A few weeks ago, in response to the initial protests by farmers against the new central farm laws, three state assemblies – Chhattisgarh, Punjab, and Rajasthan – passed Bills to address farmers’ concerns.  While these Bills await the respective Governors’ assent, protests against the central farm laws have gained momentum.  In this blog, we discuss the key amendments proposed by these states in response to the central farm laws.

What are the central farm laws and what do they seek to do?

In September 2020, Parliament enacted three laws: (i) the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, (ii) the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and (iii) the Essential Commodities (Amendment) Act, 2020.  The laws collectively seek to: (i) facilitate barrier-free trade of farmers’ produce outside the markets notified under the various state Agriculture Produce Marketing Committee (APMC) laws, (ii) define a framework for contract farming, and (iii) regulate the supply of certain food items, including cereals, pulses, potatoes, and onions, only under extraordinary circumstances such as war, famine, and extraordinary price rise.

How do the central farm laws change the agricultural regulatory framework?

Agricultural marketing in most states is regulated by the Agricultural Produce Marketing Committees (APMCs), set up under the state APMC Act.  The central farm laws seek to facilitate multiple channels of marketing outside the existing APMC markets.  Many of these existing markets face issues such as limited number of buyers restricting the entry of new players and undue deductions in the form of commission charges and market fees.  The central laws introduced a liberalised agricultural marketing system with the aim of increasing the availability of buyers for farmers’ produce.  More buyers would lead to competition in the agriculture market resulting in better prices for farmers.  

Why have states proposed amendments to the central farm laws?

The central farm laws allow anyone with a PAN card to buy farmers’ produce in the ‘trade area’ outside the markets notified or run by the APMCs.  Buyers do not need to get a license from the state government or APMC, or pay any tax to them for such purchase in the ‘trade area’.  These changes in regulations raised concerns regarding the kind of protections available to farmers in the ‘trade area’ outside APMC markets, particularly in terms of the price discovery and payment.  To address such concerns, the states of Chhattisgarh, Punjab, and Rajasthan, in varying forms, proposed amendments to the existing agricultural marketing laws.

The Punjab and Rajasthan assemblies passed Bills to amend the central Acts, in their application to these states.  The Chhattisgarh Assembly passed a Bill to amend its APMC Act in response to the central Acts.  These state Bills aim to prevent exploitation of farmers and ensure an optimum guarantee of fair market price for the agriculture produce.  Among other things, these state Bills enable state governments to levy market fee outside the physical premises of the state APMC markets, mandate MSP for certain types of agricultural trade, and enable state governments to regulate the production, supply, and distribution of essential commodities and impose stock limits under extraordinary circumstances.

Chhattisgarh

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 allows anyone with a PAN card to buy farmers’ produce in the trade area outside the markets notified or run by the APMCs.  Buyers do not need to get a license from the state government or APMC, or pay any tax to them for such purchase in the trade area.  The Chhattisgarh Assembly passed a Bill to amend its APMC Act to allow the state government to notify structures outside APMC markets, such as godowns, cold storages, and e-trading platforms, as deemed markets.  This implies that such deemed markets will be under the jurisdiction of the APMCs as per the central Act.  Thus, APMCs in Chhattisgarh can levy market fee on sale of farmers’ produce in such deemed markets (outside the APMC markets) and require the buyer to have a license.

Punjab and Rajasthan

The Punjab and Rajasthan Bills empower the respective state governments to levy a market fee (on private traders, and electronic trading platforms) for trade outside the state APMC markets.  Further, they mandate that in certain cases, agricultural produce should not be sold or purchased at a price below the Minimum Support Price (MSP).  For instance, in Punjab sale and purchase of wheat and paddy should not be below MSP.  The Bills also provide that they will override any other law currently in force.  Table 1 gives a comparison of the amendments proposed by states with the related provisions of the central farm laws. 

Table 1: Comparison of the central farm laws with amendments proposed by Punjab and Rajasthan

Provision

Central laws

State amendments

Market fee

  • The central Acts prohibit the state governments and APMCs from levying any market fee, cess, or any other charge on the trade of farmers’ produce outside the market yards notified or run by APMCs.
  • The state Bills empower the state government to levy a fee (on private traders and electronic trading platforms) for trade outside the markets established or notified under the respective state APMC Acts.  Such fees collected will be utilised for the welfare of small and marginal farmers in case of Punjab, and for running of the APMCs and welfare of farmers in case of Rajasthan.

Minimum Support Price (MSP) - fixed by the central government, based on the recommendations of the Commission for Agricultural Costs and Prices

  • The central Acts do not provide for the MSP.  They do provide for a contractual agreement for buyers and farmers to enter into prior to the production or rearing of any farm produce.  This agreement must specify a minimum guaranteed price that the buyer will pay to the farmer for the sale.  
  • The Punjab Bill provides that sale or purchase of wheat or paddy in state should be at prices equal to or above the MSP.
  • The Rajasthan Bill provides that the pre-determined prices for all crop under farming agreements should be at prices equal to or above the MSP.  

Penalties for compeling farmers to sell below MSP

  • Not prescribed.
  • In Punjab, if any buyer compels a farmer to sell wheat or paddy at a price below MSP, he will be penalised with an imprisonment term of at least three years and a fine.  
  • In Rajsthan, if a buyer compels a farmer to enter into a farming agreement below MSP, it will attract imprisonment between three and seven years, or a fine up to five lakh rupees, or both.

Delivery under farming agreements

  • The central Acts provide that the delivery of the produce can be: (i) taken by buyers at farm gate within the agreed time, or (ii) made by the farmer, in which case the buyer will be responsible for preparations for timely acceptance of the delivery. The buyer may inspect the quality of the produce as defined in the agreement.
  • In Rajasthan, if a buyer refuses to accept agricultural produce or take delivery of goods within a week from date of intimation by the farmer, he will attract imprisonment between three and seven years, or a fine of up to five lakh rupees, or both. 

Regulation of essential commodities

  • The Essential Commodities Act, 1955 empowers the central government to regulate the production, supply, distribution, storage, and trade of essential commodities, such as medicines, fertilisers, and foodstuff.  The Essential Commodities (Amendment) Act, 2020 empowers the central government to regulate the supply of certain food items, including cereals, pulses, potato, and onions, only under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity of grave nature.  
  • The state Bills provide that the respective state government will also have the powers to: (i) regulate the production, supply, and distribution of essential commodities, and (ii) impose stock limits under extraordinary circumstances.  Such circumstances may include: (i) famine, (ii) price rise, (iii) natural calamity, or (iv) any other situation.

Imposition of stock limit

  • The Rajasthan Bill amending the central Act empowers the state government to impose stock limits, under certain conditions, on any farm produce sold under a farming agreement.  These conditions are: (i) if there is a shortage of such farm produce in the state, or (ii) if there is a 25% increase in prices of such produce beyond the maximum price which was prevailing in the market (within two years before passing of such an order by the state government).

Dispute Resolution Mechanism for Farmers

  • The central Acts provide that at first, all disputes must be referred to a Conciliation Board for resolution.  If the dispute remains unresolved by the Board after 30 days, the Sub-Divisional Magistrate (SDM) may be approached for resolution. 
  • Further, parties can appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the SDM.  Both SDM and Appellate Authority will be required to dispose a dispute within 30 days from the receipt of application.
  • Instead of the dispute resolution mechanism specified under the central Acts, the Rajasthan Bill provides that disputes will be resolved by APMCs, as per the provisions of the state APMC Act.  

Power of civil courts

  • The central Acts prohibit civil courts from adjudicating over disputes under the Acts. 
  • The Punjab Bill allows farmers to approach civil courts or avail other remedies under existing laws, in addition to those available under the central Acts.
  • The Rajasthan Bill provides that the jurisdiction of civil courts over disputes will be as per the state APMC Act and rules under it.  Currently, the state APMC Act prohibits civil courts from adjudicating over disputes related to trade allowance and contract farming agreements under the Act.

Special provisions

  • -
  • The Bills provide that the state APMC Act will continue to apply in the respective states, as they did prior to enactment of the central Acts (i.e. June 4, 2020).  Further, all notices issued by the central government or any authority under the central Acts will be suspended.  No punitive action will be taken for any violation of the provisions of the central Acts. 

Note: A market committee provides facilities for and regulates the marketing of agricultural produce in a designated market area. 

Have the state amendments come into force?

The amendments proposed by states aim to address the concerns of farmers, but to a varying extent.  The Bills have not come into force yet as they await the Governors’ assent.   In addition, the Punjab and Rajasthan Bills also need the assent of the President, as they are inconsistent with the central Acts and seek to amend them.  Meanwhile, amidst the ongoing protests, many farmers’ organisations are in talks with the central government to seek redressal of their grievances and appropriate changes in the central farm laws.  It remains to be seen to what extent will such changes address the concerns of farmers.

 

A version of this article first appeared on Firstpost on December 5, 2020.

On June 3, 2011, the National Advisory Council (NAC) posted the draft of the National Food Security Bill on its website and has asked for public feed back on the Bill by June 12, 2011. Key Features of the Draft National Food Security Bill, 2011 -          Every person shall have the right of access to sufficient and safe food either directly or by purchasing the food. -          The central and state government shall share the financial cost of procuring, storing and distributing food grains to the population entitled to it. -          There are special provisions for pregnant and lactating mothers, children in the 0-6 age group, destitute persons, homeless persons and disaster affected persons.  The appropriate government shall take immediate steps to provide relief to persons living in starvation. -          The state government shall provide all children upto class 8 freshly cooked meal in all schools run by local bodies and the government.  It shall also provide mid-day meals to children who are admitted under the 25% quota for children belonging to disadvantaged groups in unaided private schools -          Each household shall be categorised into priority and general in rural and urban areas. -          Each individual in the priority group households shall be entitled to at least 7kg of grain every month at a maximum price of Rs 3/kg for rice, Rs 2/kg for wheat and Rs 1/kg for millets. -          Each individual in the general group households shall be entitled to 4kg of grain per month at 50 per cent of the Minimum Support Price for paddy, wheat and millet. -          The state government can exclude certain persons who fulfil the exclusion criteria in rural and urban areas.  However, it has to cover at least 90% of the population in rural areas and 50% of the population in urban areas. -          The Bill lays down norms for procurement, storage and distribution of food grains under the Public Distribution System.  It also gives detailed norms for Fair Price Shops, ration cards, and monitoring the system. -          It seeks to set up a National Food Commission and State Food Commission in each state.  The Commission shall inquire into complaints on denial of entitlement, advise central and state governments and monitor the schemes.  Each district shall have a District Grievance Redressal Officer. -          The Bill includes penalties for dereliction of duty by public servants, which includes deduction of penalty from the salary of the public servant. -          Any person deprived of his entitlement to food shall be entitled to compensation from the appropriate government. -          The Gram Sabhas should conduct social audits of all schemes under this Act. The Back Story to the Bill The Right to Food Campaign In April 2001, the People’s Union for Civil Liberties (PUCL) Rajasthan had filed a writ petition in the Supreme Court against the Government of India, Food Corporation of India, and six state governments. The petition contended that the right to food was a fundamental right under “the right to life” provided by Article 21 of the Constitution of India. Although no final judgment has been given, the Supreme Court has issued several interim orders in the case.  Among the most significant of theses is the conversion of eight centrally sponsored schemes into legal entitlements, including the Public Distribution System (PDS), Antyodaya Anna Yojana (AAY), National Programme of Nutritional Support to Primary Education, also known as “Mid-Day Meals scheme”, and Integrated Child Development Services (ICDS), among others. Some orders by the Court in the area of food security include:

  • BPL families are entitled to 35kg of foodgrains at a subsidised price.
  • State governments are to implement the Mid-Day Meals scheme by providing every child in government schools and government assisted primary schools with a prepared mid-day-meal with a minimum content of 300 calories and 8-12 grams of protein each day of school for a minimum of 200 days.
  • Six priority groups have been identified who are entitled to the Antyodaya card.  The card entitles the people to 35 kg of grain per month, at Rs 2/kg for wheat and Rs 3/kg for rice.

On May 8, 2002, the Supreme Court appointed two Commissioners for the purpose of monitoring the implementation of the interim orders.  The Commissioners have submitted a number of reports highlighting the issues of concern on the implementation of the interim orders and making detailed recommendations. Government Initiatives One of the key commitments made by both UPA I and UPA II was on food security whereby it proposed to enact a legislation that would entitle every BPL family in both rural and urban areas to 25 kg of rice or wheat per month at Rs 3 per kg.  However, the Sonia Gandhi-led NAC has differences with the central government on the contours of the legislation.  The basic issues on which there are divergent views include (a) coverage under the Bill; (b) method to be adopted to ensure food security; (c) the amount of food grain required; and (d) the impact on the food subsidy burden. On October 23, 2010, the NAC made certain recommendations on the National Food Security Bill.  The Bill seeks to address nutritional deficiencies in the population. Some of its key recommendations are:

  • § Legal entitlements to subsidised food grains should be extended to at least 75% of the population – 90% in rural areas and 50% in urban areas.
  • § The priority households (46% in rural areas and 28% in urban areas) should have a monthly entitlement of 35kgs at Rs 1 per kg for millets, Rs 2 for wheat and Rs 3 for rice.  Rural coverage can be adjusted state-wise based on the Planning Commission’s 2004-05 poverty estimates.
  • § The general households (44% in rural areas and 22% in urban areas) should have a monthly entitlement of 20kgs at a price that does not exceed 50% of the current Minimum Support Price (the price at which the government buys food grains from the producer) for millets, wheat and rice.
  • § Government should specify criteria for categorisation of population into priority and general households.  Full coverage of food entitlements should be extended to all by March 31, 2014.
  • § Need for enabling provisions to revitalise agriculture, diversifying the commodities available under the Public Distribution System (PDS), ensuring universal access to safe water and proper sanitation, universalising primary health care, and extending nutritional and health support to adolescent girls.

In response, the Prime Minister set up an Expert Committee under Dr C. Rangarajan to examine the Bill and make recommendations.  The Rangarajan Committee submitted its report in January 2011.  It stated that it would not be possible to implement the NAC recommendations because of lack of availability of food grains and huge subsidy implications.  It was in favour of restricting entitlements of Rs 2/kg for wheat and Rs 3/kg for rice to households falling below the Tendulkar Committee poverty line plus 10 per cent of the BPL population.  This is equivalent to 48 per cent of the rural and 28 per cent of the urban population, which is about the same as the NAC categorisation for priority households. The NAC however criticised the Rangarajan Committee’s stand and proceeded with the task of drafting an appropriate legislation.  It finally posted the draft of the National Food Security Bill on its website and has asked for public feedback. Divergent Perspectives The draft has been critiqued by various experts.  A group of distinguished economists wrote an open letter to Mrs Sonia Gandhi opposing the NAC’s draft on the grounds that it legalises the PDS even though there is a large body of evidence of the inefficiency of the system (see Wadhwa Committee reports and Planning Commission report).  The economists contended that in addition to reforming the PDS, other alternate models of subsidy delivery should be examined such as direct cash transfers or food stamps.  The system of direct cash transfer through food coupons was also outlined in the Economic Survey of 2009-10.  It stated that the system would be less prone to corruption since it would cut down government’s involvement in procuring, storing and distributing food grains. However, there are divergent views on direct cash transfer too.  Some experts such as the economist and member of NAC, Prof Jean Dreze contend that food entitlement is better because it is inflation proof and it gets consumed more wisely than cash which can be easily misspent.  Others are of the view that cash transfer has the potential for providing economic and food security to the poor. The ball is now in the government’s court.  According to news reports, the government may finalise the Bill soon and introduce it in the forthcoming monsoon session of Parliament.