The aggrieved agricultural sector of India has been agitating, with a spectacular display of unity across India, against the enactment of three legislations that received President Ram Nath Kovind’s assent late September, 2020. The three Acts are:
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
- The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
- The Essential Commodities (Amendment) Act, 2020
What do these Acts entail?
The first, Promotion and Facilitation Act, intends to “promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce outside the physical premises of markets.”
The second, Empowerment and Protection Act, “protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner.”
The third, Essential Commodities Act, lays down that the Centre may regulate essential food items such as cereals, pulses, potatoes, onions, edible oilseeds and oils under extraordinary circumstances such as war, famine, extraordinary price rise and natural calamity.
CJP’s sister publication, SabrangIndia, reported extensively on the problems and anticipated fear that farmers have with the three new laws. Their anxiety lies with the fading away of Agricultural Produce Market Committee (APMC) mandis that were earlier established by the State Governments to protect farmers against exploitation by retailers or big corporate giants.
Let us look at The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, hereby known as the Promotion and Facilitation Act. In India, farmers used to directly deal with traders to sell their products. However, this led to their exploitation as often they could not sell their produce at a fixed or suitable price, a reasonable rate. The traders with the bargaining power of money in their pockets called the shots.
This was why the APMC Act(s) both contextual and specific to states were put in place in and around the 1960s to bring an end to this exploitation. Bihar scrapped this act in 2006. In Bihar, where the APMC market system has been abandoned, small farmers are sitting on the roadside selling their produce for a pittance. Kerala has its own re-defined model of procurement that assures higher rates of procurement to farmers as compared to other states.
According to these APMC act(s), each locality need to have its own mandis (markets) and the selling of agricultural produce happens through these mandis. Mandis function under two basic principles. The traders who wanted to buy the products from a particular mandi were expected to take license from the APMC and only those traders with licenses were allowed to buy commodities from the mandi.
Minimum Support Price: For certain essential products, there is a minimum selling price (MSP) fixed by the government. The traders can bargain and buy the products only above these minimum selling prices. Government, through this system, aimed to ensure that farmers would get a fair and reasonable price for their products.
But with the current (Promotion and Facilitation) Act, 2020 in place, farmers can theoretically sell their produce in any market. This is not a practical solution, as farmers often cannot travel the long distances nor do they have the negotiating power. It also opens the floodgates for corporate entities and big traders to directly buy from the farmers from all parts of the country at lower or any rate without the intervention of the government in the mandis, regulation by licenses and a minimum support price. The farmers are bound to leave the APMC mandis if they get a better rate outside of it. Traders too will not prefer to buy goods through the mandi by paying licenses and paying taxes if they can directly buy products outside the mandi. This is intended to weaken the APMC system and will eventually fade away.
Under this new law, the government does not guarantee a minimum support price for trading outside APMC mandis either. But even if the government declares a MSP, there is no guarantee that farmers will get to sell their products at that particular price unless the government actively participates in the market to guarantee MSP and keep a check on exploitation. The law also works on an assumption that the farmers might get a better price outside the mandis.
The question is whether they hold any bargaining power against chains like Reliance Fresh, D-Mart, Big Bazaar and Adanis who have entered into opaque deals with the Food Corporation of India (FCI)?
Are APMC systems flawless?
No. APMC systems currently have several issues that need to be addressed. Over time APMC have gotten corrupted and license procedure to new traders was seen by APMC as a source of bribes. Thus traders who paid and obtained licenses came to form cartels. This means an agreement will be reached among the traders on the price (for a particular product) before the auction at a mandi starts. For example, something along the lines of “we will not quote more than Rs 10 for per kg of onions today” will be decided in advance by the cartel of traders. As a result, farmers are forced to sell their produce at a price set by traders without auction. Farmers’ organizations have repeatedly called for this issue to be addressed. They have not however asked for a scrapping of the mandis. The anwer probably lies in Farmer Cooperative Markets or Consumer-Farmer Markets.
Will the new rules solve APMCs’ problems?
The new laws will not solve these problems but will push farmers into a deeper crisis.
Why do we say this?
- Under the new law, farmers can sell their produce in any market. This means an onion farmer in Nashik can sell onions in Kerala. This sounds nice. However it is not practical for small farmers to ‘trade’ their produce transporting to distant markets. This law is not intended for the farmers to gain by acquiring a larger market but it’s making it easier for the big corporates to buy from all parts of India for the cheapest price possible.
- Large companies can now buy produce directly from farmers. If they are paying a lower price, farmers can go to APMC run mandis as these mandis will still be in operation even after the new law comes to effect. This is what the proponents of the law say. We have enough experience that show how government systems have been systematically sabotaged in all sectors which have been opened for the private players. Look at education and health. The same is going to happen in agriculture also. For example, suppose the big companies pay the farmer a better price in the early years. Of course the farmers will leave the APMC. When there is an opportunity to buy directly from farmers outside Mandi, traders will not prefer to buy goods through Mandi by paying licenses and paying taxes. Gradually the APMC system will weaken and become just a market for private entrepreneurs. Under the new law, the government does not guarantee a minimum support price for trading outside APMC mandis. Even if government declares a minimum support price, there is no guarantee that farmers will get that price unless the government actively participates in the market to guarantee MSP. Otherwise MSP will remain just on paper.
- It will affect not only the farmers but also the lives of the people in depending on agriculture. State Governments like those Punjab and Haryana receive a good amount of tax on sales through mandis. This amount is the main source of revenue for many governments. The new law will eliminate the tax that states are currently receiving.
- The main reason for farmer indebtedness is not that harvest is bad. Farmers do not get a fair price for their produce – that is the real reason. Minimum support price is the mechanism to address this issue.
The Swaminathan Committee recommended that the support price should be one and a half times (C2 + 50%) of the cost of production. This was one of Modi’s key promises in the 2014 elections. But the new law does not even mention support price. If the support price becomes a legal right, the big corporates who aim to conquer the market through the new law will have to pay that price or more. The goal of gaining big profit and hence the market-share, will have to be abandoned by the corporates. To avoid that, the new law has been enacted without due debate or discussion and without any provision of a minimum support price. This is why it is being dubbed a pro corporate law.
- Farmers fear that the practice of FCI procuring at subsidised rates from farmers for public distribution will also end with this bill. This is because this procurement was mainly done through the mandis. One of the key recommendations of the Shanta Kumar Committee set up by the government in 2014 to study the issues related to FCI was to reduce this stockpile, something that Farmers have contested. That is exactly what the government is aiming for through the new law.
With the unresolved issues of the Promotion and Facilitation Act, let us turn our focus on to The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, hereby known as the Empowerment and Protection Act. This legislation allows companies to enter into contract farming agreements with the farmers which means that the price and quality of the produce will be fixed prior to farming through a contract and they will get a guaranteed fixed price for the produce.
But this will cause great distress to the farmers. How does the government expect farmers who are an unlettered community to understand the complexities of Indian contract law against parties that economically stand at a better position than them? With fragile living conditions, how will they pay legal expenses if a situation arises? In cases of disputes, they cannot even approach civil courts, as discussed further in the article. Small poor farmers cannot win legal battles with companies!
The new law does not explicitly guarantee that companies must mandatorily pay MSP to farmers even when engaged in contract farming. During British rule, indigo plantation happened through contract farming which was exploitative. This concept is not alien to India. Farmers need a strong, regulated and assured market.
Farmers can very well face issues of production problems and market failure which may or may not attract legal consequences as they are bound by contracts. The Economic Times had reported on PepsiCo, a big multinational company, suing 11 farmers from Gujarat who cultivated a potato variety grown exclusively for its popular Lay’s potato chips alleging infringement of intellectual property rights under the Protection of Plant Varieties and Farmers Rights Act, 2001. This is testimony to what the future holds for poor farmers.
The popular opinion about the Essential Commodities Act, 2020 is that this enactment will increase the income of the farmers, but can also lead to heavy hoarding of stocks, say experts. Without government regulation of essential crops, prices will widely fluctuate.
P Sainath, Founder of People’s Archive of Rural India – PARI explained, “If a big trader stockpiles a particular crop from the market, it allows them to manipulate the price and move the farmers price down by not buying from them, pushing them to a point of desperation or move the price that the trader gets in the market, upward by stockpiling it for a significant amount of time. So big traders have a greater power over the farmers to depress the prices.”
Earlier, when the un-amended Essential Commodities Act was in place, storage of essential crops like oil seeds, onions, cereal, pulses, potatoes for a long period were not permitted. But since the 2020 amendment, all these crops will no longer fall under the category of essentials and corporate houses who desire to enter the food grain market can easily store such crops for its benefit. However, these will be considered as essential items in times of unforeseen circumstances such as war and natural disasters.
Violation of our Federal Constitution
The enactment of such laws also reflects poorly on the federal set up of our Constitution. The Constitution of India stipulates a dual government-one at the Centre (Union Government) and one at the periphery (State Governments).
The Government at the centre exercises its jurisdiction over issues of national importance like defence, foreign relations, etc and the State deals with matters of immediate and local importance like agriculture (the key point here), health, education, etc.
The Seventh Schedule of the Constitution lays down the subjects to be covered under the Union, State and Concurrent List. In a situation wherein both the Centre and States decide to formulate a law, the Central law shall prevail.
While formulating the three impugned legislations, the Central Government seems to have invoked Entry 33 of List III. Entry 33 provides that the Parliament can make laws in ‘public interest’ on matters of trade and commerce, supply and distribution of industrial products.
But Agriculture is covered under entry 14 (Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases) of the State List under the Seventh Schedule of the Constitution.
Apart from this, entries 18 (rights in or over land, land tenures, rents, transfer agricultural land, agricultural loans, etc.), 28 (markets and fairs), 30 (agricultural indebtedness), 45 (land revenue, land records, etc.) 46 (taxes on agricultural income), 47 (succession of agricultural land) and 48 (estate duty in respect of agricultural land) amply establishes Agriculture as a state subject.
The concurrent list that covers subjects for the consideration of the Centre and the States also have entries that places agriculture outside the jurisdiction of the Indian Parliament. For instance, entry 6 List III covers Transfer of property “other than agricultural land”; registration of deeds and documents.” Entry 7 covers all contracts but “not contracts relating to agricultural land”.
The actual confusion arises from entry 26 and 27 of the List II that states are subject to entry 33 of List III. As mentioned above, entry 33 empowers the Parliament to control trade and commerce, production supply and distribution of domestic and imported products of an industry in public interest.
Since under List III, Central laws prevail, the Union Government can argue that there has been no encroachment of jurisdiction and its well within its powers to pass laws on intra and inter state trading, contract farming, preventing states from receiving any fees outside the APMC mandi, etc.
But for argument sake, if the industrial products (mentioned in entry 33) like edible oilseeds and oils, cattle fodder, raw cotton and jute, cotton seeds fall under the ambit of the broad category of agriculture, then what is the need for all the State list entries, placing agriculture under its List? It renders the said entries absolutely redundant.
Doctrine of Pith and Substance
This notion can be better understood by the doctrine of pith and substance which is used as a principle to determine the constitutionality of a legislation where there is conflict of legislative powers conferred on Federal and State Legislatures with reference to Lists. It essentially helps to decipher the character of a legislation that overlaps between two entries. The question which is asked in such cases is: What is the pith and substance of the legislations?
In State of Rajasthan v Shri G Chawla and Dr. Pohumal 1959 AIR 544, the validity of the Ajmer (Sound Amplifiers Control) Act, 1952 enacted by the State legislature was challenged and the judicial Commissioner of Ajmer held that the Act fell within Entry No. 31 of the Union List and not within Entry No. 6 of the State List (as was claimed by the State) and therefore ultra vires the State Legislature.
Entry 31 of the Union List empowered the Centre to regulate Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication including amplifiers. Entry 6 of the State List covered public health and sanitation; hospitals and dispensaries whereas entry 1 covered public order.
But the Supreme Court disagreed with the Judicial Commissioner and upheld the legislation’s constitutionality. It said that the pith and substance of the act was within the powers of the State legislature as the main issue of amplifiers (related to health and tranquillity) was largely covered under the State list and touched upon the other list (Union list) incidentally.
Similarly, when agriculture largely falls under the State list, and is incidentally covered in the Concurrent List, the farm laws seem to have been hastily passed by the Parliament which does not have locus to do so, in the first place. It is also strange to note how the laws were passed without consulting even a single State.
This doctrine tests the competency of a legislature to enact a law. The main function of legislatures is to make laws but when it legislates on matters outside its jurisdiction, a limitation in the form of ‘Doctrine of Colourable legislation’ can be invoked.
The origin of the doctrine can be traced to the Latin phrase Quando aliquid prohibetur ex directo, prohibetur et per obliquum which means whatever cannot be done directly, it cannot be done indirectly. So, if the legislature is directly prohibited to do something, it cannot do it indirectly either.
When the Union does not have the power to make laws on agricultural reforms, as it is a State subject, it can certainly not use incidental entries to invoke its power. Agriculture cannot only be viewed from a lens of trade and commerce; it is an occupation, a means of livelihood for about 58% of India’s population.
The courts too have recognised the parliament overreach at times, upholding the validity of State laws in the face of Central laws. In ITC Ltd vs Agricultural Produce Market Committee AIR 2002 SC 852, the Supreme Court had upheld the validity of state laws related to agricultural produce marketing and struck down the central Tobacco Board Act, 1975.
This case presented a conflict between the operation of two Acts. Parliament took the tobacco industry under its control under Entry 52, List I and enacted the Tobacco Board Act. The Bihar Agricultural Produce Markets Act, 1960 was enacted by the State of Bihar referable to Entry 28 of List II which gives the State legislature the exclusive power to legislate on Markets and Fairs.
The Court observed that the setting up of markets areas, markets yards and regulating use of the facilities within such area or yards by levy of market fee is a matter of local interest and would be covered by Entry 28 of List II and thus within the legislative competence of the State.
The second legal loophole in the acts concern the right of the farmers to adjudicate in matters of dispute. Let us look at the provisions of The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
Section 13 provides “No suit, prosecution or other legal proceedings shall lie against the Central Government or the State Government, or any officer of the Central Government or the State Government or any other person in respect of anything which is in good faith done or intended to be done under this Act or of any rules or orders made thereunder.”
So, if there is an issue that needs redressal, the farmer has to approach the Sub-Divisional Magistrate (under section 8) only and no civil courts as it is barred by section 15 that provides “No civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter.”
The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 has similar clauses where the Central Government or the State Government are not liable to be prosecuted, to the prejudice of the aggrieved farmers who will be pitched against rich corporate bodies.
Section 18 of the Act states, “No suit, prosecution or other legal proceeding shall lie against the Central Government, the State Government, the Registration Authority, the Sub-Divisional Authority, the Appellate Authority or any other person for anything which is in good faith done or intended to be done under the provisions of this Act or any rule made thereunder”. Section 19 bars the jurisdiction of civil courts to adjudicate on any matter pertaining to the farmers.
Through these sections, the government has absolved itself from all responsibilities and grievances that would need immediate attention. The phrase “any other person” in sections 13 and 18 of the Promotion and Facilitation; and Empowerment and Protection Act is strangely unfortunate and wide, which could potentially include big corporate companies, large retailers etc that also enjoy immunity from prosecution. The probability of a poor debt-ridden farmer fighting the system was bleak in the first place but at least there was a door available. With these new drafted laws, the farmers are deprived of this as well.
In Anita Kushwaha vs Pushap Sudan 2016 8 SCC 509, the Supreme Court had held that access to Justice is a Fundamental Right guaranteed to citizens by Article 14 and Article 21 of the Constitution of India. The Bench said, “In order that the right of a citizen to access justice is protected, the mechanism so provided must not only be effective but must also be just, fair and objective in its approach. So also, the procedure which the court, Tribunal or Authority may adopt for adjudication, must, in itself be just and fair and in keeping with the well-recognized principles of natural justice.”
What is the reason to bar a civil court’s jurisdiction or prevent the prosecution of the Government in the process? As civil courts jurisdiction is ousted under these statutes, the parties contracting under these laws do not have the privilege of approaching the judiciary even under a farming agreement, which ought to be governed by the principles of contract law.
A dispute involving civil consequences (contractual and commercial) cannot be adjudicated by SDM’s and ADM’s that are essentially run by executive authorities. These are administrative bodies that lack the expertise to comprehend the plight of the troubled farmers. The executive cannot put itself in the shoes of the judiciary.
In a letter written to the Prime Minister by the Delhi Bar Association, the lawyers have addressed the same issue and stated the possible corruption that may arise in the transfer of power from the Civil Courts to Executive authorities and how the same will be detrimental and disastrous to the cause of lawyers as well as litigants.
The letter states, “The strategy to hide and seek and introduce provisions to oust jurisdiction in this manner is highly inappropriate. We can’t be unmindful of the fact that a strong judicial institution, to check administrative arbitrariness and unfair treatment is essential in a democratic republic and not an amenable executive authority. Introduction of Conciliation Board to be constituted by the SDMs, headed by his junior officer, as Chairman is distractive and unaccepted.”
We all know the history of the East India Company forcing Indian agriculturalists to produce indigo instead of food crops to feed corporate greed. The most recent update is a call for a Bharat Bandh on December 8, where farmers don’t plan to back down before the laws are rolled back. The Government yet remains unaffected by the sense of betrayal the farmers feel.