Everywhere in the world, citizens aspire freedom to live, move, come-together and to trade. The great revolutionary document called the Constitution of India is built on the promise of freedom to Indian citizens. Unfortunately, the State, since 1950s, has used coercive measures to curtail freedom. In 2020, the Central government has enacted two new Laws and one Amendment Act for our farmers. The nation has witnessed (and is still witnessing) widespread protests by the farmers across borders of the National Capital Territory and elsewhere. The protestors have called these laws as ‘black laws’ and they demanding the Indian State to take back these laws. In this blogpost, I will not be discussing the protestors’ rights or the process through which these contentious laws were passed. Rather, I will be discussing the context of these new laws- through the lens of Constitution of India and Freedom which our farmers have aspired for since the beginning.
Removing the barriers in free trade: Farmers laws
Article 301 of the Constitution of India provides that “trade, commerce and intercourse throughout the territory of India shall be free.” This includes inter-state trade and intra-state trade too, as clarified by the Hon’ble Supreme Court in the case of Atiabari Tea Co., Ltd. vs The State Of Assam (five judges bench). The farmers who produce their crops must be free to sell their produce anywhere in India- that is the spirit of Article 301. But the State Governments have imposed several restrictions on free trade of farmers produce through their respective APMC Acts (which establishes a local Mandis which have monopoly over all trading activities related to farmers’ produce). Due to these APMC markets, the farmer is not able to sell his crop outside his local limits and there are certain taxes that are imposed on the farmers/traders by these APMC Acts which restrict the freedom of the farmers through various means. Neither any trader has any incentive to trade with the farmer as there are a lot of barriers imposed by the State Governments.
To enable national marketplace for farmers, so that they can sell their crops anywhere in India, the centre has enacted the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act of 2020 (hereinafter referred to as the ‘First Law’). The objective of the Act is to provide a system for “the farmers and traders” to “enjoy the freedom of choice relating to sale and purchase of farmers’ produce.” This law is created to enable competitive markets and to end the monopoly of the Mandis/APMCs “to promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce”— without bulldozing them as they also serve as one of the competitors in the market. Section 3 of the first law states that “any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the Inter-State or Intra-State trade.” This provision is important as it smoothen the way for farmers to trade inter-state and intra-state and this provision is coupled with Section 6 which removes the restrictions of tax imposed by the State Governments (through APMC) on farmers and traders (Although this provision says that the state government can levy any tax/market fee/cess on any trade which takes place in APMC market areas). The law opens up possibilities for traders (through Section 4) and farmers to engage in open markets without curtailing their profits and it also enables the farmers or traders to supply their surplus produce to areas where there is shortage of food at any price (through hoarding and warehousing). The first law also allows for establishment of “electronic trading and transaction platform” to facilitate inter-state and intra-state trading of farmers’ produce (Section 5(1)). This is a first step in right direction but there is lot more to achieve in this (which I will discuss in conclusion part).
Now coming on to the other law which is Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 (hereinafter referred to as ‘second law’). This law is enacted with an objective to protect the interests of the farmers while trading agricultural crops and to enable farmers to engage with “agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce”. Section 3 of the second law grants a right to the farmer to enter into any agreement and it provides for the period of the agreement and other necessary conditions. Further, the agreement in which the farmer will enter with any business/trader etc., will be based on “mutually acceptable quality, grade and standards of a farming produce” (Section 4(1) of the Second Law). Section 4 also provides for certain other necessary conditions in the agreement which must be taken care of by the parties who want to enter into an agreement- such as agriculture practices, climate conditions and other factors. To ensure fairness and transparency in the whole agreement between the parties, Section 4(4) also allows for “third party qualified assayers” who shall monitor the whole cultivation or rearing process. Also, any agreement under this law (second law) for selling and purchasing of any famers’ produce “shall be exempted from the application of any State Act” (Section 7(1)) which means that there would be no imposition of taxes levied by the States Governments through APMC Acts. The Clause 2 also grants freedom to warehousing corporations and other businesses to enter into agreement under this law with farmer(s) and stock up the farmers’ produce (irrespective of the requirements under Essential Commodities Act). This can help in regulating the prices (and resources) in the free markets during those times when the crops are destroyed due to natural or other reasons and will end the monopoly of Central Warehousing Corporation (CWC). As Ajay Shah, former consultant in Department of Economic Affairs (2001-2005), argues, “private persons will peer into the future, forecast future shortages, and stock up goods in response. This is an area where the policy agenda, in the main, is that of ending government involvement.”
Other goods apart from agriculture produce are available in free markets after 1991 liberalisation policy, so why not allow private players to compete in open markets with minimum-to-no state coercion. When there are incentives for private players, then they will put in all the resources to “study the food economy, and make forecasts of future prices” (Ajay Shah) which will in turn benefit the farmers as they will know what to sow and when to sow and they will be able to avoid crop failures.
For any trade to take place and for any commercial activity, there needs to be availability of data without which all policy and trading activities will suffer- opening up the markets is a good step, but dissemination of information is also necessary to enable players to compete in free markets. To avoid the informational transaction costs, the first law has also introduced “Price Information and Market Intelligence System for farmers’ produce” which will be developed by the Central Government (Section 7(1) of the first law).
Furthermore, it is every citizen’s fundamental right to “carry on any trade or business” (Article 19(1)(g)) and any restriction of the said fundamental right is only possible under Article 19(6). We must never forget that freedom is the general rule and the restrictions are exceptions.
Protecting our Farmers: from Big Corporate Houses to Traders
The fear of non-payment of dues by the trader to farmers is a genuine issue and the small farmers, especially from marginalised communities, are more prone to such violation of rights. The first law lays down, in Section 4(3), that the trader shall make payment to the farmer on the same day or within three days (subject to conditions in the agreement). This provision in the first law protects the farmer from any non-payment of his/her dues. Any violation of this provisions attracts stringent punishment under Section 11 of the first law, in essence, penalty up to five lakhs rupees.
Section 8 of the Second Farmers Laws protects the uneducated farmers from exploitation by big corporate houses as the provision says that the agreement entered by the farmers with any business entity shall not be for the purpose of sale/lease/mortgage of farmer’s land. This provision, in essence, will protect those marginalised farmers who are exploited by big landowners and middlemen. The second law also provides for mitigation of loss of the farmer or the business entity and flow of credit/money by recommending the farming agreement to be “linked with insurance or credit instrument” (Section 9). There is always a concern about the land of the farmer that if he/she is unable to deliver the crops due to climate change or any natural disaster, then his/her land is taken away by the way of legal proceedings- but the second law, in Section 15, ensures the farmer that “no action for recovery of any amount due shall be initiated against the agricultural land of the farmer.” Therefore, protecting the land of the farmer from any recovery proceeding.
These farm laws are in the spirit of Article 301 of the Constitution of India and they ensure farmers with the freedom which they have always asked for- to trade, to sow, to cultivate and to do whatever they want to do with their farming land. Interestingly, these laws do not dismantle the APMC Acts/Mandis created by the State Government and the option of selling their crops at these Mandis is not taken away from the farmers. Basically, the laws have created more options for free trade and marketplace- without any state coercion. There is also a need to diminish the digital divide that exists in India- in order to allow the farmers to trade electronically – there must be awareness programmes under Digital India Scheme to educate the farmers throughout India. The laws are in right direction and there is still a lot of reforms which are to be considered by the government- like opening up exports and imports of agricultural produce (International Trade) and futures market.
Note: Public discourse, debates and dissent are important for the democracy. Without the public discourse, democracy fails. The way in which these farmers laws were passed by the Government during a pandemic and the handling of farmers protests is unacceptable and the ministers must be held accountable for the same as it is very important- to limit the power of the executive- through Courts and outside Courts.