Farm Bill 2020: Do Indian farmers really need these new agricultural legislation? A complete analysis
Nov. 17, 2020
The nation often talks about the three Farm bills which were passed by the Lok Sabha last month amid strong protests. While a section of the population remains in favor of the bill implementations, there's a huge hue and cry amongst others regarding, and we have seen farmers and political leaders coming out in the streets to oppose these farm bills 2020. The thee bills passed by the Lok Sabha in recent are the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, and Essential Commodities (Amendment) Bill.
The bills have been approved by the President as well, to be framed as Laws now. Farmers of Maharashtra and Kanpur had already accepted the passing of these new farm bills. But this had also raised confusion and concerns amongst lots of farmers and the common public. This new legislation resulted in a widespread protest by the farmers, mandi brokers and opposition parties, few months back.
The key provisions of the new legislation as per the Government are to improve the financial standards of small and marginal farmers, who don’t have other ways to get a better price or invest in technology to improve the productivity of farms. This bill allows farmers to sell their produce outside APMC ‘mandis’ to whoever they want. Now anyone can buy their produce even at their farm gates. Through these policy changes Indian farmers will have the advantage of getting better prices through competition and cost reduction on transportation.
Why The Protests Emerged
In near future the commission agents of the ‘mandis’ and states may lose 'commissions' and 'mandi fees' respectively (which is one of the main reasons for the ongoing protests). Another key reason for the protest is that some are of the view that this bill is designed to help only big corporate houses, that too at the cost of farmers.
Other issue raised by the protesters include ‘minimum support price’ (MSP) implementation likely to become dysfunctional in due course. Irrelevance of state-controlled Agricultural Produce Market Committee (APMC) ‘mandis’, risk of losing out land rights under contract farming rule, reduction in price of farm produce due to market domination by big agri-businesses and exploitation of farmers by big contractors through contract farming provisions, are other key issues for the protest.
Some farmers have complained that they are apprehensive about getting Minimum Support Price (MSP) for their produce and also concerned reduced benefits since the corporates may dictate the price in future.
New Reforms Likely to Scale Up Agri-Business in Longer Run:
Just few weeks back there were concerns regarding future prospects of the feed business in the country. The new reforms are in favor of scaling up Agriculture related business in the longer run. As contract farming will be promoted now therefore poultry units, which are mainly located in Southern India will be benefitted as they are dependent for maize supplies from Northern markets.
In line with the new laws, farmers can be approached directly now for negotiating the contracting deals, without going through government regulations and taxation in the states. Earlier the animal industry feed persons were not allowed to get involved with the maize/corn growers, who only had the options to sell their corn in the local markets. In all this was a limitation towards development of the corn or feed industry. The new reforms therefore can stabilize the animal feed raw material prices in coming months.
Another advantage for the poultry and animal feed companies is that under the new rules stocking grains beyond 5000 tons (previously allowed quantity limit) will be possible. Hence these companies can increase their stocking quantity in case of increasing demand situation.
This amendment shall be beneficial in making farmers fee from the regulation of Agriculture Produce Marketing Committee (APMC). Decreasing regulation would enable farmers in harness economies of scale directly. It will also encourage Private sector investment in cold storages and pave ways for modernizing the supply chain. The Government announced freedom to stock more – without the fear of frequent impositions of stock limits, ban on exports or imposing price control on agricultural commodities.
Removal of stock limits, ensuring larger markets for farmers, investments in infrastructure and transportation will not only reduce costs for farmers but also ensure higher price for their produce. The agricultural markets have seen less investment due to its highly controlled system by the Government. Removing these restrictions (like stock limits) can attract investments by making it competitive.
Again, better infrastructure and transportation are critical areas which will make investments lucrative in the country. The act allows farmers to sell their produce directly without going through the intermediary hassles and has will be able to sell with fewer expenses since he will not have to pay any Mandi tax.
Also, selling in his own state also won’t be a barrier since the farmer will be now free to sell across any part of the country. The amendment also increases the involvement of NCDEX the National level exchange for Agriculture commodities, as farmers will be able to sell his produce to the Commodity exchanges as well.
Last but not the least, the government needs to establish a proper constitutional framework for the minimum selling prices and procurement in the new bill in order to eliminate fears and doubts among the farmers. Focus should be on building roads that link villages to markets as it will encourage more number of farmers to sell without the help of middlemen. There should be climate-controlled storage facilities and measures should be taken to ensure uninterrupted power supply so that buyers ready to purchase produce from the farmers, should be willing to negotiate better prices.
The CACP recommends MSP along with the Central ministries and State Governments, but is not a statutory body set up by the Parliament. It is only a government policy that is part of administrative decision-making. The government declares MSPs for crops, but there is no legal implication. The government can procure at the MSP if it wants to. Therefore the system of MSP will remain and government procurement will continue. So, the fear prevailing among most farmers, regarding MSP not to become dysfunctional also needs to be eradicated.
The protests and acceptance reports are heard quite often but these bills surely indicate a strong message regarding end of monopoly of Agriculture Produce Market Committees (APMCs) in carrying out the trade of farm produce in the country. The Bills are most likely to establish an efficient system where the farmers and traders can sell their purchase outside the Mandis. It shall also promote intra-state trade so the cost of transportation may reduce henceforth. The farmers can now engage with agri-business companies, retailers, in a better way now and they are also expected to benefit of accessing modern technologies.
The Farm bill 2020 in longer run can benefit the small and marginal farmers with less than five hectares of land, and attract FDI’s as well. In fact it can be said that the farmers have now moved towards a hassle free system with greater flexibility in decision making, and with higher possibility of enhancing their income levels. These reforms are expected to attract investments in warehousing and allow direct contact buyers and sellers of the farm produce.
Presently India is a leading producer of items such as wheat, spices, pulses, fruits, milk, and vegetables etc. The ECA was in fact hampering the consumer interest, since it the previous guidelines were not in favor of private investments in the agricultural sector. On the whole, with the amendment bill implementation being given a green signal, economic situation of farmers and the country should improve in near future, subject to proper implementations by the government.
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