rotting or getting destroyed.
4. Better Competition: The provision of intra-sate and inter-state trade will enable farmers to get higher price for their produce. This incentive of higher price will result in better competition among them. Thus, the quality of the produce will also improve.
5. Innovation: The present tech-savvy generation will find some opportunities to explore in this field. They will be able to compare and contrast the prices spelled out in different states for their produce and they will make the best use of technology to get the highest price for their commodities. They can also help the present generation of the farmers to enhance the capacities of soil and get into agreements with industrialists for their crops.

Demerits of the Act

1. Destruction of APMC structure ultimately: It is alleged that the APMC mandis will finally come to an end due to no taxation in other trade areas. So, the farmer will benefit to sell out of these mandis and will gradually put an end to APMC mandis. The people working in the APMCs have not been provided with any other alternative and thus will render them unemployed, which is not for the benefit of the country.
2. Forcing to sell to corporate companies: The farmers allege that the mandis operated under the APMC law will be abolished due to this Act. Once these mandis shut down, the farmers will be forced to sell the crop to corporate companies at a lesser price. Once mandi system is abolished, no one will buy farmers produce at MSP.

• Risk of Fraud: Farmers will be exposed to the risk of fraud due to the entry of people without license or registration.

1. Judicial Support: The farmers and the traders are left at the hands of the SDM and the Collector but they are to some extent dependent upon the government, whereas the Courts are absolutely free. Thus, it is essential to bring a court structure or say some sought of a tribunal to control the whims and fancies of the Government.
2. Solutions to curb these demerits:
3. Should give equality to APMCs in terms of trade: This means that whether the taxes levied on the APMCs are levied similarly to other trading areas as well or the taxes are levied with some concessions and modifications to both the APMCs and other trading areas. The second alternative of this equality can be that all the taxes are removed from the APMCs as they are removed from the trade areas outside them.
4. Proper Registration: There should be proper registration of the private players including industrialists, retailers and contractors, corporate companies and so on to curb frauds, tricks and flam done to the farmer.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.

To understand this Act, we first look at the provisions of this Act and then understand a term called MSP that is not explicitly mentioned in this Act but is a major concern under the Act.

1. Meaning:

1.  As the name of the Act suggests, the government intends to empower and protect the farmers in the agreements that are spelled on two aspects- price assurance and farm services.
2. Price Assurance: it is the price guaranteed to the farmer by the sponsor when a contract is enforced between the two.

• Under this Act the agreement is between a farmer and a sponsor. “Sponsor” according to Section 2, clause (o) means a person who has entered into a farming agreement with the farmer to purchase a farming produce.
• According to Section 3, clause (1), sub-clause (a), the farmer may enter into the agreement in respect of any farming produce, and the agreement must provide for the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters.
• As per Section 3, clause (1), sub-clause (b), the farmer may enter into any agreement in respect of farming produce and the agreement must provide for the terms related to farm services.

2. Period:

Next important provision of this Act is the clause of the period, as to what is the amount of time that this contract will continue.

• For this under Section 3, clause 3 of the Act, it is clearly mentioned that the minimum period shall be for one crop season or one production cycle of livestock (in case of animal related farm produce) and maximum period shall be five years.
• But it is also given that the period of contract can be extended by a mutual agreement between both the parties or as the parties may deem fit.
• Model Contracts: So now there is a possibility that the farmer may get deceived by a rich sponsor by any uncertain clause added in the Contract.
• To curb this, there is a provision in the Act under Section 3, clause (4) that the Central Government may give out some Model Contracts to enable the farmers to enter into agreement easily.
• Or the Government can issue some guidelines or a set of guidelines to control the exploitation of the farmer.

3. Price Fixing Mechanism:

This mechanism can be made clear into two sub points: pre-fix price and price + flexibility

• Pre-fix Price: this is the price already agreed by both the parties and spelled out in the Contract.
• Price + Flexibility: it is given under Section 5, that such pre-fixed price are subject to variation but the Contract should explicitly provide for:
  • A guaranteed price to be paid for the produce.
  • A clear price reference for any price over and above the guaranteed price, including the bonus and premiums. This flexible price can also be linked to the price given by the APMCs for the same crop.
• But it must be kept in mind that the Pre-fixed price or the guaranteed price or additional amount must be clearly annexed as per the terms laid in the Contract.

4. Delivery and Payment Procedure:

This provision is simplified under Section 6 of the Act.

• Firstly, it is given that at the time of delivery the sponsor is free to check the quality of the produce and can also check at the intermediate levels with the help of an expert. This expert givens in writing to the sponsor regarding the quality check.
• Secondly, the sponsor shall make all the necessary arrangements of collecting the farm produce within the specified time.
• Thirdly, the sponsor shall:
• Where the production of seeds is in question, make payment of not less than two-thirds of agreed amount at the time of delivery and the rest after due certification, but not later than 30 days of the delivery.
• And in other cases, make payment of agreed amount at the time of accepting the delivery of farming produce and issue a receipt slip with details of the sale proceeds.

5. Sponsor prohibited from acquiring ownership rights or making permanent modifications on farmer’s land or premises:

• Under this provision the sponsor has no right on the Land of the farmer and if any permanent structure is built for the fulfillment of the Contract on farmer’s land should be removed at the expense of the sponsor on the completion of the Contract.
• Force Majeure: Under this provision if due to any unwarranted circumstances or say due to Acts of God the parties or a party cannot perform his/her part of the Contract then no fee or penalty can be levied upon them.
• Aggregator: Under Section 10 of this Act, provision is laid out that an aggregator or a farm service provider can be party to the Contract. But the role of the aggregator or farm service provider should be clearly mentioned in the Contract
• An aggregator for this Act is any person, including a Farmer Producer Organisation, who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor.

Merits of the Act:

1. At par with other sectors: like every other sector is free to contract and then produce the contracted item, so this freedom should also be given to the agriculture sector. Thus, this Act provides this freedom and keeps agriculture at par with other sectors or economic activities.
2. Protection to the Farmer: the land of the farmer is completely protected from the sponsor as the Act clearly mentions that the sponsor has no right to the Land of the Farmer.
3. Cost effective: The provisions of the Act points that this will help farmer to spend less amount of money from his pocket because the facilities like transportation, providing fertilizers etc, is being taken care by the Sponsor.
4. Crop pattern: As expected by environmentalists, the crop pattern of the country will change. The current food crops-wheat and paddy- that are grown in abundance has a lot of bad effect on the ecology. Thus, it is suggested to change the crop pattern. Due to this Act, crop pattern will change and the farmers would prefer other crops or flowers as well.

Demerits of the Act:

1. No Courts: This Act also just like the previous Act, promotes a no court dispute resolution mechanism. This will definitely give the government a free hand to act according to their own wishes or caprices. Thus, it is essential to bring in judiciary either by the complete court structure or via some tribunals.
2. Legal advice available to Corporate: Instead of the ‘may’ provision for Model Contracts, the Government should compulsorily make these contracts so that the Legal teams of the corporate cannot dupe the farmer.
3. Weak regulations: The provision that anyone holding a PAN card can enter into an agreement is not good. It should be ensured by the Government that anyone entering into a Contract in this field should get a proper verification and registration done. For this, appropriate verifying and registering authorities should be established.

The Essential Commodities (Amendment) Act,2020

Amendment Act: This Act is Amendment in the principle Act- The Essential Commodities (Amendment) Act, 1955. The Principal Act is thus not repealed only a few amendments are made to the same Act. Provisions of the Act:

1. In this Act it is mentioned that supply of foodstuffs is no longer needed to be regulated. Thus, with the passage of this Act, any private player be it an industrialist or a food corporate company can hoard the food stuff- cereals, vegetables, fruits, pulses, oilseeds etc.
2.  It is also explicitly spelt out that this storage and supply can be regulated in two extraordinary circumstances:

• If the situation is such that the country faces War, Natural Calamity of grave nature or Famine.
• The other situation is that if there is an unnatural price rise. This is explained in two aspects:

1. First if the price rise is 100% in comparison to the retail price in the previous year for horticulture produce.
2. Second if the price rise is 50% for the non-perishable foodstuffs like cereals, pulses etc.

Then under these situations by the issuance of a gazette notification government can declare such items of foodstuffs as essential commodities and discontinue their hoarding.

2 exceptions of this provision:

• The first exception to this is if the food processing unit has an individual capacity of processing the item then such a unit can store the product even after the notification.
• The second exception to this is if any exporter has a pre-demand order, say an exporter has an order for 10 lakh quintals of mustard seeds and the seeds are notified as an essential commodity, even then such a commodity can be stored and exported.

Merits of the Act:

1. Should give entry to private players: India has now achieved a food security and after the post food crisis period, the Government can afford to give a chance to commercial players to enter this domain.
2. Competition: With the entry of private entities the quality of the products or the item generally improves and a sense of competition develops among the players, this indeed is very healthy for a better economy.
3. Globalization: To match up the global standards and to improve the circumstances of the farmer, it is necessary that we improve the system. For eg, in South Korea, a farmer gets out of 40 almost 35-36 units of money which is not the current situation in India.

Demerits of the Act:

1. Off Price rise: When any commodity is hoarded, its supply in the market gets decreased and when the supply decreases, the price increases, thus the hoarders or private players will be able to manipulate the prices very easily. This will adversely affect the common man.
2. Artificial demand: A demand is considered artificial if it increases consumer utility very inefficiently. There is a possible threat that an industrialist can create artificial demand by showing less of supply procured by him or by increasing the quantity of required supply.

Conclusion

With this we finish understanding all the farm laws along with their merits, demerits and a scope to improve.  The regulations associated with these Acts are weak and they need a rethinking. The regulations so far listed have one or the other loophole in them. Also the fact that the Government wishes to keep the courts out of the dispute resolution mechanism is not fair. The Government should amend this provision either with the installation of some sort of Tribunals or some Boards and also give a right to appeal in the District or High Court. The Government could have brought these reforms in a systematic manner, rather than changing the whole system overnight.

Finally these Acts are in the benefit of the farmers and thus the Government should not step back. They should rather try to make the farmers aware about the provisions and conduct some round of talks with them.

 

This Article is authored by:- Bhoomika ( MCMDAV-36, Chd.)