Three Agrarian Ordinances: Undermine State Autonomy and Harmful to Farmers

The cabinet of the Union Government approved three ordinances on June 03 and notified in the Gazette of India on June 05, 2020. These ordinances are: (i) The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Ordinance,2020; (ii) Farmers (Empowerment And Protection) Agreement On Price Assurance And Farm Services Ordinance, 2020; and (iii) The Essential Commodities (Amendment) Ordinance,2020. The first ordinance states that its purpose is to provide “the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels”. While the second ordinance is intended “to provide a national framework on farming agreements that protects and empowers farmers to engage with agree-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework.” The third ordinance states that it intends “for the purpose of increasing competitiveness in agriculture sector and enhancing the income of the farmers, the regulatory system needs to be liberalised while protecting the interests of the consumer. Thus, all the three ordinances formally are aimed to protect the farmers’ interests, that is why these are described as measures of agrarian reforms. There is a common running thread in three ordinances i.e. the encroachment on the subjects in the State List of the Constitution of India and greater freedom and enlarged role of big private traders in trade of agriculture produce.

Attack on State Autonomy

Although these ordinances aim to protection of Indian farmers, provide them better prices and increase their income yet the study of deep structure of these ordinances tell a different story. In the first place these ordinances give a heavy shock to the autonomy of the States and tilts the balance of Center-State relations or federalism in favour of the Union Government. In the process of issuing of these ordinances the Union Government has neither consulted States nor the opposition parties. An impression goes that the Union Government is no more interested in “cooperative federalism”. The process of issuing these ordinances is unilateral on the similar lines that of abrogation of Article 370 in case of Jammu and Kashmir. These ordinances are violative of several entries in the List II or State List in Constitution of the country. The entry 14 in the State List reads as “Agriculture including agricultural education and protection against pests and prevention of plant diseases”. The following entry no. 15 is written as “Preservation and protection and improvement of stock and prevention of animal diseases; veterinary training and practice. On the basis these entries the States have developed research and extension services in public sector for agriculture and animal husbandry. The ordinance on Farmers Agreement on Price Assurance and Farm Services mentions handing over agricultural services including veterinary services to the private companies entering contract farming with the farmers and they are exempt them from application of any State Act. The ordinance on The Farmers’ Produce Trade and Commerce violates entry 26 of the State List which reads as “Trade and commerce within the State to the provision of entry 33 of List III” or the Concurrent List. The Chapter II of the ordinance in section 3 states that “any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on inter-state or intra-state trade and commerce in a trade area”. Further section 6 of the Chapter II reads as “No market fee or cess or levy by whatever name called under any State APMC (Agriculture Produce Market Committee) Act or any other State law shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce” This is violative of entry 66 of the State List which empowers States to charge “Fees in respect of any matter in this List”. The entry 26 of this List allocates the “Trade and commerce within the State subject to provision of entry 33 in the Concurrent List. The entries 27 and 28 of the State list allocate “Production, supply and distribution” and “Markets and fairs” in the realm of State administration. This ordinance over rides the State APMC Act and allows private markets in the area of market committee free from the regulation of the committee and disallows charging of any fee, cess or levy on traders or farmers operating in the private markets. With this the States will suffer considerable loss of revenue on this count which the Constitution grant as them as a right. The Punjab Budget of 2020-21 has a provision of Rs. 1950 crore each for market fee and Rural Development Fund Thus this State is expected to lose total of Rs. 3900 crore in a single year. This revenue is used for development and maintenance of market yards and village link roads. This ordinance will make each State to lose substantial amount of revenue and make them further financially stressed. The Essential commodities (Amendment) Ordinance excluded the supply of foodstuffs including cereals, pulses, potatoes, onions, edible oils from the list of essential commodities. Their storage and prices cannot be regulated in normal situation. The government can regulate them only in the extraordinary situation like war, famine, extraordinary rise in the prices and natural calamity of grave nature. This ordinance removes the stockholder limit on the processors, value chain participants of any agricultural produce if it does not exceed the overall ceiling of installed capacity of processing or demand for export in case of an exporter. It allows big trading, processors and export companies to hold stock of agricultural produce. The other ordinance allows them to procure from anywhere in the country without paying any taxes or fee or levy under any State APMC Act. This will allow big players to manipulate prices of agricultural produce.

Under the garb of protecting the farmers to provide them remunerative prices and increase their income, the autonomy of the States is substantially reduced. Earlier allowing the 2% additional borrowing over and above 3% of GSDP (Gross State Domestic Product) permitted under Fiscal Responsibility and Budget Management Act to fight the situation under Covid 19, a condition was imposed to collect electricity bills from the farmers for tube wells and then transfer subsidy to them through direct bank transfer (DBT). This created a lot of uncertainty among the farmers about continuity of power subsidy to them. The ordinances are in continuity with implementation of GST in the country which has taken away power of the States to impose taxes under value added tax (VAT). The GST experience is very bitter with the States as they suffered 3-4 month delay in getting their share of taxes. The States have a large responsibility towards citizens ranging from general administration, law and order, judicial system, development activities, the provisioning of health, education and welfare measures. In absence of sufficient autonomy to raise revenue, manage funds and functionaries, the status of States will be reduced to the level glorified Municipal Corporations and the States will not be able to deliver on their responsibilities. In such a large and diverse country which India is ‘one fit all’ model does not work. In the interest of balanced regional development the sufficient autonomy must be ensured for sustainable development.

Farmers’ Interests Get Beating

These ordinances are in the name of promoting Indian farmers’ interest provide wide ranging scope of expansion of trade in agriculture produce by big private trading, processing and exporting companies. More than 86% of Indian farmers are small and marginal, they have no capacity to involve themselves in such activities. If these ordinances are read along with Shanta Kumar Committee Report (GOI, 2019 pp.21-22,56-57) which suggests trimming of role of FCI because of its high cost of storage of grains and recommends assignment of this role to private traders.

If these ordinances are converted into Acts after getting approval of the Parliament this will deepen the ongoing agrarian. In the situation of procurement crisis of wheat and paddy the State governments will become helpless to redress the crisis of the farmers. The bitter experience of farmers in dealing with sugar mills is a pointer towards the shape of things in future. It is well known that the sugar mills did not pay to the farmers their dues of sugarcane sold to these mills for the period ranging from 3-5 years and the governments could not do anything to help in redressing the grievances of the farmers. This lesson needs to be examined by the State governments and farmers’ organisations while examining these ordinances.

When ordinances become fully operational, the area market committees will lose market fees and the State governments will lose rural development fund. The market fee is used for development and maintenance of market yards and facilities for farmers and rural development fund is used for rural infrastructure especially construction and repair of village link roads. In this situation of revenue loss it will be difficult to maintain the rural infrastructure and repair the rural link roads and farmers will face big problem in bringing their produce to the market yards whether maintained by the Mandi Board or in the private market yards of Companies envisioned in the ordinances. These ordinances intend to attack the present agricultural marketing system dominated by market committees under the control of the State governments. The farmers need to recall the experience of price fluctuations before the present marketing system for agricultural produce was created after the mid 1960s after setting up of Agriculture Price Commission in 1965 and later its name was changed to Commission for Agriculture Costs and Prices (CACP). The earlier system was exploitative both for farmers and consumers. In the pre 1965 the traders dealing the agricultural commodities were small and local. Now the size of these traders and their capacity to control is much larger as compared to traders in pre green revolution era. Now the traders are going to be large companies which are pushing the agenda of corporatisation of agricultural produce. Large companies will convert agricultural trade in monopsony market form and the State governments will find difficult to handle them and redress the farmers’ grievances on this count. Under monopsony market conditions both farmers and consumers are likely to lose on price front. In this market form a few big companies will be pitted against 120 millions of the farmers in this country. They will rig prices at the time of procurement to the disadvantage of the farmers and charge high prices from the consumers after the harvesting season.

It is important that the regional political parties and farmers’ organisations understand the underlying message of these ordinances. Understanding of some leaders that they will be able to save MSP after ordinances become fully operational is misplaced and they don’t realise the depth of the agrarian crisis towards which theses ordinances will lead. Indian farmers are already neck deep in crisis and these ordinances will further push them to ruination. The policy making of the country has been transferred to the corporates and they are calling the shots in their own self interest. They are redrafting the rules of the game in economic affairs to suit their profitability. There is now a need to shift the policy in favour of the common people. The ordinances are issued at a time when people are fending for their life and health. The experience of lock down period shows that it is largely government sector which came forward while private sector did not pay wages to their workers who have started moving to their homes back. In this situation bringing such legislation through the route of ordinances is unfortunate. They should have been thoroughly discussed with the states and the stakeholders before their Gazette notification.

Note: An earlier version of this article has appeared in Punjabi Tribune (Chandigarh) on 9th and 10th June 2020. 

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