In three ordinances, the provisions that are bothering farmers

In News

• The government had in June promulgated three ordinances towards the empowerment of farmers and opening up agriculture marketing.
• In the ongoing monsoon session of Parliament, the government has introduced three Bills to replace these ordinances. The bills are:
  • The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Bill;
  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill; and
  • The Essential Commodities (Amendment) Bill.
• Meanwhile, some farmers in some states (mainly Punjab and Haryana) have been protesting against these laws.

 

Background: Ordinances promulgated for the farm sector

The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 (FPTCO)

• This ordinance intends to provide barrier-free trade for farmers’ produce by allowing anyone to purchase and sell agricultural produce.
• In doing so, it aims to end the monopoly of the Agricultural Produce Market Committees (APMC).

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 (FAPAFS)

• This ordinance aims to legalise contract farming, so that big businesses and companies can cultivate large areas of agricultural land.
• It allows farmers and buyers to enter into contracts in which the farmer is assured of a certain price at the time of sowing, while the buyer gets to procure the produce at the pre-decided rate.

The Essential Commodities (Amendment) Ordinance, 2020

• This ordinance was introduced to amend the Essential Commodities Act to remove the existing restrictions on stocking food produce.
• Sale of six types of agricultural produce, including cereals, edible oils, oilseeds, pulses, onions and potatoes were deregulated, by amending the Essential Commodities Act, 1955.
• No stock limits are to be imposed on these commodities except in case of national calamity or famine or an extraordinary increase in prices.
• Even in such exceptions the stock limits would not apply to processors and exporters.

 

News Summary:

• A section of farmers in some states (mainly Punjab and Haryana) have been protesting against certain provisions in these Ordinances/ Bills.

 

Reasons for some farmers' concerns

• While farmers are protesting against all three ordinances, their objections are mostly against the provisions of The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance (FPTCO).
• Their concerns are mainly about sections relating to “trade area”, “trader”, “dispute resolution” and “market fee” in FPTCO.

Provision on "trade area":

• FPTCO defines “trade area” as any area or location, place of production and collection including farm gates, factory premises, warehouses or any other places, from where trade of farmers’ produce may be undertaken in the territory of India.
• However, the definition does not include the premises and structures managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act.
• In effect, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.
• As per the government, the creation of an additional trade area outside mandis will provide farmers the freedom of choice to sell their produce.
• Issues with the definition of "trade area":
• However, as per the protesters, this provision will restrict APMC mandis to their physical boundaries and give corporate companies the freedom to exploit farmers.
• Private companies will be able to establish private mandis on which there will be no government regulation.
• Companies will benefit as trading rates will not be under pressure of government procurement and they will be able to force farmers to reduce their rates and farmers will not even get Minimum Support Price (MSP).
• The farmers claim that this is the first step towards elimination of MSP.

Provisions on "trader":

• FPTCO defines a “trader” as a person who buys farmers’ produce through inter-State trade or intra-State trade or a combination of both.
• The trader can purchase the produce for himself or for the purpose of wholesale trade, retail, end-use, value addition, processing, manufacturing, export or consumption. Thus, it includes processor, exporter, wholesaler, miller, and retailer.
• A trader can operate in both an APMC mandi and a trade area. Further, any trader with a PAN card can buy the farmers’ produce in the ‘trade area’.
• Issues with the definition of "Trader":
  • As per the state APMC acts, for trading in the APMC mandi, the trader would require a licence/registration. In the present mandi system, arhatiyas (commission agents) have to get a licence to trade in a mandi.
  • The protesters say arhatiyas have more credibility (trustworthy) as their financial status is verified during the licence approval process.
  • As the traders operating outside the APMC mandis do not need a license, farmers cannot have a similar level of trust on the financial status of the trader.
  • Protests have been mostly concentrated in Punjab and Haryana, as the arhatiya system is more influential in these two states compared to other states.

Provisions on "market fee":

• FPTCO states that no market fee or cess or levy (applicable under any State APMC Act or any other State law) shall be levied on any farmer or trader for trade in a ‘trade area’.
• Under the existing system, such charges in states like Punjab come to around 8.5% — a market fee of 3%, a rural development charge of 3% and the arhatiya’s commission of about 2.5%.
• As per the government, removal of market fee will reduce the cost of transaction and will benefit both the farmers and the traders.
• Issues with the provision of "market fee":
  • However, the protestors claim that this provision does not provide a level playing field to APMC mandis and by removing the fee on trade, the government is indirectly incentivising big corporates.
  • They say the corporates will use this difference to offer better prices to farmers in the initial days and when the APMC mandi system will collapse in some time, the corporates will monopolise the trade.

 

Issues with the provision of dispute resolution:

• The protesters say that the FPTCO provision on dispute resolution does not sufficiently safeguard farmers’ interests.
• As per the provision, 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.
• The Sub-Divisional Magistrate will refer the dispute to a Conciliation Board to be appointed by him, for the settlement of the dispute.
  • Conciliation is an alternative dispute resolution process, in which the parties involved use a conciliator, who helps them to resolve their differences.
• Farmers claim that the ordinance does not allow farmers to approach a civil court and fear that the proposed system of conciliation can be misused against them.

 

Issues with provisions on essential commodities

• The provisions under this will allow private players to buy the produce in harvest season when prices are generally lower, stock it, and sell it when prices increase.
• Thus, protesters say it will harm the farmers and will only benefit the middlemen and the traders.
• They say small and marginal farmers will suffer the most as they depend on the intermediaries to sell the produce.

 

Union government’s response to the protests:

• The government said that the MSP system will not be abolished and will continue to stay.
• Moreover, the new bills will help farmers get better price for their produce through a transparent system.
• It further said that the three bills will boost production and will be beneficial to all: farmers, consumers and traders.