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India’s Supreme Court stays contentious farm laws, but settlement may be a far cry

SAM SPECIAL-13-01-2021

The Indian farmer’s agitation at New Delhi, which has been on since November 26, was in a logjam on Tuesday with the farmers refusing to accept a committee proposed by the Supreme Court to go into the issues involved. 

Earlier in the day, the court headed by Chief Justice S.A. Bobde put on hold the three contentious farm laws and said a committee would be formed to take over negotiations to end the crisis.

The contentious central government laws are: the Farmers' (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, and the Essential Commodities (Amendment) Act.

The committee will have H.S. Mann of Bharatiya Kisan Union (BKU), Pramod Kumar Joshi, Ashok Gulati and Anil Dhanwat of Shetkari Sangathan as members, the court said. 

But in the evening the farmers said that they will not interact with the committee as the members are pro-government and had supported it on the issue earlier. 

Thousands of agitating farmers, mainly from neighboring Punjab and Haryana, have been camping at Delhi's borders since November 26 in the biting Delhi winter, sleeping in tents and tractors.

The Supreme Court had earlier asked the Central government if it was willing to hold the implementation of the laws, while warning that the court would hold them if the government did not. Attorney General K.K. Venugopal was asked to come back with a response. Likewise, Senior advocate Dushyant Dave, representing the farmers' unions, was also asked to consult the farmers and inform the court if they were willing to join the deliberations before the proposed committee. 

However, late Monday evening, the unions issued a statement saying that they would not appear before the committee since the government's affidavit said that the laws would not be repealed.

Ahead of this, eight rounds of talks were held between the central government officials and the farmer unions but had failed to end the deadlock as the government ruled out repealing the contentious laws while the farmer leaders said they would return home only after the laws were withdrawn.

However, not all three Acts should actually worry the farmers. Only one of them, which enables the Central government to poke its nose into the States’ affairs, should. 

Act on stockpiling 

The Essential Commodities (Amendment) Act is about doing away with the central government’s powers to impose stock holding limits on foodstuffs, except under “extraordinary conditions” such as war, famine, other natural calamities of grave nature and annual retail price rise exceeding 100% in horticultural produce (basically onions and potato) and 50% for non-perishables (cereals, pulses and edible oils).

In view of the fact that stock limits apply only to traders (the Act exempts processors, exporters and other “value chain participants” as long as they don’t keep quantities beyond their installed capacity/demand requirements) farmers should not be concerned at all. In fact, farmers would gain from removal of stocking restrictions on traders, as it would translate into unlimited buying and demand for their produce.

Act on contract cultivation

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act has to do with providing a regulatory framework for contract cultivation. This Act specifically concerns agreements entered into by farmers with agri-business firms (processors, large retailers or exporters) ahead of any planting/rearing season for supplying produce of predetermined quality at minimum guaranteed prices.

It is pointed out that farmers have no reason to object to an Act that enables contract farming. Such exclusive agreements between companies and farmers are already in existence in relation to crops of particular processing grades. It applies to potatoes used by beverages and snacks giant PepsiCo for its Lay’s and Uncle Chipps wafers or dedicated for exports (gherkins). The processors/exporters in these cases undertake assured buyback at pre-agreed prices, and also provide farmers seeds/planting material and extension support to ensure that only produce of desired standard is grown. This arrangement is actually helping farmers.

And contract cultivation is voluntary and apply to crops not covered by trading in regular the Agricultural Produce Market Committee (APMC)-run agricultural markets called Mandis in North India. There is hardly any domestic market for gherkins, just as the high dry matter and the low sugar content potato that PepsiCo needs for its chips is different from the potato used in Indian kitchens. Farmers don’t sell sugarcane and milk in Mandis. Sugar mills and dairy plants routinely source through contract farming. 

Therefore, an Act that formalizes contract cultivation through a “national framework” and explicitly prohibits any sponsor firm from acquiring the land of farmers – whether through purchase, lease or mortgage – should actually be welcomed by the farmers.

The contentious issue

However, the really contentious Act is the one which abridges the rights of States and increases the hegemony of the Central government in federal India.

The Act in question is: the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act. It permits sale and purchase of farm produce “outside” the APMC Mandis. Further such trades (including on electronic platforms) will attract no market fee, cess or levy “under any State APMC Act or any other State law”.

The issue here is the right of the Central government to enact legislation on agricultural marketing. Article 246 of the Indian Constitution places “Agriculture” in entry 14 and “markets and fairs” in entry 28 of the State List. But entry 42 of the Union List empowers the Centre to regulate “inter-State trade and commerce”. But while trade and commerce “within the State” is under entry 26 of the State List, it is subject to the provisions of entry 33 of the Concurrent List, under which the Centre can make laws that would prevail over those enacted by the States.

Entry 33 of the Concurrent List covers trade and commerce in “foodstuffs, including edible oilseeds and oils”, fodder, cotton and jute. In other words, the Central government can pass any law that removes all impediments to both inter-State and intra-State trade in farm produce, while also overriding the existing State APMC Acts. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act enables that. But farmers do not want any restrictions on the movement, stocking and export of their produce.

Much of government procurement at Minimum Support Prices (MSP) (of paddy, wheat and increasingly of pulses, cotton, groundnut and mustard) happens in APMC Mandis. It is feared that if more and more trading moves out of the APMC Mandis, these regulated markets will lose revenues and may shut down. Farmers will then be at the mercy of big corporates.

Additionally, there is worry over the dispute resolving mechanism for transactions outside the Mandis. The Act proposes that disputes be referred to the Sub-Divisional Magistrate and District Collector. But these are government officials, not independent courts, the farmers point out. 

At the committee, the farmers may make a strong pitch for the retention of the Minimum Support Price (MSP) system because it protects them from the vagaries of the weather which make farming an uncertain and risky profession in India.