Farm Acts 2020 : What awaits us

On September 27, the President of India gave assent to the controversial farm bills passed by Parliament in the previous week. Two new acts and one major amendment to an existing act have been legislated during the last session of the Parliament, though the entire country has been put under partial lockdown since March due to pandemic. The Union Government claims that the acts will transform Indian agriculture and attract private investment. Prior to the enactment into acts, these were promulgated as ordinances, on June 5, 2020, by the President as the 'Parliament was not in session and there was an immediate need for legislation'.

(a) The Essential Commodities (Amendment) Act, 2020 has amended the 'Essential Commodities Act' of 1955. The new act allows the 'supply of such foodstuffs, including cereals, pulses, potato, onions, edible oilseeds, and oils, as the Central Government may, by notification in the Official Gazette, specify, may be regulated only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature'.

It permits almost unrestrained hoarding and higher profit to the hoarders as the Act clearly mentions that 'any action on imposing the stock limit shall be based on price rise and order for regulating stock limit of any agricultural produce may be issued under this Act only if there is — (i) hundred per cent increase in the retail price of horticultural produce; or (ii) fifty per cent increase in the retail price of non-perishable agricultural foodstuffs, over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.'

Immediate concerns: Under a totally decontrolled market, the major stockists will form a cartel to maximise their profit by hoarding the essential commodities of mass consumption. The Act has made the state government toothless as they cannot intervene, by law, to stop hoarding unless prices are raised beyond a certain limit.

(b) 'The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act', 2020, says: 'A farmer may enter into a written farming agreement in respect of any farming produce and such agreement may provide for — (i) the terms and conditions for the supply of such produce, including the time of supply, quality, grade, standards, price, and such other matters; and (ii) the terms related to supply of farm services. However, the Act also says that 'No farming agreement shall be entered into by a farmer under this section in derogation of any rights of a sharecropper.'

Immediate concern: The act provides legal sanction for contract farming under which farmers will produce crops as per contracts with corporate investors for a mutually agreed remuneration. The main concern is corporate investors who run global supply chains will dictate terms and would look for short term gains. They will be primarily interested in the farm output not on the sustainable development of the farmland.

The concept of contract farming is not new in India. The indigo planters of British East India Company started it in Bengal in the eighteenth century. Indigo cultivation had changed the characters of the farmland as rice and indigo cultivation processes were substantially different. After the invention of chemical indigo in Germany when the demand for organic indigo dropped suddenly and the company agents stopped procuring indigo from the farmers resulting in large-scale starvation deaths among traditional rice cultivators of Bengal who were compelled to cultivate indigo. It took years to make those lands suitable for rice cultivation again.

In recent times, contract farming of sugar canes in Maharashtra's Marathwada district has made most of the land almost barren. It is reported that unrestricted use of groundwater for sugar cane farming (which is extremely water-intensive cultivation) has aggravated the groundwater crisis of the region. Though farmers have received an assured price from sugar factories due to contractual agreements, the quality of their farmland has drastically depreciated due to bad farming practices. Experts apprehend that if the existing farming practice continues, water-stressed regions such as Marathwada could be heading towards desertification.

It may be pointed out that historically only Bihar and eastern UP were the centres of the sugarcane belt, which were in line with the water resource endowment of the region. But over time, the strong political lobby of sugar factories took the sugarcane belt to Maharashtra, Karnataka and Tamil Nadu, which do not have that type of water resource endowment. Unrestrained corporatisation of agriculture is likely to destroy the remaining bio-network of the Indian farm sector.

(c) The 'Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act', 2020 allows the farmers, by giving them the freedom, to sell their produce anywhere they want to. The Act says: 'Subject to the provisions of this Act, any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the inter-State or intra-State trade and commerce in farmers' produce in a trade area. Any trader may engage in the inter-State trade or intra-State trade of scheduled farmers' produce with a farmer or another trader in a trade area.' The definition and scope of two terms in this Act are very important: 'trade area' and 'trader'.

A 'trade area' means any area or location, place of production, collection and aggregation including –– farm gates; factory premises; warehouses; silos; cold storages; or any other structures or places from where the trade of farmers' produce may be undertaken in the territory of India but does not include the premises, enclosures and structures constituting –– (i) physical boundaries of principal market yards, sub-market yards and market sub-yards managed and run by the market committees formed under each State APMC in force in India; and (ii) private market yards, private market sub-yards, direct marketing collection centres, and private farmer-consumer market yards managed by persons holding licenses or any warehouses, silos, cold storages or other structures notified as markets or deemed markets under each state APMC in force in India.

A 'trader' means a person who buys farmers' produce by way of inter-state trade or intra-state trade or a combination thereof, either for self or on behalf of one or more persons for the purpose of wholesale trade, retail, end-use, value addition, processing, manufacturing, export, consumption, or for such other purposes.

Immediate concerns: (i) Power and revenues of state governments will be curtailed due to the marginalisation of state APMCs. An agricultural produce market committee (APMC) is a marketing board established by a state government in India to ensure that farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels. Until May 2020, the first sale of agriculture produce could occur only at the market yards (mandis) of APMC.

The concept of agriculture produce market regulation program in India dates back to the British period as raw cotton was the first farm produce to attract the attention of the Government due to the anxiety of British rulers to make available the supplies of pure cotton at reasonable prices to the textile mills of Manchester (UK). Consequently, the first legislation was the 'Berar Cotton and Grain Market Act' of 1887, which empowered British Residents to declare any place in the assigned district a market for sale and purchase of agricultural produce and constitute a committee to supervise the regulated markets. This Act became the model for enactment in other parts of the country. Most of the states enacted 'Agricultural Produce Markets Regulation (APMR) Acts' during the sixties and seventies and put these in operation. All primary wholesale assembling markets were brought under the ambit of these acts. Well laid out market yards and sub-yards were constructed and for each market area, an agricultural produce market committee (APMC) was constituted to frame the rules and enforce them. Thus, organised agricultural marketing came into existence through regulated markets.

It is feared that since there is no market access charged for business done outside the mandis, the APMCs will slowly begin to lose business to outsiders. As the APMCs charge a market cess of 0.8 per cent to 3 per cent, it is a major source of earning for states like Punjab, Maharashtra, Haryana and Karnataka, etc. Maharashtra has around 305 APMCs and 598 subcommittees which report an annual turnover of Rs 45,681 crore. It is reported that APMCs of Maharashtra have witnessed the loss of 25-30 per cent in their incomes between June and August this year as compared to their earnings for the same period a year ago. The loss is attributed to the ordinances related to agricultural marketing reform promulgated by the Centre in June. With states not permitted to levy market fee/cess outside APMC areas under the new laws, Punjab and Haryana could lose an estimated Rs 3,500 crore and Rs 1,600 crore each year respectively.

(ii) This Act will create a few large private buyers who will exercise monopsony power against thousands of small and marginal farmers. A Study suggests that agricultural output, price, and credit markets are highly interlinked. Weak credit markets result in the inefficient performance of agricultural markets. In the absence of proper credit facilities, small farmers will be compelled to take loans from the affluent buyers and would sell their products at a discounted price. Farmers will become price takers. Experiences of the countries, where large retailers controlled the food market, suggest rapid erosion of income of the farmers, particularly the small and marginal farmers. An Oxfam (2004) study revealed that while exporting apples from Africa to Europe, the African farmers as a whole got only 9 per cent of the total price of an exported apple, the overseas retailers in the UK corners 42 per cent share and the rest went to other stakeholders like agents, packers, transporters, et al. In 1981, a UN study also suggested a similar picture of deprivation of local producers.

A report, titled, 'Study on Agricultural Diagnostic for the Bihar State of India' gave a deep insight into how the removal of APMCs (in 2006) and liberalisation of the agriculture the sector, in fact, hurt the income of Bihar's farmers and how MSP and state procurement did not help them. The report findings strongly suggested that the Government's role in agro-economics is far more important than popularly believed.

It may be recalled that Tribhuvandas Patel successfully led farmers against the unfair trade practices of the agents of Polson and Polson Dairy and established the Kaira District Co-operative Milk Producers' Union Limited, on 14th December 1946, which eventually gave India the 'Amul' brand. The new Farm Acts are likely to bring back the domination of Polsons of the 1930s.

Corporatisation of Indian agriculture

The corporate intervention in the Indian firm sector began with a bang in the mid-sixties in the name of the 'Green revolution'. The program, initiated by the Rockefeller Foundation, USA, had introduced a new cultivation process that is completely dependent on the corporate sector for agricultural inputs like seeds, chemical fertilisers, pesticides, and sustained water supply. The marketing of the products was primarily left with government-controlled mechanisms like minimum support price (MPS), a public distribution system (PDS), APMC, etc. Now, these three new acts of 2020 have shifted the marketing responsibility of agricultural commodities from the State to private corporations. Thus corporatisation of Indian agriculture has been completed.

It may be recalled that on December 10, 1974, Henry Kissinger had submitted a confidential report, titled 'National Security Study Memorandum 200' (NSSM-200) - For US Security and Overseas Interest' (also called the Kissinger Report), to the US Government. The main recommendations of the report were:

The United States needs wide access to the mineral resources of less-developed nations (LDCs).

The smooth flow of resources to the United States could be jeopardised by LDC government action, labor conflicts, sabotage, or civil disturbances, which are much more likely if population pressure is a factor.

Young populations are also much more likely to challenge imperialism and the world's power structures, so their numbers should be kept down if possible.

Therefore, the United States of America must develop a commitment to population control among key LDC leaders while bypassing the will of their people.

The Kissinger Report identified 13 key nations (India one of them) as the primary targets of population control. And the food was considered as one of the major tools through which the USA wanted to achieve its objective. Kissinger commented 'if you control the oil, you control the country, if you control the food, you control the population.'

On July 18, 2005, the Ministry of Agriculture, Government of India and U.S. Department of Agriculture (USDA) agreed to work together for a new India–US knowledge initiative on agriculture education, research, services, and commercial linkages. They agreed on a work plan which included among others: (i) Education: Preparing graduates to harness science and technology for the pursuit of attaining and sustaining the 'Evergreen Revolution'; (ii) Food-processing and marketing; (iii) Biotechnology and (iv) Water Management. To supervise this plan, a board was created consisting of eminent scientists and representatives from the governments, NGOs, and private firms. The honorary members were Dr Norman Borlaug (USA) and Dr MS Swaminathan (India) — the architects of the first Green Revolution. The private sector representatives in the board were: Monsanto, Archer Daniels Midland Company and Wal-Mart from the USA side and from the Indian side, the representing firms were: Masani Farm and ITC Ltd.

By then, ITC had already taken a major initiative, through e-Choupal, to establish a sophisticated supply chain to strengthen large corporations 'grip on the food business. To facilitate this change, the public sector National Bank for Agricultural and Rural Development (NABARD) has initiated, in January 2009, an in-depth study on organised agri-food retailing and supply chain management', covering different Indian states and all major agricultural commodities including fruits and vegetables. Thus the ground for the 2nd green revolution has been prepared at different levels. The game plan is very clear. Transnational corporations, with the help of their junior Indian partners, will retain total control, from cultivation to retailing, in the food industry. Logically, the next major intervention would be through the introduction of genetically modified seed (GMO) in Indian agriculture.

Emerging hub of global food industry

The ground for these Firm Acts was prepared over a long period. Ten years ago while releasing a study, done by CII & Yes Bank, on 'The Indian Processed Food Industry: A Diagnostic Review of Opportunities and Challenges', on the side-lines of the second Processed Food Advantage India 2010, Subodh Kant Sahai, the then Minister for Food Processing Industries, said —" The food processing sector has the potential to become the outsourcing hub for the world and India will be feeding the world in years to come." The conference was attended by more than 50 international companies engaged in food processing and retailing.

TTo meet this objective, the government has permitted 100 percent foreign direct investment (FDI) through automatic route in the manufacturing of food products. From FY 2017-18 to the first half of FY 2019-20 India has received US$2 billion of FDI in the food processing sector.

These policy changes and huge inflow of FDIs will certainly boost exports of food products by transnational food corporations. But it will also endanger the food security of millions of economically disadvantaged citizens of the country. Moreover, along with food grains, India will export its precious water, in virtual mode, as food production consumes huge quantities of fresh water which is increasingly becoming scarce in every passing day. The long term food availability to Indians will be at stake due to the systematic transfer of valuable natural resources like 'jal jangal jamin', through virtual mode, to the developed world. Fertile land and water resources of the farmers will be used, as the womb and blood of a surrogate mother, by the transnational food retailers.