Central acts will facilitate corporates

Draft prepared ahead of round of talks scheduled for December 29, 2020

 Farmers Bill cartoon english

Note from the editor:

In a recent response to an RTI plea filed by Jatin Desai, the central government revealed that it had no record of meetings or discussions with farmer associations ahead of finalizing the three new farm laws. The farmers on protest, however, seem deeply conscientious and meticulous, as this note, prepared ahead of the meeting scheduled with the government on December 29, 2020, shows. Countercurrents exclusively accessed the note prepared ahead of the consultation by KV Biju, national coordinator of the Rashtriya Kisan Mahasangh, which is part of the protests.

As in the case of the Goods and Services Act, the new agricultural laws too will favour large corporate players. It will reduce the operational costs of corporates and make for easier accounting and management.

If state laws remain, corporate bodies will need state level managers, accountants and other managerial staff and facilities. Once the tax system and the central act are adapted for automated management, costs borne by corporate houses too will reduce.

The central laws will create uniformity in prices. Agricultural production too is likely to get concentrated with different regions specialized in different crops. We have seen what happens with this in onion production, as Maharashtra now is almost the sole producer of onions for the whole nation – this had led to sharp variation in prices.

Such concentration of production will serve corporates well, but prove detrimental to the farming community. The diversity in agricultural products and the different work cultures across the nation also factor into production cost. In Madhya Pradesh, for example, production cost of paddy is Rs 19  per kilogram and the MSP fixed by the state government is Rs 18.75. In Kerala, it costs Rs 24 to cultivate a kg of paddy and MSP fixed by the state government is Rs 26.75.

The state agricultural production system for a crop is different in different regions, with different varieties of the crop and different patterns of work – states are best able to take these considerations on board while framing policy. That is why a state law for agriculture is helpful.

The Central law in agriculture is a violation of the Constitution, which provides for undisputed federalism and lays down clearly the powers of states and central government. Division of power is most important for the federal system.  

These acts violate Article 246 of the Constitution; Article 246 (2) states: “Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List).

Article 246 (4) states: “Parliament has power to make laws with respect to any matter for any part of the territory of India not included (in a State) notwithstanding that such matter is a matter enumerated in the State List. The pith and substance of the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 Act is regulating intrastate agriculture and hence it is repugnant to the State Act.

It seeks to supplant the State Agricultural Produce Market Committee (APMC) Acts of all states. Agriculture is a subject under Entry 14 of List II of the Constitution, over which states have the exclusive power to make laws, by virtue of Article 246 (3).

Agriculture being a State subject under the Constitution, any Central legislation seeking to remove barriers to trade and creating a unified national market for farm produce has the capacity to start a fresh debate on federalism.

Union of India lacks legislative power to bring such enactment. In the garb of reforms, it has pushed forth an ill-thought-out piece of legislation. We believe this will impact the procurement policy of the state governments, Bavandar Yojana of Madhya Pradesh, MSP support for vegetables and fruits announced by the Kerala government through VFPCK (Vegetable and Fruit Promotion Council Kerala) and other State governments’ welfare measures for farmers that already exist.

ITC LTD vs Agricultural Produce Marketing Committee Bihar (Appeal(Civil) SC.6453 of 2001) case proves how corporates use the central act to their benefit. We fear that most welfare schemes of the states may be questioned in court by corporates, using these central acts.

Our view is that any legislation related to agriculture must be of the state government. If it contains any matter in the concurrent list, it must be in accordance with section 254 (2) of the Constitution.

The earlier BJP-led NDA government brought the model APMC Act in 2003; in 2017, the model Agricultural Produce and Livestock Marketing (APLM Act) was brought in and the Model Contract Farming and Services (CF&S) Act in 2018. Tamil Nadu passed the Contract Farming and Services (CF&S) Act, which got the President’s assent in 2019.

Rather than passing a central act, the Centre prepared a model act and sent it to the state government – the reason was clear; any move to bring a central act would attract protests from state governments and farmers.

The pro-corporate BJP government made use of the coronavirus pandemic as an opportunity to bring in anti-farmer laws and the amendment of the Essential Commodities Act. From the farmers’ community, more than 12,000 commit suicide every year. This is in large part because of the destructive policies of government. For us, government policy is more lethal than coronavirus. That is why we began our agitation.

Section 14 of the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 Act states: “The provisions of this act shall have effect, notwithstanding anything inconsistent therewith contained in any State APMC Act or any other law for time being in force or in any instrument having effect by virtue of any law for the time being in force”.

The overriding effect of this Act must be questioned by the state governments, as it has impact on farmers also. If state governments introduce “Bavandar Yojana” of Madhya Pradesh or MSP for vegetables by Kerala government, such schemes related to farmers’ gate price will attract legal action according to the overriding effect of this Act.

The Act is thus trespassing on the State Subject by the Central Government, using the subject in the concurrent list. Agriculture is a State Subject. Trade and Commerce is in the concurrent list.

The amendment of the Essential Commodities Act (ECA) and the other two farm laws is meant exclusively to facilitate corporate retailers and agri-business corporations. Sub-section 1(a) of Section 3 of the ECA states: “The supply of such food stuffs including cereals, pulses, potato, onions, edible oilseeds and oils as the central Government may, by notification in the official Gazette, may be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature.”

The question is: How does this benefit farmers? In all price rise scenarios, including the recent onion price rise, farmers did not get any benefit. When we compare the farmers’ gate price for onion in Maharashtra mandis and the retail price in Mumbai, it is evident that in Mumbai onions sold at twice the farmers’ gate price. Not farmers, but middlemen benefit from such price rise.

There are two reasons for the sudden and huge rise in prices: shortage and hoarding by the corporate retailers.

Sub-section 3 (b) of the Act  states: “Any action on imposing stock limit shall be based on price rise and an order for regulating stock limit of any agricultural produce may be issued under this Act only when there is —

(i) hundred per cent increase in the retail price of horticultural produce; or

(ii) fifty per cent increase in the retail price of non-perishable agricultural food stuffs.”

India is one of the poorest countries in the world. Two-thirds of the people of India live in poverty. 68.8% of Indians live on less than $2 a day. Over 30% of these have even less than $1.25 per day available to them, and are considered extremely poor. Among the poor the biggest chunk are farmers and farm labourers. To such people, a price hike of even 10% will make things unaffordable. How then will they cope with a 100 per cent increase?

The sub-section quoted above goes on: “Provided that such order for regulating stock limit shall not apply to a processor or value chain participant of any agricultural produce, if the stock limit of  such person does not exceed the overall ceiling of installed capacity of processing, or the demand for export in case of an exporter.”

“Explanation – The expression “value chain participant” in relation to any agricultural product, means and includes a set of participants, from production of any agricultural produce in the field to final consumption, involving processing, packaging, storage, transport  and distribution, where at each stage value is added to the product”.

Here is proof that this was meant for corporate retailers and agri-business corporations. All their activities are exempted. This explanation includes “distribution”, which means retailing. This alone makes it clear that the amendment is meant for corporate retailers.

We must also consider what is happening in the retail sector. Big retailers are integrating all functions — production (through contract farming), processing, packaging, storage and transportation. This goes against the interest of small producers. Corporate retailers have processing, storage and transportation facilities; all these are allowed to stock without limit, while farmers are not. Agri-business corporations and corporate retailers can hoard as much as they can! Farmers cannot. And yet, this amendment is meant to serve farmers?

Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 replaces the state Act and would expose farmers to multiple avenues for exploitation. The Act would allow traders to conduct trade outside the mandis by bypassing the competitive process and, thereby, dominate marginal and small farmers with limited produce and low bargaining power. This has been already proved in Bihar, which repealed the APMC Act in 2006. Small farmers in Bihar have now stopped farming and are migrating to other states in search of work as labourers.

MSP issues

Section 36 of the APMC Act of Madhya Pradesh (Madhya Pradesh Krishi Upaj Mandi Abhiniyam, 1972,) states: “The price of the notified agricultural produce brought into the market yard for sale shall be settled by tender bid or open auction system and no deduction shall be made from the agreed price on any account whatsoever: [Provided that in the market yard the price of such notified agricultural produce of which support price has been declared by the State Government, shall not be settled below the price so declared and no bid shall be permitted to start , in the market yard, below the rate so fixed.]

Madhya Pradesh APMC Act assured the MSP. The new Central Act is completely silent about the MSP. Yet, the prime minister wants farmers to believe that it is superior to what it replaces?

The High Court of Madhya Pradesh in The Annadata Kisan Samiti V/s The State of Madhya Pradesh case (WP-8944-2016) ordered on 20-02-2018, to implement Section 36 of the Krishi Upaj Mandi Athiniyam 1972. The court directed the MP State Agricultural Marketing Board to take necessary action.  After that, farmers had started filing FIRs against traders who purchase below MSP.

After the new Central Acts were passed, prices started plummeting in mandis in Haryana, Punjab and Madhya Pradesh. The largest price fall is in Madhya Pradesh. Rashtriya Kisan Mahasangh did a study in the mandis of Madhya Pradesh. One of the best variety of paddy, PUSA-1718, sold at only Rs. 1400 per quintal in different mandis in October this year, whereas the maximum price received for this variety is Rs. 1550 per quintal.  MSP fixed by the state government is Rs. 1875 per quintal. Traders are now purchasing at the lowest price; it is clear whom the Central Act has helped.

Exports of agri-commodities rose by 43.4 per cent to Rs 53,626.6 crore in the first half of the current fiscal. In September 2020, agri exports rose by 81.7 per cent to Rs 9,296 crore from Rs 5,114 crore in September 2019.  Agricultural export order has been increasing over the last three months in India. Despite that, in all mandis, agricultural products are selling below MSP. In this situation, the government must withdraw the new laws at the earliest. Let the state governments amend the APMC act to ban below-MSP sale like Madhya Pradesh APMC act.

Government of India’s procurement programmes and MSP are being continuously challenged by USA, Canada, Brazil and Australia in the WTO as trade distorting subsidies. To protect MSP and the procurement programme, the Government of India has to either  quit the WTO or  state governments have to fix MSP for all agricultural products (so that these are out of the purview of the WTO) and ban purchase below MSP. We suggest that state governments fix MSP for all agricultural products and ban purchase below MSP. This will ensure a price more than MSP for farmers.

Free Market Policy not at all good for farmers

Free market based policies never help farmers. That is why free market economies like the US and EU offer big support to agriculture to make it viable in these economies.  United States congress passed farm bill 2008 on June 18, 2008 the allotted subsidies was a $288 billion, it is for a five-year period. Farm bill 2014 authorizes $956 billion in spending over the next ten years. This is the largest allotment as farm bill. Some of the American NGOs and developing countries criticised the bill over its huge allotment. Then the government reply was that it is for ten years and it is for the special nutrition for the years of 2014-2018. But the Farm Bill 2019 allotted $867 billion of subsidies for farmers over the next four years.

European Union Subsidies per year is $65 billion. In India, these policies are not followed. Agricultural subsidies are very low, in comparison, in India.

Corporatisation of Agriculture will lead to the collapse of economy

Even after twenty years of liberalisation, the growth in industry and service has not provided enough jobs. Organised sector employment growth is still very small, and in 25 years, we know now that “structural adjustment” is a failure.  Developed economies in the time of corporatisation shed workers from the system. If the same thing happens in India, it would be disastrous. We can see the example of USA where in 1920, 2.4 lakhs farmers and 40 lakhs workers engaged in cotton farming. Corporatisation started in 1944. By 2019, only 1600 entities (including farmers and companies) were engaged in cotton farming; there were two lakh workers.

In India 58 lakh farmers are engaged in cotton cultivation and 70 lakh workers get 92 days of work per year in it. If corporatisation happens across all crops, where will these workers go? Which sector can possibly absorb such a large force of the unemployed? Already, the trends are clear. The Hindu reported on December 28, 2020 that former Union Minister Harsimrat Kaur Badal raised the issue of daily ceilings on cotton procurement imposed by the Cotton Corporation of India (CCI) in Punjab. There has been four-times reduction in purchase, with the purchase ceiling at 12,500 quintals when daily arrivals are 50,000 quintals. The schedule announced by CCI would extend procurement till next September – small farmers cannot store their produce that long, and will not be able to wait to sell for so long.

If jobs are lost in agriculture when job losses are also happening in other sectors, imagine what chaos would ensue. Automation in banking caused loss of 60,000 jobs in the year 2019. A World Bank research paper said, “automation threatens 69 per cent of the jobs in India, while 77 per cent in China”.

These agricultural laws will lead to corporatisation of retail trade and agriculture. One job in organised retail replaces 16 unorganised retail jobs, on average. Wherever organised retailers occupied major share of retail trade, inflation is very high. The best example of this is Britain where 83 per cent retail is controlled by big players; the UK has even witnessed violent protests against inflation.

Contract farming

Section 37-A of The Madhya Pradesh Krishi Upaj Mandi Athiniyam 1972 is to regulate marketing of agricultural produce under contract farming. This simple provision is far better than the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020. Then why does the Centre insist on a central law? The only possible answer is its support to corporates.

The way out

Article 254 (2) of the Constitution of India states: “Where a law made by the Legislature of a State with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State.”

Article 254 (2) provides a manoeuvre to save a state law which is repugnant to the central law on matters under the Concurrent List. As such, it relaxes the rule of repugnancy contained in Article 254 (1). Under ordinary circumstances, the Central law reigns supreme over a State law, rendering the State Law void. However, there may arise some extraordinary circumstances in a State, under which special provisions made by the State will be more desirable than a uniform Central law. As such Article 254 (2) was incorporated in the Constitution to maintain an element of flexibility and to make it possible to have a State law suitable to local circumstances against a contrary Central law.

As per the Constitution, let state governments pass laws. The State Governments must pass new laws related to agricultural trade and commerce (concurrent list) and create new farmer friendly contract farming law in consultation with farmers’ organisations. These new laws must contain a provision that ban the sale or contract below MSP and purchase below MSP must be made a punishable offence.

These can be sent to the President as per the Article 254 (2) of the Constitution. Madhya Pradesh APMC Act 1972 got the President’s assent. Tamil Nadu Contract Farming Act got the President’s assent.

The Central act is dangerous for farmers. Let state governments decide on agriculture issues.

Please repeal these laws.



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