FARM BILLS 2020: WHAT ECONOMIC CONCERNS EXIST AHEAD?

With the vision of revolutionising agriculture sector, the BJP Government introduced three farm bills, namely The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, and the Essential Commodities (Amendment) Bill, 2020, was passed by both the houses of the parliament amidst mass opposition.

In brief, the bills aims to liberalize the agriculture sector by reducing government interference in agribusiness and creating a structure free of middlemen and allowing the trading to take place beyond the purview of Agriculture Produce Market Committees (APMCs), along with removing restrictions on private stockholding of agricultural produce. However, to the farming fraternity it is largely perceived as an aim to expand corporatisation of agriculture and gradual reduction of government support, which is estimated to put detrimental economic impacts.

Firstly, The Farmers (Empowerment & Protection) Agreement of Price Assurance and Farm Services Bill, draws a framework for contract farming agreement between farmers and buyer, prior to the sowing which aims to eliminate market intermediaries for full price realisation. Farmers are given assured pricing even before production, thus reducing the risk of crop failure and income instability which was burdened on the small farmers. It has highlighted the value chain development & interlinkages with concerned stakeholders, which can potentially boast the micro finance, microcredit business and also pave a way for public- private partnership in agriculture by allowing greater role of corporates in procurement and investments thus reducing farmer’s cost of marketing. However, in contract farming farmers will be the weaker players in terms of their power to negotiate thus giving an edge to the large corporates, exporters, wholesalers and other sponsors in the agreement, along with the incorporation of potential discretion by large entities’ in their willingness to come in contract with large small and marginal farmers. And the lack of a prescribed fixed price in the agreement can work contrary to the intention of protecting incomes of farmers, if left unregulated.

Secondly, Farmers produce trade and commerce (Facilitation & promotion) Bill has moved for the creation of alternate marketing system, which enables barrier free inter- state and intra- state trading of agriculture commodities by farmers and traders beyond registered ‘mandis’ under state APMCs. The idea of reinforcing trade mobility can constructively create a market structure by balancing out the regional surplus and deficit in production and procurement. It also provides possibility for efficient market information and management systems leading to a robust and standardised mechanism of price discovery by enabling virtual agricultural marketing, through electronic trading and transaction platform. The scope of competition among buyers is also provided by this bill which in a way can increase remuneration for the farmers.  At present, APMCs account for less than one fourth of total agricultural trade but is perceived to be an important component of agriculture market. For instance, in Bihar, which abolished APMCs in2006, experienced lower average pieces compared to the MSP crops. While the initiated bill does not do away with the APMC mandis, the inclination towards corporate interest at the cost of farmers’ interest and a lack of regulation in these non- APMC mandis are a source for apprehension. The dearth of any regulation in non- APMC mandis is being a predecessor to the withdrawal of the guarantee of MSP- based procurement, which is essentially an economic backbone to the greenfield workers.

The Essential Commodities Act gives the central government the power to decide certain commodities such as essential commodities, and the current idea of the bill is to remove cereals, pulses, oilseeds, edible oils, onions, and potatoes from their list of essential commodities and remove the stockholding limits of these except under ‘extraordinary circumstances’. However, price limits for such circumstances are so high that chances of such trigger are very less and it’s important to intervene in the market to prevent collapse of prices. This amendment has the potential of bringing private sector investment and FDI, by overcoming the apprehensions of excessive business regulation and strengthen infrastructure and modernise supply chain.

The bills have basically covered some crucial aspects of agriculture sector however anticipating radical changes and advances in the agriculture sector is irrational. Building trust on all the stakeholders involved in the implementation process and strengthening the relation between the government and greenfield workers are essential to transform the face of agriculture in India. Apparently, agriculture is the only sector to give emerging signs of recovery from the pandemic, thus it is essential to bolster the sector with vital provisions and regulations.

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