ASHA presents brief notes on the context, serious deficiencies and implications on the 3 “agriculture reform” ordinances which are to be tabled in the Lok Sabha on the 14th of September 2020 as Bills. These are in essence agri-business facilitation bills that will steer Indian agriculture towards greater corporate control at the expense of farmers’ and consumers’ interests.
Indian language material on the Bills as powerpoint presentations in Bangla, Hindi, Gujarati, Marathi, Odia, Tamil and Telugu, is available here: https://kisanswaraj.in/2020/09/06/webinar-on-3-agriculture-reform-ordinances-whither-farmer-sept-11th-2020-3-30pm/
ESSENTIAL COMMODITIES ACT (AMENDMENT) BILL 2020 –
“FOOD HOARDING FREEDOM FOR CORPORATES BILL 2020”[i]
The Essential Commodities Act (Amendment) Bill 2020 is listed to be introduced in the Lok Sabha on 14th September 2020, and is listed for consideration and passing on the 15th.
RATIONALE GIVEN BY GOVERNMENT: The ostensible reasons for the amendment are enhancing of farmers’ incomes and attracting private investment in post-harvest agricultural infrastructure in a predictable setting, which frequent ad hoc orders of ECA 1955 were apparently jeopardizing.
WHAT DOES THE BILL DO? The ECA Amendment Bill removes the supply of all food commodities from regulation under Essential Commodities Act, except in “extraordinary circumstances”. The price limits set for such ‘extraordinary circumstances’ are so high that they are likely to be never triggered, and even in those cases, big companies like Adanis would be exempt from any stock limits. (Details below).
ARE FARMERS INVOLVED HERE?
- Preamble says that the purpose is “enhancing income of farmers” but the EC Act was never about Farmers or their incomes. There was no restriction under ECA on Farmers or Farmer Producer Organisations (FPOs) from stocking produce and selling it.
- The restriction was on Agri-business companies and traders. Now, those restrictions are being removed for all food commodities, so it gives them to purchase and store any quantities, hence indulge in hoarding. Therefore, it should be called “Food Hoarding (Freedom for Corporates) Bill”.
- Companies like Adani-Wilmar, Reliance etc. will now have freedom to stock any amount of food commodities (this freedom was only with farmers and FPOs until now). They will build huge storage and processing facilities, and build complete market domination. This means that they will dictate terms to farmers – which is likely to lead to less prices to farmers, not more income.
- It has been established that when there is price rise in retail market, the benefit is not passed on to the farmers, but when there is a price fall, the loss is passed on to the farmers.
- For example, Adani-Wilmar imports large quantities of oils and pulses from its holdings in other countries including Africa. Adani-Wilmar is investing 350 million dollars in Bangladesh setting up food processing industry. Since there will be no limit on stocking in India, imports by Adanis from their businesses abroad can dominate Indian market in a bigger way.
GOVERNMENT WILLINGLY CURTAILING ITS POWER TO PROTECT THE INTERESTS OF MOST MARGINALISED CITIZENS VIS-À-VIS HOARDERS AND BIG BUSINESSES:
NOT FOR FARMERS, BUT FOR BIG AGRI/FOOD BUSINESSES
For Big Agri-Business
– Removal of stock limits, Removal of restrictions
– Bigger storage chains, Domination over supply & market
– Bigger doors open for importers and companies with production facilities and land in other
countries such as Adanis
– No additional freedom due to this Act
– No change in their holding capacity (storage & finance)
– Reduces bargaining capacity including of FPOs vs. Agribusiness
– Market domination by Agribusiness may lower farmer prices
– Govt says it won’t help build farmers’ storage & processing capacity, it leaves everything to
big agribusiness companies
v There used to be several regulatory tools with the earlier version of ECA, with the government – licensing, price control, compulsory licensing, stocking, information collection and produce for inspection records, entry/search/examination of premises and seizure etc. All of this is being thrown away now.
v Now, food stuffs’ supply regulation only under ‘Extraordinary circumstances’ – war, famine, extra-ordinary price rise, natural calamity of grave nature and that too of only Stock limit imposition based only on a certain price rise now – only when there is 100% rise in retail price of horticultural produce or 50% rise in retail price of non-perishable food stuffs. What has not been specified is which price and where, as well as when and how such data will be maintained when reference is now to “Price prevailing in preceding 12 months or Average retail price of last five years”.
v Even within the very limited purview of regulatory authority kept for food stuffs now, exemptions have been given. The non-applicability of the regulation is to processors and value chain participants within their installed capacity of processing, or demand for export. It is of course not clear how export demand will be scrutinized and confirmed if fake indents are produced.
v There is a big concern around invisibilising of stocks in the country of different food stuffs for policy action. Further, there are different regulatory regimes applicable between registered warehouses and private players now. The implications for trade and food support policies are apparent, when the government does not have information on food stocks and where they exist, whether they exist, in what quantities etc.
WHAT THE GOVERNMENT OUGHT TO HAVE DONE
- State the objective accurately and transparently, that this is about enhancing investments in post-harvest infrastructure in food supply chains of India and not draw in unverified and unrelated claims about enhancing farmers’ incomes.
- Ensure that the ‘extra-ordinary circumstances’ which allow for regulation cover other situations too and not just the four listed, especially to ensure that non-competitive behaviour of any buyer is also considered an extra-ordinary circumstance, just as “unreasonable and unusual hoarding” should also be considered as one! How can regulatory obligation of the state on these matters be abdicated?
- Ensure that various tools of regulation are available and not just imposition of stock limits (price control, compulsory selling, movement control, regulating certain classes of commercial and financial transactions etc.). This is so that the interests of the weakest citizens can be protected.
- Ensure that the price triggers that allow regulation to take place are specific to a locality, and of a lower range of price increase so that they are actually relevant for the objective.
- Ensure that regulatory powers are differential based on the existing infrastructure in a given locality which means that district level mapping or something needs to be taken up for such a differential and nuanced approach to take place in a locality.
- Ensure that regulatory authority is backed by adequate intelligence, based on imposition of mandatory maintenance of certain records and submission of the same to the government in online and offline ways, especially of real-time stock position of food stuffs all over the country.
[i] This is what the Bill in effect is about, and therefore, we have chosen to rename it as such.
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 or
“THE APMC BYPASS BILL 2020”
Farmers’ interfaces with market continue to be on an unequal playing field – the reason why APMC statutes were brought in, continues to remain, and nothing much has changed on that front for small and marginal holders of the country. In fact, the new Bills bring in players bigger than the local traders and it is not just local monopsonies with cartelized trade but big monopolies that can be expected now. The interface of farmers with markets will now be more unequal than ever before. Swinging from stifling protectionism (at least in the posturing even though in reality farmers’ interests were not actually protected) to complete liberalization and de-regulation is a wild swing from one end to the other, without taking into consideration farmers’ realities.
It is worth noting that farmers’ freedom was never curtailed legally in the APMCs Act. It is also important to note that only 35% of produce traded in regulated markets. However, APMCs provide space for farmers for collective bargaining on price & non-price issues (grading, weighing, moisture measurement etc.).
While the other trade needs to be de-criminalised, that cannot be understood to be de-regulation. That would be a complete and callous neglect of farmers’ interests. It should also be acknowledged that farmers’ woes with markets and unremunerative prices are due to many other inter-locked factors including agri-credit needs being met by local traders and that unequal international trade dumping subsidized produce into India. Another point worth noting is that even state governments are inaccessible for farmers, when it comes to just returns, leave alone a Joint Secretary in the Union Government.
For the government, price intelligence comes from the mandis, and the government intervention in markets depends on this, beyond procurement for food schemes. Mandi traders in turn taking cues from spot exchanges.
While the ostensible reason for bringing a Central Act is that state governments are not adopting and implementing Model Acts brought in by the Centre, it should be noted that many changes have already been made post-2003 using GoI Model Act. Meanwhile, the ones who opted for de-regulation have not seen their farmers’ fate change in any way – Bihar, for example.
Also, it is the ECA Amendment along with APMC Bypass Bill that will ultimately work against both farmers and consumers – we should read the Bills together.
SOME CLEAR DISCONNECT-FROM-GROUND, DEFICIENCIES AND AMBIGUITIES IN THE BILL:
- Trader to trader transactions were not being regulated earlier – they are not Farmers’ Produce – now, they have been brought in without any basis.
- It is unclear why separate definitions and clauses have been included for Farmers’ Produce (Sec.2(a)) and Scheduled Farmers’ Produce (2 (j)) when the intention is to de-regulate both, but one category put under state APMC Act discretion.
- Sec 2(d) “Farmer” means a person engaged in production of farming produce by self or by hired labour or otherwise and includes FPOs. Most FPOs are not engaged in production and they cannot be equated with Farmer.
- FPOs are now put on par with existing traders and big corporations to compete for farmers’ produce in the market space. It is unclear why they are being over-regulated when the FPO movement itself is in a nascent stage in the country, requiring the government to announce separate investments and enabling measures for them. It is also unclear why the government is proposing to regulate decisions within an autonomous farmers’ body which runs with decisions made by member farmers themselves.
- Central government is abdicating all oversight responsibility since it does not want to prescribe a system of registration of all traders of all farmers’ produce.
- The entire grievance redressal system is visualised only around prompt payments, that too based on a ‘receipt of delivery’. The entire grievance redressal depends on this receipt – how many farmers will get it in “trade areas”?
- How will same day payment happen for inter-state trade since disintermediated trade unlikely for inter-state trade, that too without the buyer looking at samples of produce delivered.
- Exploitation of farmers is understood to be only around prompt price payment without acknowledging that it is around price realisation also, and critically so as far as farmers are concerned. There are also several non-price related matters on which farmers are exploited.
- The Bill says Central government MAY develop a price information and market intelligence system – without such a data system, can the government intervene at all and will it intervene at all?
- Electronic trading like in e-NAM is riding on top of physical mandi structure in the country, not as a parallel system – if Mandis are destroyed without much trading, will e-NAM happen with farmer participation?
- Fragmented markets – many electronic platforms disconnected from each other – what will offer reference price then? Fragmented markets also mean monopsonistic markets.
- Fragmented regulatory structures are going to create more uneven playing field for farmers.
Ultimately, this is going to lead to replication of old structures outside the mandi. In fact, the most advantaged, trade-ready and well-equipped who would like to operate now outside the regulated mandi and also without paying a fee in the trade area, will be the existing local traders and commission agents! Creating two market spaces with two completely different set of rules is a recipe for disaster.
WHAT THE GOVERNMENT OUGHT TO HAVE DONE TO REGULATE MARKETS THAT DE-CRIMINALISE TRADE TRANSACTIONS OUTSIDE MANDI SPACES:
Government cannot swing between extreme protection to extreme liberalizing. The unequal playing field whenever farmers interface with markets continues – we need protection but not a License Raj. Elements of such protection are:
- Remunerative price is the protection that farmers seek. MSP should be guaranteed by the government as an entitlement of all farmers. Such an entitlement of farmers, and an obligation on the government can be met through numerous measures and mechanisms put into place. So, any trading below MSP should be made good by the govt – either to a loss-making trader or a loss-making farmer.
- Oversight over all trade is important – it could be through multiple functionaries and not just APMC Committees. It could be department officials designated for the purpose for specific commodities. It could be Panchayats for farmgate purchases. There should be records of the trade at the least from these people – date, quantity, seller, buyer, price, and any quality related data. There should be a registry of all buyers/traders. This is not the same as a license raj. It is not enough to say PAN card is essential. What we need is a “online register SHALL be maintained”. Registration of all players a Must and record-keeping of all transactions too to the extent possible. Numerous oversight agencies and functionaries can be notified, depending on commodity. While it is acknowledged that not all primary transactions can have oversight, there should be effort to cover as many as possible.
- APMC market yard and “trade areas” should be equalized in terms of cess/fees collection and oversight mechanisms. Otherwise, all trade will move out of yards. Licensed traders will move out first!!
- A Central Act might be alright, provided State governments have the authority to regulate and also collect fees for intra-state trade. Centre can have the authority for inter-state trade. Any trading above a particular ceiling in volume and value and any inter-state trading of a certain scale could have the Centre getting into a licensing system (a parallel might be in the Food Safety and Standards Act 2006 which registers all players and beyond a certain ceiling, licenses). After all, bigger players who play unfairly can do greater damage than local players and they need to be regulated more rigorously.
- Price Intelligence is important for government intervention to kick in. In fact, data architecture to be fully worked out (of players, transactions, prices), incorporated into the regulatory system and implemented for transparency, oversight and policy action.
- Grievance redressal & Penalties should be for all kinds of exploitation and not just prompt price payment. It should be at taluka and district level.
- FPOs should be kept out of the purview of this legislation – it is an internal arrangement between farmers within their own institution. However, rules for such FPOs should ensure that they do not get captured by corporations. Further, definition of Farmer should exclude FPO
- Trader to trader transactions should be kept out of purview of this regulation
- Government has to grow a national spot exchange (a Hub & Spoke model) to connect e-platforms including e-NAM that offers a template for inter-operability– such an exchange should be transparent and needs a regulatory oversight.
- Government should commit within the same legislation (a la Food Security Act 2013 which has enabling provisions) to maximum procurement of various commodities tied with local food schemes, and market intervention from the state, to agri-credit reforms to benefit small and marginal holders and particular neglected regions, to crop insurance and disaster compensation and to empower FPOs as enabled players in the market.
 This is what the Bill in effect is about, and therefore, we have chosen to rename it as such.
Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill, 2020
CONTRACT FARMING BILL 2020
Contract farming arrangements in India are mostly unwritten and most of what happens in seed production arrangements and even sugarcane production can be termed as ‘contract farming’, apart from the fact that such arrangements exist for niche, high value products like chip-grade potatoes, or gherkins or floriculture for export.
As in the case of other market interfaces of farmers in India, it can be safely assumed that farmers in contract farming arrangements also are the weaker players in terms of their ability to negotiate what they need. Such arrangements, in the lure of short-term economic benefits, might also compromise the farmer’s ability to grow the right kind of crops suited to the local environment and growing conditions. Further, a highly intensive agricultural paradigm with chemical and water usage may be adopted too. On the other hand it is also seen that “sponsors” are averse to dealing with a multitude of small and marginal farmers of the country and most contract farming arrangements have been with medium and large farmers. There are many studies pointing to parties not adhering to the contract commitments, and these are unenforceable in any case, due to lack of written arrangements.
Against this backdrop, the Bill that the government is introducing in the Parliament as a Central Act titled “Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill 2020” is actually a misnomer. This Bill is not about mandating that sponsors shall enter into a written farming agreement. The Bill is couched in “May” legalese leaving many things voluntary and not spelt out. The entire Bill is for written contracts, while it does not mandate written agreements.
It faultily includes FPOs into the definition of Farmers. It also equates supply or provision of inputs for farming as “farm services”. It brings in a “Production Agreement” which is a route to direct corporate farming. It calls for third party qualified assayers and third party enforcement!
WHAT THE GOVERNMENT OUGHT NOT TO HAVE DONE
- Since the agreements are voluntary and even having a written contract in such arrangements has been left voluntary, there should not have been a Bar of Jurisdiction of Civil Court (Sec.19) brought in. Otherwise, this would be very unfair to farmers, the weaker party in any contract.
- Should not have equated inputs with services (Sec. 2(e))
- Should not have distinguished between Farming Agreement and Trade & Commerce Agreement (Sec 2(h) and 2(h)(i))
- Should not have “Production Agreement” concept at all since it appears to be a proxy route to corporate farming (Sec.2 (h)(ii))
- Should not have included into the Definition of Farmer (Sec.2(f)) FPOs also – FPOs should be taken out of the scope of such a Bill completely
- Should not have kept the arrangement outside the purview of ECA 1955 and other Acts applicable.
In fact, what the government should have done is to have ensured that the pricing of Farming Produce be referenced to MSP as the guaranteed price and the price fixed in the contract should be over and above the MSP (Sec.5).
 This is what the Bill in effect is about, and therefore, we have chosen to rename it as such.