Saturday, May 18, 2024

Empower the Contractors & Companies and Disempower the Farmers & States

What Lies in the Law: Analysis of the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

The devil resides in detail. One should dissect every section of new farm law, to uncover how “the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020” harms the agriculture, farmers and emasculates the state laws. This law replaces the welfare measures with market pleasures.

Three Lies in Title of Law: Title of this Act contains expressions‘their Empowerment’ and ‘Protection’, ‘Price Assurance’, which are not found in the entire text of the Act, except in the title of the Act, hence they areThreeLies as Law (No. 1 to 3). Neither content nor the intent appears to translate these expressions into real.

This FEAPAFS Act revolves around farm produce, terms, conditions, quantity, inputs supply etc to produce as per specifications, but this law is made under the ‘entry’ 33 of Concurrent List (List III) of the Constitution which reads as ‘food-stuff’. The Constitution in its division of power clearly says that agriculture and related matters are exclusively within the List II of states, over which neither the Centre has any executive power nor Parliament can legislate.

Lie as Law – 4: The Food-stuff as Farm Produce

Making this law under ‘food-stuff’ clause for ‘farm produce’ is the Lie as Law No. 4. Its arbitrary misinterpretation of ‘food stuff’ as farm produce and ultimately a fraud on the scheme of power-distribution adversely affecting the federal nature, which is also held to be ‘basic structure’ of the Constitution that cannot be amended by Parliament. There are two disabilities of Parliament: One- it cannot make laws that tamper with basic structure, two – it cannot make laws on the subjects entered in List II (states list).

Whole law centres around ‘farming produce’, nowhere ‘food stuff’ is mentioned. Section 2 (e) defines farmer as who engages in production of farming produce.  (f) defines ‘farmer produce organisation’, and (g) deals with ‘farming agreement’.

The drafters have brought ‘food-stuff’ into the broad definition of ‘farming produce” under section 2 (h) which says:

Section 2(h) “farming produce” includes—(i) foodstuffs, including edible oilseeds and oils, all kinds of cereals likewheat, rice or other coarse grains, pulses, vegetables, fruits, nuts, spices,sugarcane and products of poultry, piggery, goatery, fishery and dairy, intended for human consumption in its natural or processed form;(ii) cattle fodder, including oilcakes and other concentrates; (iii) raw cotton, whether ginned or unginned;(iv) cotton seeds and raw jute;

Lie as Law -5: Force Majeure

There is a force majeure provision, which does not guarantee protection of farmer.

Section 2 (j) says “force majeure” means any unforeseen external event, including flood, drought, bad weather, earthquake, epidemic outbreak of disease, insect-pests and such other events, which is unavoidable and beyond the control of parties entering into a farming agreement.

This clause may protect more the paying party rather than the farmer, who must receive the payment. A farmer, who is always victim of vagaries of nature, will possibly be the victim of force majeure in farm agreement also, which makes it unenforceable. Protection of farmer is doubtful. It is the Lie as Law No.5

Lie as Law – 6: Introduction of Sponsor

Section 2 (o) “Sponsor” means a person who has entered into a farming agreement with the farmer to purchase a farming produce;

This definition of ‘sponsor’ and the rights given to him under this Act, creates the new class of middlemen, which proves the Centre’s statement that middlemen will be removed is the Lie as Law No. 6.

Lie as Law -7: Liberation of Farmer

Section 3. (1) A farmer may enter into a written farming agreement in respect of any farming produce and such agreement may provide for—(a) the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters; and

(b) the terms related to supply of farm services:

When 80 per cent of farmers own less than 5 acres of land, who will be a weak party if pitted against a corporate giant. Each ‘expression’ like quality, grade and standards, price and such other matters, and terms related to supply of farm services’ will put him under the burden of proving such conditions which he can neither notice nor prevent. Whole of this law gives validity to those terms that increases the power of an already dominant trader. Liberation of farmer is the Lie as Law No. 7.

Lie as Law – 8: Price Assurance – A myth

Section 4 could be a source of problem: This extends the complexity and heavily weighing on one party of the contract that was initiated in Section 3.

4. (1) says: The parties entering into a farming agreement may identify and require as a condition for the performance of such agreement compliance with mutually acceptable quality, grade and standards of a farming produce.

(3) The quality, grade and standards for pesticide residue, food safety standards, good farming practices and labour and social development standards may also be adopted in the farming agreement.

(4) The parties entering into a farming agreement may require as a condition that such mutually acceptable quality, grade and standards shall be monitored and certified during the process of cultivation or rearing, or at the time of delivery, by third party qualified assayers to ensure impartiality and fairness.

This section emphasises that ‘as a condition for the performance’ with mutually acceptable quality further strengthens the company and makes farmer vulnerable. If the quality specified is not achieved by any ‘natural’ reason, there is no protection for enforcement of conditions beneficial to him. Because of this specification of a term, the force majeure clause may not come to farmer’s rescue. Farmers payment may suffer reductions if he cannot maintain quality because reason beyond his control. Farmer will be subjected to vagaries of nature and consequences of ‘contract’ also. Whom does this law liberate, and where is the price assurance? This law did not provide for Minimum Support Price, and the mechanism of Agricultural Markets States which give MSP are made irrelevant. Price Assurance is not given, but removed-the Lie as Law No. 8.

Lie as Law -9: Comparison with APMC price!

The main purpose of this law is to allow the state to give up its welfare role and legal protective cover to small and medium farmers. Protective state laws may not give any substantial benefit to rich and top-class farmers holding five to hundred acres, who are already trading with companies, raising commercial crops and selling to and at a price they want. All those farmers and their purchasing companies and agents are hailing the new farm law as they are out of restrictions of State Laws.  Section 5 says:

5. The price to be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself, and in case, such price is subject to variation, then, such agreement shall explicitly provide for—

(a) a guaranteed price to be paid for such produce;

(b) a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium, to ensure best value to the farmer and such price reference may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices:

Provided that the method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement.

Clause (b) of this section says that price can be bettered with link to prevailing prices in specified APMC yard etc. But there are other provisions of this law, which makes state laws and the APMCs completely irrelevant and many of them are already on the verge of becoming dysfunctional, starved of revenue, rendering hundreds jobless, and finally facing the extinction. Law makers know it. It is a deliberate misleading section. The Lie as Law No. 9.

Lie as Law -10: Government leaves farmers to sponsor.

The language of Section 6 gives the impression that farmers interests are taken care of, but in practice it imposes duty to deliver the produce at farm gate on time. It says sponsor mustmake all preparations to ensure to take such delivery. Those preparations may spell harsh to farmer. The Government will not do anything. Lie as Law -10.

6. (1) Where, under a farming agreement, the delivery of any farming produce is to be—(a) taken by the Sponsor at the farm gate, he shall take such delivery within the agreed time;(b) effected by the farmer, it shall be the responsibility of the Sponsor to ensure that all preparations for the timely acceptance of such delivery have been made.

Lie as Law-11: About APMCs and State Laws

Centre is saying that APMCs under state’s laws are not removed by the Centre. But it provided that the agreement between farmer and the company will exclude the State Law. Section 7(1) empowers the contract between company and farmer to override the State law on the subject. 

Section 7. (1) Where a farming agreement has been entered into in respect of any farming produce under this Act, such produce shall be exempt from the application of any State Act, by whatever name called, established for the purpose of regulation of sale and purchase of such farming produce.

A law made by Parliament, on concurrent subject, cannot wipe out the role of States like this. The Centre has abdicated the duty to reduce the inequalities but increasing them by not implementing the Directive Principles of State Policy, which are mandatory as fundamental for the governance. With this law, Centre is preventing all the States from performing that Constitutional duty. 

Here, it is not to the centre but to the company the States are made to surrender their power. Before making this law that seriously affects the sovereign powers of states, Centre should have consulted them. Surprisingly, our states did not know that their laws are going to be exempted by an agreement and surrendered to the parties to the contract, mostly to the company, as the farmer is a weak partner.

Emasculating States laws

Section 20 is clear. This central law supersedes all the laws made by states.No state is consulted before depriving them of their powers. It says;

20. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any State law for the time being in force or in any instrument having effect by virtue of any such law other than this Act:

Unleashing the traders

With the second part of this section, all the restrictions on hoarding and trading for the benefit of consumers and farmers are lifted to ensure progress of merchants, traders, and big companies.

(2) Notwithstanding anything contained in the Essential Commodities Act, 1955 or in any control order issued thereunder or in any other law for the time being in force, any obligation related to stock limit shall not be applicable to such quantities of farming produce as are purchased under a farming agreement entered into in accordance with the provisions of this Act.

Central Law overrides the state laws and just an agreement with companies will also override the State’s farmer protection laws, the Lie as Law No. 11.

Lie as Law -12: Protection of farmers ownership.

Section 8 apparently protects the farmer’s land, from fraudulently being transferring to the company or sponsor. When dues to them are not paid, and their dues are higher than the value of property, a farmer is compelled to sell it to someone.  But he cannot sell the land to others too, till the term of agreement is completed.

Also Read: Farewell to Welfare of Farmers & Most Obedient to Market Forces

8. No farming agreement shall be entered into for the purpose of— a

(a) any transfer, including sale, lease and mortgage of the land or premises of the farmer; or

(b) raising any permanent structure or making any modification on the land or premises of the farmer, unless the Sponsor agrees to remove such structure or to restore the land to its original condition, at his cost, on the conclusion of the agreement or expiry of the agreement period, as the case may be:

The proviso is problematic.  Ownership of the structure remains with the sponsor until expiry of agreement. Proviso says:

Provided that where such structure is not removed as agreed by the Sponsor, the ownership of such structure shall vest with the farmer after conclusion of the agreement or expiry of the agreement period, as the case may be.

This means ownership of farmer will not be vested until the expiry of agreement. If agreement is for five years, the ownership of the structure does not vest in farmer for five years, because the rescinding of contract is always disputed, and he cannot sell to anyone until the term is exhausted. Protection of land and Farmer’s interest is Lie as Law No. 12

Lie as Law-13: Sponsors get Govt benefits.

Section 9 provides security and insurance link or credit instrument under Government Scheme. But gives benefits of state credits to the sponsor also.

9. A farming agreement may be linked with insurance or credit instrument under any scheme of the Central Government or the State Government or any financial service provider to ensure risk mitigation and flow of credit to farmer or Sponsor or both.

Section 10 adds on various other parties like aggregators also to the contract of farmer besides the company partner.

10. Save as otherwise provided in this Act, an aggregator or farm service provider may become a party to the farming agreement and in such case, the role and services of such aggregator or farm service provider shall be explicitly mentioned in such farming agreement.

Term aggregator includes many. It says:

(i) “aggregator” means any person, including a Farmer Producer Organisation, who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor.

Sponsor is the new class of middlemen. The claim that middlemen are removed is not true, but a new middleman become a party to the contract and entitled to benefits of farmers. The Lie as Law No. 13.

Lie as Law-14: No access to justice.

The Act excludes the jurisdiction of all civil courts and gives high discretionary power to revenue magistrates. It may be recalled Telangana Government recently removed all discretionary powers of the revenue officers, after having vexed with increased corruption in revenue department. When Companies and the farmers approach these officers, the scope of undue influences and bribery will be very high on the officers, the experience says.

Section 13 appears to be a good provision because the conciliation is prescribed as preliminary step for dispute resolution. But the power to reject the representatives for conciliation proposed by parties can be rejected on the excuse that he is not fair and balanced. Who will decide the fairness and balance nature of parties, and on what criterion?

13. (1) Every farming agreement shall explicitly provide for a conciliation process and formation of a conciliation board consisting of representatives of parties to the agreement:

Provided that representation of parties in such conciliation board shall be fair and balanced.

To give executive, the authority to resolve, this Act removes the jurisdiction of the courts. Those who are vexed with delay and high cost in judiciary where some clever lawyers can resort to all the tricks to defeat the justice, may find this better. But to quote again recent Telangana registration law, which removed the quasi-judicial power of executives to deal with land disputes, as that was troublesome, time consuming and expensive, besides increasing the corruption.The Telangana restored the local courts jurisdiction to deal with titles and inheritance. 

Section 19 says:

19. No civil Court shall have jurisdiction to entertain any suit or proceedings in respect of any dispute which a Sub-Divisional Authority or the Appellate Authority is empowered by or under this Act to decide and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or any rules made thereunder.

This law does not express trust in law courts but entrust the revenue babus with the power to decide disputes. And to say it is the reform isthe Lie as Law No. 14.

Lie as law -15: Immunity for Corporates.

Last, but the worst, is the immunity clause. While drafting any law, the babus exclude themselves from the possibility of liability. It is beautifully worded as “Action taken in Good Faith”. None bothers about this common routine clause of all the laws. It gives fantastic immunity to all officers from any liability, even if they cause serious harm to the people. The excuse is ‘if action taken was in good faith’. What is good faith? The Indian Penal Code(IPC) says ‘an act in good faith means what is done with due care and caution’. This should mean that any act done without due care and caution, or with malice, or by abuse of authority, deliberately to help someone or harm some, they are liable. Surprisingly, there is no law to make them liable for deliberately malicious or negligent acts. This is an over-all immunity for all officers. This is the main source of corruption. Like all the laws made by Congress governments, these laws by BJP also have same clause.

But the new farm lawsmade to ‘liberate’ farmers has progressed further. The immunity clause immunes ‘any person’. Who is this ‘any person’? They can include various parties to the contract farming. The farmer being a victim, immunity clause makes no sense for him. Hence, the beneficiaries are companies, traders, sponsors, aggregators etc, besides immunising even unscrupulous officers who did not work in good faith. No immunities for farmer, but for contracting companies! To say it is for the welfare of farmers is the Lie as Law No. 15.

Lie as Law- 16:Additional benefits to farmer.

The Object and Reasons Statement drafts a rosy picture about helping farmers from the risk of nature, uncertainties in production and unpredictable market.

Statement says: ‘It was felt that promotion of agreements for farming producemay strengthen the process of monetisation whose primary objective is to de-risk agricultureat various stages, enable scaling of investment by industry for production and processing ofhigh value agriculture produces, give fillip to exports and help farmers to enjoy the additionalbenefits of operational efficiency”.

It is not known, who felt this, and why? There is nothing in the object statement and the enactment about MSP or to secure the small and marginal farmers who hold less than five acres and constitute more than 80 percent of farmers of the nation from mischief of business companies besides the vagaries of weather. There is neither consultation from the stake holders nor the State Governments. Which farmers or their groups asked for liberty. Writing about additional benefits while taking out existing benefits is the Lie as Law No. 16.

Lie as Law –17: The urgency

Second Object says:

2. The COVID-19 pandemic and resultant lockdown also threw up challenges for agriculture and impacted the livelihood of farmers. As agriculture sector has immense potential to make significant contribution to the economic growth, there was a need to find long term solutions for farmers and for agriculture as a whole. Therefore, to achieve these objectives and to mitigate risks for farmers, enhance their income, put in place an effective and conducive policy regime for agreements and for holistic development of the agriculture sector, there was a need for immediate legislation.

The object statement says that the Government has recognized urgent need for making a law to help farmers who suffered due to Covid-19 pandemic. But the Government used the situation of that pandemic to promulgate this law as ordinance and replaced it after passing the Bills in Pandemonium. The urgency, so called, to liberate farmer, is another Lie as Law No. 17.

And the truth of law is….

After discovering 17 lies as the law, the question is what is the truth? The agricultural markets in India are mainly regulated by state Agriculture Produce Marketing Committee (APMC) laws.  APMCs were set up with the objective of ensuring fair trade between buyers and sellers for effective price discovery of farmers’ produce.[Report No. 62, Standing Committee on Agriculture (2018-19): ‘Agriculture Marketing and Role of Weekly GraminHaats’, Lok Sabha, January 3, 2019.] Report says APMCs can: (i) regulate the trade of farmers’ produce by providing licenses to buyers, commission agents, and private markets, (ii) levy market fees or any other charges on such trade, and (iii) provide necessary infrastructure within their markets to facilitate the trade.

The Standing Committee on Agriculture (2018-19) observed that the APMC laws are not implemented in their true sense and need to be reformed urgently.  Issues identified by the Committee include: (i) most APMCs have a limited number of traders operating, which leads to cartelization and reduces competition, and (ii) undue deductions in the form of commission charges and market fees.(Report No. 8, Standing Committee on Agriculture (2019-20): Action taken by the government on the report ‘Agriculture Marketing and Role of Weekly GraminHaats’, Lok Sabha, December 12, 2019.)

Ignoring Standing Committees recommendations

The Standing Committee on Agriculture (2018-19) stated that availability of a transparent, easily accessible, and efficient marketing platform is a pre-requisite to ensure remunerative prices for farmers.  Referring to the fact that most farmers lack access to government procurement facilities and APMC markets, the Committee opined that small rural markets could emerge as a viable alternative for agricultural marketing if they are provided with adequate infrastructure facilities. 

The Standing Committee also recommended that the Gramin Agricultural Markets scheme (which aims to improve infrastructure and civic facilities in 22,000 GraminHaats across the country) should be made a fully funded central scheme and scaled to ensure presence of a Haat in each panchayat of the country. These recommendations are ignored, and the Centre did exactly opposite of these suggestions.

It does not liberate farmers by any means but liberates the companies from all regulations of the state statutes, make them invalid if the contracts have conflicting terms. A bakra (small farmer) is liberated and released into market of wolfs. The welfare state goes, and the ‘market’dominates the States.

Prof. M. Sridhar Acharyulu
Prof. M. Sridhar Acharyulu
Author is Dean, Professor of law at Mahindra University at Hyderabad and former Central Information Commissioner. He published a number books in English and Telugu.


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