From UPSC perspective, the following things are important :
Prelims level : APMC Act
Mains level : Paper 3- Addressing the farmers apprehension about MSP
Farmers are protesting the farm laws which brought changes in the agri-produce marketing and the contract farming. Farmers are also demanding the legal backing of MSP. The article analyses the issues and suggests the measures to address them.
Analysing merits and feasibility of demands of protesting farmers
1) The Farmer Produce Trade and Commerce (Promotion and Facilitation) Act
- The Act creates a new “trade area” outside the APMC market yards/sub-yards.
- Any buyer with a Permanent Account Number (PAN) can buy directly from farmer sellers outside APMC market.
- The state government can’t impose any taxes on such a transaction.
- Therefore, it is expected that this would lower buying costs for buyers and that would automatically mean higher prices for farmers.
Concerns with the law
- Buyers buying at lower cost does not necessarily mean they would pass on the cost saved on procurement to selling farmers.
- The claim is also made that now farmers would have a choice of channels.
- However, the majority of the farm produce across India with the exception of states like Punjab and Haryana does not go through APMCs.
- Anybody with a PAN card allowed to buy agricultural produce could mean a free-for-all situation, which is not desirable.
2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act
What necessitated law on contract farming?
- Contract farming has shown that marginal and small farmers are generally excluded.
- The problems they face include the following-
- Highly one-sided i.e. pro-contracting agency contracts.
- Delayed payments.
- Undue rejections and outright cheating.
- Poor enforcement of contract farming regulation by the state governments.
Concerns with the law
- The Act defined FPOs (farmer producer organisations) as farmers, which restricts them to the supply side.
- But there is hardly any FPO in farm production.
- Further, the contract farming Act does not provide for remedies when companies cancel contracts or there is delay in taking delivery of produce.
- The Act says that sponsor would also pay, besides the minimum guaranteed price, a premium or bonus which will be linked to APMC or e-trading price.
- This goes against the very concept of contract farming.
- The contract price should be left to the contracting parties to decide.
- Further, if the understanding is that mandis are not discovering prices well, then why peg the contract price to such mandi price?
Lessons from 2003 APMC Act
- The government must go back to the 2003 Model APMC Act, which also had model contract agreement with mandatory and optional provisions in a contract.
- In the 2003 Model APMC Act, the APMC was supposed to resolve the disputes.
- Further under 2003 APMC Act when a licence is given to a trader or commission agent, there is a counterparty risk assurance.
Apprehensions about MSP
- The Shanta Kumar Committee report and the CACP reports had suggested reducing procurement and an end to open-ended procurement from states like Punjab to cut down costs of FCI.
- It is feared that FCI itself may start procuring directly from the new trade area to cut down buying costs like market fees and arhtiya commission.
- It is more about the changes in the “social contract” between the state’s farmers and the Union government.
- The demand for legal backing to MSP also arises from the fact that the government has been announcing MSP for 23 crops, but procurement is limited to a few crops.
- Also, CACP in one of its reports in 2017-18 (kharif) suggested that “to instil confidence among farmers for procurement of their produce, a legislation conferring on farmers ‘the right to sell at MSP’ may be brought out.”
- Punjab’s amendments to farm Acts — making MSP mandatory for wheat and paddy are ill-advised as this law will discourage private buyers from buying.
- It is difficult to enforce such a law. Private agricultural markets cannot be run through such diktats.
- By creating stringent rules (fine or imprisonment), the government may create a situation where farmers would not be able to sell at all.
- Maharashtra attempted this legality in 2018 in its APMC Act but had to reverse it after protests by traders.
Consider the question “What are the factors that necessitated the robust contract farming Act? What are the issues related to the Act? Suggest the measures to address these issues.”
Apprehension among the farmers related to the farm laws needs to be addressed and the concern in the laws need to be addressed.