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138The Farm Bills 2020Sep-23-2020

The Farm Bills 2020

Blog by – Mr. Keval Lakhani (Chartered Accountant - Research)

Amidst applause and criticism from the political as well as the farming community, the Farmers’ Produce Trade and Commerce (Promotion and facilitation) Bill, 2020, and Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill,2020 were  cleared in the Lok Sabha and in the Rajya Sabha by voice of vote. The Bill will now be sent to the President of India for his assent before they are notified as laws.

What is the Farm Bills 2020 and is it a bold reform? 

These bills aim at transforming the agricultural sector at the same time providing a means to increase the farmer’s income, especially the small and marginal farmers.  The bill proposes to create a structure in which the farmers and traders can sell their purchase to end consumers as well as institutional clients outside the “Mandis”( APMC Markets) . There are provisions which enable the farmers to sell his produce outside the state as well. 

Under the current mechanism, each state makes a levy on the procurement of Agricultural produce from a dedicated APMC Market. The levy could range from 2% to 14% varying from state to state. The farm bills in effect mitigate the same if the transactions are conducted outside the APMC market. 

Apart from the above levies, the farmers can escape from the menace of the middlemen who are known as  “arhatiyas” who charge a fee on the procurement transactions conducted through them. 

These bills also aim at providing an arrangement whereby the farmers can directly engage with agribusiness firms , exporters , large retailers as well as wholesalers to sell their farming produce at a predetermined price level, thereby promoting transparency. 

The bills also aim at promoting producing good crops as per the agreed arrangement between the farmer and the procurer which could lead to a surge in organic farming. Such a move could lead to incremental investment in bio pesticides instead of chemical based pesticides.

Why the Angst? 

Certain section of the political and agricultural community has expressed great anger at the decision of the centre. Most of  the protests have come from the State of Punjab which is likely to lose its hold over the Agriculture produce and management . States especially Punjab, stand to lose a big share of the revenue from mandis post implementation of the farm bills,2020. 

Punjab earns Rs 3500 to Rs 3600 Crores annually in the form of market fee and rural development fund which now stands at risk.

Arhatiyas also stand to lose a good chunk of their income as the dependence on the intermediaries would drop substantially paving way for a more open and accessible market for the farmers. 

It is also believed that these reforms may lead to “ corporatization “  of the agricultural markets which may lead to the suppression of farmers and give undue advantage to corporations. 

Valid Concerns?

Minimum Support Prices ( MSP ) provided by the government are of great support to the farmers . If the MSP is threatened by the incorporation of these laws it could be detrimental to the interest of the small and marginal farmers.  

Ability of farmers to negotiate with corporate clients when it comes to pricing of produce is highly debatable as they are not equipped to do so.

Unfolding with times:   

The execution of change in life is generally met with great amounts of resistance. The democratization of farmers and farm laws is a massive change which is bound to be met with resistance.

It is the prerogative of the system to ensure that substantial resources are dedicated in educating the farmers about the new ecosystem and how it could lead to the betterment of the structure. For the longest of periods, farmers have been cluttered to a very claustrophobic environment which is now opening up.  If the right education is provided, it provides immense opportunities to make the most of a free market scenario. 

These measures could also bring a zing in the entire farm mechanization space (tillers, seeds, irrigation, logistics) as it gives farmers to produce higher margin produce. 

All new initiatives take time to show results and this measure most certainly would take time to adapt to, but a lot of its success would depend on timely review of on ground action and the happiness of the Indian farmer for whom these initiatives have been carved out.

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Darshan Mehta

Thoroughly made simple to understand. Thanks Mr. Keval for this simple worded article elaborating the Farms Bill. This should be a good change for the farming industry, & Indian farmers should enjoy an ecosystem like that of the West

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