Continuing from yesterday
(see Farm Sector Reforms – 2)
The second piece of legislation, namely, The Farmers (Empowerment and
Protection) Agreement on Price Assurance and Farm Services Bill, 2020,
primarily provides for the following four things:
1. Forward
Sale Agreement: A farmer may enter into a written forward agreement
with a person to sell his produce at a predetermined price.
Any such agreement shall specify (a) the price (fixed, or
benchmarked with a guaranteed minimum); (b) The time of delivery; (c) place and
method of delivery; and (d) quality specification for the produce.
The ownership and risk of output due to vagaries of nature of
otherwise, shall remain with the farmer till he offers a valid delivery to the
buyer.
2. Contract
Farming: A farmer may enter into a written agreement with a person to
provide farm services for predetermined fee. The service buyer shall specify
the crop, quality, and other specifications, and may provide necessary inputs
like fertilizers, seeds, technical knowhow etc. to the farmer. In this case,
the risk of output may remain with the service buyer, depending upon the
conditions specified in the agreement.
The new law prohibits implicit leasing or sale of agriculture
land through such agreement. Also the rights of the share cropper (the farmers
who till someone’s land in lieu of a share in the crop) also sought to be
protected in the law.
3. Stock of
agriculture commodities: The buyer in either of the above cited two
arrangements can stock the produce acquired under the agreement, regardless of
any limits imposed by any state legislations or the Essential Commodities Act,
1955 on such stocking.
4. Registration
and Dispute Resolution: All such agreement will have to be registered
with the appointed Registering Authority. All disputes in relation such
agreements shall be settled as per the resolution mechanism prescribed in the
Bill. In the two tier resolution mechanism, the first step would be
conciliation (arbitration) at a panel constituted by SDM of the area. The
second step would an Appeal to Appellate Authority (Collector). No civil court
would have the jurisdiction over disputes relating to the trade specified under
this law.
It is pertinent to note the
following in this context:
·
The forward
market for agriculture commodities in India is mostly informal, unorganized and
unregulated. There are stocks exchanges and electronic trading platforms that
offer future market in select agriculture commodities, but the farmers’
participation in these markets is miniscule. These markets are mostly used by
traders and commercial consumers to either hedging or speculation purposes.
The new law permits forward
contracts, but these contracts will be out of the purview of SEBI (regulator
for derivative contracts in commodities). These agreements will be unregulated.
·
As discussed
yesterday, the full implementation of the new regime may decimate the extant
APMC mechanism. In that eventuality, the price discovery of agriculture produce
will totally depend on the market forces. In absence of a deeper futures market
in all commodities, the price discovery may not be efficient and create harmful
volatility in food prices.
The apprehension is that the
large corporates who would in a position to dominate the markets. They may
entrench themselves deep in the agri ecosystem to dictate the cropping patterns
as well prices. In this colonial form, the farmers would be forced to grow
whatever these large players want and sell at the price mostly determined by
them.
·
A large
number of farm holdings in the country do not have clear ownership. In many
cases the registered owners are either dead or have been excluded by the family
members or encroachers. Besides, millions of farmers are share croppers.
In respect of land holdings
that are being used by share croppers; or where the farmer actually tilling the
land is not a clear title holder, entering into these agreements may not be
possible.
·
As I wrote
yesterday also, millions of marginal farmers (land holding of less than one
acre) may not benefit much from these legislation. These farmer account for
more than two third of the total farm holdings.
…to continue tomorrow
