The three contentious farming laws have brought the debate on agriculture, which was hitherto neglected by the Indian media and politicians alike,  to the forefront. Change is inevitable, necessary for growth, but are all changes for the better?

For the past decade or two, the Indian agriculture’s contribution to the GDP has decreased substantially but without any substantial decrease in the total agricultural population in the country.

But Indian economy is not the only one suffering a loss, majority of the farmers in India struggle to make ends meet and are burdened with loans. Suicides among farmers have reached alarming rates. In 2019, total 10,281 people engaged in farming( farmers and farm labours) committed suicide i.e. almost 29 suicides a day.

The Indian farming sector needs radical changes and there is no two ways about it. The literature is clear on that. 

This article is restricted to only those aspects which I think are glaring defects in these laws and need serious reconsideration. These laws does not improve the existing framework but rather have created a parallel framework, but without the essential regulatory framework and infrastructure. Much like demonetisation, bad consequences may ensue no matter how good were the intentions.

Dispute Resolution Mechanism- a half-hearted effort.

Chapter III of the Farmers Produce Trade and Commerce(Promotion and Facilitation) Act, 2020 (hereinafter the act) provides for the dispute settlement mechanism to settle issues between farmers and buyers transacting under the act.

While discussing and understanding these provisions, one has to keep in my mind the disadvantageous position farmers are in owing to the lack of bargaining power in comparison to the big corporations.

Absence of a ‘Competent Authority' under the Act

All the special statutes barring civil court’s jurisdiction have simultaneously provided for establishment of a ‘competent authority’ to adjudicate on related matters. RERA, MACT, SCDRC, LARR Authority to name a few. Section 15 of the act does ousts the jurisdiction of the civil courts to entertain disputes, however without establishing an alternative ‘competent authority’. The adjudicating authority under the act is Sub-Divisional Magistrate, a part of Indian bureaucracy infamous for corruption and flouting ethical norms. On top that the ‘appellate authority’ is the collector and the act does not provide for any specific provision for recourse to the courts against the decisions of these authorities. 

Instead of doing the hard work of establishing a ‘competent authority’, the government has left the poor farmers to the mercy of often corrupt bureaucrats. I think it’s laughable that the government is trying to allay the fears of the farmers of exploitation with such an unreliable dispute resolution framework.

Forced Conciliation

Section 62 of Arbitration and Conciliation Act, 1996 states that there will be no conciliation if the other party rejects the invitation to conciliate. In fact, the party looking to initiate conciliation has to send the other party an invitation to conciliate.

Under section 8 of the act, on application of one of the parties to the dispute, it is mandatory for Sub-Divisional Magistrate to appoint a Conciliation Board and it is only after the lapse of 30 days from such appointment that the SDM is authorised to pass an order for settling the dispute.

Another concerning point is the wide discretionary powers given to Sub-Division Magistrate to settle disputes. In case a farmer fails to nominate a representative for conciliation within 7 days of appointment of the conciliation board, SDM can appoint any person he deems fit to represent the farmer in conciliation proceedings. The chairperson of the conciliation Board will work under the supervision and control of the Sub-Division Magistrate, meaning the SDM will have the direct control over the conciliation proceedings.

Government’s unfounded belief in the fidelity of the bureaucracies is unreasonable and farmers are right to have apprehensions that in absence of any regulatory oversight odds are that this ‘authority’ will dance to the tune of the big corporations

Price Assurance

Agriculture industry is yet to become as sophisticated as financial markets or IT industry. Government will have to play a greater guiding role and put more efforts in spreading awareness among farmers. In a country where majority of farmers don’t get MSP for their crops in the current regulated market, it is only reasonable to expect from the govt. a concrete, lucid plan to safeguard farmers from exploitation in the open market and ensure fair prices.

Agricultural produce is highly perishable and farmers lack the financial standing to store the yield. This means farmers are in a hurry to sell the produce and cannot wait too long negotiating and this gives trader undue advantage while quoting prices for the produce.

Another valid fear of the farmers is that the corporations rather than buying directly from small villages, will buy from a small trader(s) in the area. With no regulation, weak dispute resolution mechanism, one doesn’t have to think hard to realise that in a scenario where the farmers cannot store their perishable crops, these small traders exploiting them by employing anti-competitive practices like price-fixing, buying cartels etc is highly probable.

It has been a common rhetoric of the proponents of these laws that for the first time, the farmers will be able to sell their produce anywhere in the country. This is a mirage. With the transportation costs so high and already scant profits, the thought of selling the crops in other state does not even cross the mind of the farmers. Only handful of farmers can afford to bear the costs of transportation and still sell their crops at a profit.

On a positive note, section 5 of the Farmers Agreement on Price Assurance And Farm Services Act, 2020(hereinafter the act) does provide for an explicit guaranteed price and a clear price reference for any additional bonus or premium. However, again the government has done only half of the job.

The method of determining the guaranteed price and such additional sum has no where been provided in the act and has been left upto the parties(read buyers) to determine the same. Only making it mandatory to annex with the farming agreement, the method of determining the price(s) is not enough and active participation of the government is necessary.

Section3(4) does provide that the government may frame such ‘model farming agreements’ as it deems fit. However, the govt. has shown no alacrity to do so. Perhaps, the hastiness with which the government passed the said laws should have shown in spreading awareness among farmers and framing such model agreements to ensure farmers go to the negotiation table with some bargaining tools.

Under section 4 of the act the parties can set certain quality, grade standards of the farming produce and make its compliance mandatory for the performance of the contract.

The sponsor i.e. the buyer can refuse to take the delivery of the produce provided he inspects the produce before taking the delivery. It is important to understand the implications of this provision.

Firstly, the sponsor, albeit with the consent of the farmers, can require for the performance of the contract, compliance with certain parameters relating to the quality and standard of the farming produce.

Secondly, the sponsor can refuse to accept the delivery of the produce if, in its opinion, it does not fulfil the quality requirement. 

The scope of exploitation here is immense and in absence of any regulatory foresight, it seems inevitable. Under Section 6(4) a mere guideline has been issued that the parties can opt for ‘third party assayers’ for monitoring and assessing compliance with such quality standards.

Instead of merely giving a suggestion, govt. should have provided for the establishment of such institutional ‘third party assayers’ and the mandatory compliance with its certifications and assessment.

This will substantially limit the potential scope of exploitation of farmers by the sponsors on the pretext that the produce is not upto the mark.

Such cases have already started to emerge where the buyers have refused to accept the delivery of the produce as well as the assessment reports of such ‘third party assayers’.

the debate around MSP

Minimum Maximum support price

For the past few months, MSP has been the political hot potato with farmers fearing that the only remaining support from the state will be done away under the new laws.

Personally, I am not a proponent of artificial price-fixing. It causes artificial surpluses and shortages and often has a completely opposite effect than intended. It causes sub-optimal allocation of resources, inflation, and storage costs to the government. India, under the NFSA has to maintain a buffer stock to ensure ready availability of food-grains in times of emergency. However, the current stocks are well above the buffer stock limit and storage costs are running high.

However, leaving the already struggling farmers to the mercy of the demand and supply without any regulatory framework in place is not a cogent solution. The transition has to be gradual so that farmers can accommodate accordingly. The requisite infrastructure is required to ensure transparency and easy access. Thus, the farmers need support while all this work is being done behind the doors.

Without a competent regulatory authority,

Efficient and reliable dispute settlement mechanism,

Unchecked powers to the buyers 

Lack of awareness among farmers

These laws have failed, rightly so, to allay the fears of the farmers and reassure them that it’s not the big corporations, but them who are the real beneficiaries.