In September 2020, three bills were introduced into the Lok Sabha with the intent to remove leakages, corruption, and middlemen in agricultural procurement and for the welfare of the millions of peasants of the country.
The first was 'The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020. This bill focused on allowing the farmers the freedom to sell anywhere to anyone.
The second was 'The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020'. This bill focused on aiding the farmers with small and marginal landholdings, immune them from market unpredictability, and enabling them to access modern technology indispensable to farming. Dispute resolution was also a part of this bill.
The third bill was 'The Essential Commodities (Amendment) Bill 2020'. This bill was more about regulating and easing the private sector's trade and other operations concerns.
The bills for the agricultural sector were equivalent to the Liberalisation, Privatisation, and Globalisation reforms of 1991. During the pandemic, the government intended to free farmers from the clutches of the middlemen and allow them more freedom when it came to selling their produce. The most important objective here was increasing the farmers' income. The income disparity between agricultural and non-agricultural workers was only growing, so enabling them to access the private sector option was important.
Another objective was to balance the mismatch in supply and demand within the Indian market. Put simply, the country was incurring mammoth import bills for commodities that could be easily grown in India, like edible oil, pulses, and even fruits and vegetables, because of a lack of crop diversification. However, there was an excess supply of other crops and commodities that used to rot in warehouses year after year. There was a significant mismatch between agricultural produce and consumer demand in the country, as it reflected what India used to produce and consume used to demand in the 1960s. Since then, the consumer food basket has changed significantly.
The third objective was to boost India's exports. In 2019, India's share in global agricultural exports was around 3 per cent. In comparison, China's share was 5.4 per cent, Brazil's share was 7.8 per cent, the United States of America had a share of 13.8 per cent, and the European Union led the world with a share of 16.1 per cent.
The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill 2020, or the FPTC Act, has several merits. For starters, it addressed the Agricultural Produce Market Committee (APMC) limitations. The problem for both the cultivators and buyers was that the notified agricultural commodities produced in the region under the jurisdiction of the APMC mandi could not be sold anywhere else. Further, the traders and buyers coming to these APMC mandis were required to have a licence, and they could not engage with the farmer directly. The commission agents, running the operations in the mandis, enjoyed a monopoly and often harassed both the buyer and the farmer to extract commissions.
However, the government was not doing away with the APMC mandis. It was merely giving a willing farmer an option to engage with a willing trader outside the purview of the commission agents and mediators. Transactions outside the APMC were not uncommon, but because they were not allowed, the buyer had the advantage when it came to negotiating a price.
The Farmers' Empowerment and Protection Agreement on Price Assurance and Farm Services Bill, or the Agreement on Price Assurance and Farm Services (APAFS), focussed on farming contracts.
Before these bills, twenty states in India already had a contract farming law in place. However, with APAFS, the government's vision was to put in place a common national law in the spirit of a one-nation-one-market and facilitate ease of doing business for farmers. Interestingly, it was Punjab where contract farming began, though without much success, in 1988 when PepsiCo collaborated with farmers to produce fruits and vegetables. Dairy farmers were already working with big and small private companies in Punjab. For instance, over 100,000 dairy farmers have been contracted with Nestle, and the company has been operating successfully for over six decades since 1961. The bill had several safeguards for the farmers to check against private-sector exploitation.
As per the bill, signing the contract agreement before production began was mandatory. It was in place to clarify the time of supply, quality, grade, standards, price, and any other relevant aspects to the farmer. The contract duration was fixed between one crop cycle and five years, allowing the farmers to exit early, if required, or enter into a long-term working relationship with the companies.
On the pricing front, the act prioritised the farmer's interests in case of fluctuations. The act had provisions for farmers to be paid a guaranteed amount if the market price went down. However, if the market price went up, the buyer would be required to pay a bonus or a premium directly proportional to the prevailing price in the APMC mandis, any electronic trading platform, or any other benchmark mutually agreed upon by the buyer and the farmer.
The Essential Commodities (Amendment) Bill addressed the uncertainty around government intervention when it came to agricultural and food commodities. The amendment to the act stated that the government could regulate the supply of the notified commodities only under extraordinary circumstances, including war, famine, uncontrolled inflation, or any other natural calamity. A hundred per cent increase in the retail price of the produce or a 50 per cent increase in the retail price of non-perishable agricultural produce over a price prevailing in the last twelve months or an average of the last five years, whichever is lower, was proposed in the bill.
While the act did not dilute the power of the government to aid the cause of the citizens, who often suffer due to high prices, it did give the operating companies more clarity, easing their planning and management.
The introduction of the laws resulted in elaborate discussions between the Centre and a few farm unions. Factoring in the feedback from the farm unions, the government was negotiating in good faith and even willing to tweak the laws to further help the farmers enhance their opportunities and incomes. However, the farm unions were unconvinced and unable to overcome their doubts. Eventually, the government, withdrew the existing laws in 2021.
Amid agitation and taking view of the farmer's demand, Prime Minister Narendra Modi announced the decision to withdraw the farm bills. However, the government has been working on various reforms and programmes for the farmers. The fertiliser subsidy, for instance, has increased fourfold to Rs. 2.5 Lakh Crore in 2022-23 from 2017-18, reducing the input costs for the farmers. Further, FPOs nationwide have been facilitated with easy access to credit, eNAM, and better logistics facilities. As of 2024, more than 90 per cent of India's agricultural trade is moving through contracts agreed upon between the farmers and their buyers, especially in the horticulture and dairy sectors.
