Indian economy is heavily dependent on agriculture almost 58% of the population of India, relying on it as their primary source of income. Both the Bharatiya Janata Party (BJP) (Page 13) and the Indian National Congress (INC) (Page 17) promised to develop this sector in their 2019 manifestos. However, despite the apparent political will, the Farm Income Growth saw a 14- year low in 2018. The growth of agriculture in 2019-20 and its contribution to the Gross Value Added (GVA) also decreased from 18.2% in 2014-15 to 16.5% in 2019-20. The COVID-19 pandemic has made things worse with additional difficulties, like difficulty in finding labourers and travel restrictions. In this light, the farmers were eagerly looking forward to constructive steps by the government that would benefit them. This two-part post looks at the various social and legal issues that this ordinance creates. Part I will look at the specific portions of the Ordinance and how they upset or worsen the current status quo. Part II will delve into the issue of federalism, since agriculture is a state list subject but has been legislated upon, in this case, by the Central government.
On 5 June 2020, the President promulgated two ordinances with the specified aim to boost rural India and agriculture. One of these was The Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020 (“the Ordinance”). Ever since its promulgation, the ordinance has been continuously opposed by the many farmer organisations in Punjab, and Haryana, the very segment that the ordinance was intended to support.
The ordinance has been promulgated as a part of the Aatmanirbhar Bharat Abhiyan of the Prime Minister with the intended view to increase farmer income. The official press release stated that “when the whole ecosystem of agriculture and its allied activities was tested during the COVID-19 crises, it reconfirmed the necessity for the Central Government to speed up the reform process to improve intra-state and interstate trade of agricultural produce.” The press release also highlighted the government’s efforts in facilitating a better price for the farmer to sell agriculture produce by increasing the number of prospective buyers.
The ordinance allows inter-state and intra-state trade of agricultural products beyond the state recognised markets (“mandis”). It also expanded the ambit of the term ‘trader’ to include any individual or collective with a valid PAN card. It has removed any and all taxes that were earlier levied by states and made provisions for the establishment of electronic trading. A three-day deadline for the payment to producers has been prescribed along with a dispute resolution mechanism outside the courts via the SDM’s office. While, this seems to be a step towards a free market which would potentially be helpful for farmers, it is riddled with economic and socio-legal issues that will explored and expounded upon in this article.
ALL THAT IS WRONG WITH “THE ORDINANCE”
Effective Dismantling of the Minimum Support Price (MSP)?
The BJP in its manifesto had advertised that it has significantly improved the earnings of the farmers by increasing the MSP to 1.5 times of the previous value. It is shocking that after identifying the increase in the MSP as a tool to increase farmer earnings, the government has, via the Ordinance, discontinued with the practice of setting the MSP.
The Niti Aayog’s 2016 report on the “Efficacy of the MSP” found that 94% of all farmers wanted the government to continue with the setting of the MSP even if 79% farmers were dissatisfied with the amount that had been set. The above-mentioned report also highlights (Page 86) that the setting of the MSP is an important policy for a wide array of reasons, including but not limited to: protecting farmers from middlemen and fluctuating market conditions; stabilising market prices and hence allowing farmer to use modern agricultural tools and ensuring a minimum return for their produces.
The ordinance aims at increasing the participation of the private sector in the procurement of crops from farmers. It allows farmers to sell their crops anywhere, including outside the government mandis. It also considerably relaxes the requirements to be a “trader.” A trader can buy crops from a farmer and anyone with a valid PAN card can be categorised as a trader. This will increase the number of private financiers in the agricultural sector. As a result moneylenders will take advantage of this situation and buy crops at a lower rate than the state government through agreements to buy the crop before it has the chance to hit the government mandis and incur them any profit.
Will the Dispute Resolution Mechanism help?
Section 8 of the Ordinance provides for its own dispute resolution mechanism with three levels, each with a time limit of 30 days. The first level is a Conciliation Board constituted by the Sub-Divisional Magistrate (SDM), the second being a Sub-Divisional Authority and the third being an Appellate Authority consisting of the Collector or Additional Collector. While this is a progressive step in ensuring that the judiciary is not over-burdened and the brunt of delays is not felt by the farmers, there are still many unanswered questions in the current drafting of the Ordinance.
Firstly, the language doesn’t clarify which SDM will have jurisdiction over the matter, since now farmers have been incentivised to sell to traders outside their state as well. The general rule of law for civil suits as per the Code of Civil Procedure gives the plaintiff the right to choose between the place of business/residence of the defendant and where the cause of action might have arisen. However, to prevent long suits related to forum non-conviniens, the government regulations should clarify the rule for the same. Secondly, authorities like the SDM or Collector are very busy with other official duties and there is a general tendency of delay in administrative tribunals like these. Thirdly, the larger question of the efficacy of administrative tribunals has already been called into question by the Law Commission of India’s Report No. 272, and it is unlikely that the dispute resolution mechanism under the Ordinance will be any different.
Farmer suicide is a phenomenon that has plagued the Indian economy for a long time. The government has conspicuously been silent around the issue. The statistics of 2016 were finally released towards the end of 2019 and the statistics starting 2017 are still not available. The available figures depict that 11,379 farmers committed suicide in India, in 2016 alone. This is primarily because of the inequality in bargaining power between private money lenders and farmers. The relaxation in the ordinance on who can be a trader further skews the balance of power in the favour of money lenders.
As discussed above, the requirements to be a “trader” for the procurement of crops have been relaxed to include any individual or collective with a valid PAN card. This increased intervention of money lenders into the market of crops will de facto allow them to buy standing crops as an off-set for the loans. When the farmers are compelled to sell at the MSP in a government mandis, they can still retain a part of the profit after paying back money-lenders. However, there is a high degree of probability that money-lenders will enter into agreements to buy crops at a lower price than the MSP in return for financing the producer. This issue has also been highlighted in various protests around the country. These protests will only increase as the oppression of the farmers increase. In the current pandemic, the probability of spread of the COVID-19 in these large gatherings is an added cause of worry.
Part II of this post will take up the bigger question of federalism and how this ordinance has possibly disrupted the constitutional mandate of separate list of subjects for legislation for both the central and state governments as given in the Seventh Schedule.