Sow Only After Preparing Soil

The resolution of the agitation over the new agricultural market reform laws has become long-drawn and vexed due to various reasons. The government claims the Acts would benefit farmers; the latter disagree. However, the Centre has now recognised problems in the Acts’ design, especially the APMC mandi bypass law and the contract farming law. It is open to amending them. The farmer unions are demanding a complete repeal of the three Acts. Some of them also feel that there is a larger issue of violation of the Constitution, as agr­iculture and agricultural markets are state domains. Therefore, it is important to examine the withdrawal of these legislation or amendments to the existing Acts.

In the Farmers’ Produce Trade and Commerce (APMC bypass) Act, the major provisions which are up for amendment include those relating to the need of only a PAN card for a buyer, restriction on farmers and buyers for app­roaching civil courts for disputes if not satisfied with dispute resolution at the SDM and DC level, and restriction on the state from levying taxes on transactions in the ‘new trade area’ created by the Act. The unions want registration and licensing of buyers (not just a PAN card) so that there are records of buyers and some counter party risk coverage for the farmer, as in the case of APMC mandis where traders and commission agents have to give bank guarantees as risk cover for farmers. The demand for states to have power to levy taxes on new trade areas (outside the APMC market yard/sub-yard) is intended to create a level playing field bet­ween the mandis and new trade areas or private mandis and to protect the revenue of the state marketing agency and APMCs. It is argued that for small/marginal farmers, APMC mandis are the last resort channel of sale.

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Another problem with the two Acts is the use of the provision of the land revenue law to make recoveries of dues as ‘arears of land revenue’ from farmers. This led to the fear that land may be auctioned to make recoveries if farmers default under the contract farming arrangement. Another major problem is the way a production contract agreement is defined, which leads to doubts whether leasing is being permitted in the arrangement, though the Act clearly states that the sponsor (contracting agency) can’t transfer, lease, mortgage or sell farmers’ land.

In both Acts, farmer produce organisations (FPOs) are treated only as a farmer, and not a buyer, which needs correction. The Farmers’ Produce Act also provides for separate payment rules for FPOs—unnecessary, as these are member-owned bodies. It is undesirable to interfere in co-operative functioning with such rules. It is like telling Amul when and how to pay its members!

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In the Contract Farming Act, basic aspects of contract farming like acreage, quantity, and time of delivery are not specified. In fact, the 2003 model APMC Act had such provisions and even a model contract farming agreement. Surprisingly, despite keeping dispute settlement outside the purview of courts, guidelines say that a farming agreement must meet the requirements of contract law! If the contracts are not to be dealt with by civil courts, why have this condition? The Act also leaves out sophisticated aspects of modern contract farming practice, like contract cancellation clauses and damages therein.

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The Act links bonus and premium—over and above the guaranteed price—with mandi price or electronic market price, which is anti-contract farming in nature. The contract price should be left to the parties to negotiate and can’t be tied to APMC price—for the very rationale for this law was to provide an alternative channel to farmers and create competition due to the perception that APMC markets were not price efficient.

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Thus, there are many shortcomings in the laws but the demand to completely scrap them and enact fresh laws again is not likely to be very productive. Some farmer activists claim that if all the amendments as demanded by them are carried out, then the Acts may not be required at all. Therefore, shelving the enforcement of the Acts, until amendments are dec­ided upon, is the way forward to end the deadlock.

(The author is professor, IIM Ahmedabad. Views are personal.)