Breaking the Complexity of Farm Acts

[This is a post by Surabhi Srivastava, Contributing Editor]

Through this post, I am making an attempt to discuss the new farm bill (now an Act) on a comparative analysis basis. Certain questions, such as whether the Centre had the power to make laws in this area? Or what is the dispute going on between centre and state? Why in certain states there is comparatively more hue and cry regarding this bill? And can the proceedings in the Parliament be challenged in the Supreme Court of India? The final question, whether farmers are in actuality going to get any benefit out of this bill?  Give a quick read to this article and find out the answers!

Understanding the existing Agricultural Produce & Livestock Market Committee system

After the nation got independence in 1947, the farmers used to sell their produce directly to the customers but owing to the Zamindari system and other unavoidable circumstances the farmers had taken a loan from some or the other sources. In result, the money lenders (including Zamindars) use to charge an exuberant amount of interest from the farmers, consequently, the money lenders use to buy the produce of the farmers in the lowest possible price and again when the farmers wished to grow crops etc., he would not have enough fund to conduct his farming activity. Again, the farmers would turn to the money lenders and the story would viciously repeat. The farmer was struck in this merciless situation and their exploitation was on a loop.

 To solve the issue regarding the exploitation of farmers, the government comes into the play and enacts, Agricultural Produce & Livestock Market Committee Act (for brevity Act). This laid the prohibition of direct exchange of goods between the farmer and any other person, rather all the process of sale would take place through mandis which were established through the ACT. The mandis were, however, run by the State Government. Now let us look at the present-day functioning of the APMC ACT, each state has its own APMC and the State divides it area wise according to its own convenience, awarding one mandi to each area. Suppose, if a trader wants to buy some product from that mandi then he would have to acquire the licence of that mandi and similarly if a farmer wants to sell his produce in a mandi he will have to acquire a licence too. This process is a mandate.

Further, if we go on to see how the product is sold according to APMC, then it is according to the auction system, the goods are divided into two categories for the purpose of sale, one being MSP (Minimum Selling Price) and Price Discovery, the price in case of the former is fixed by the Government of India and to be noted that not all crops fall under the category of MSP, there are only 22 crops that are permitted to the credit of MSP. The latter includes all other crops apart from those 22 falling under MSP; here the goods are sold according to the market situation such as demand and supply. Furthermore, in APMC, goods are sold through a chain, in nutshell, there are various middlemen between the farmer and the end consumer, the new Farm Bill is on its way to do away with this system.

However, the present chain functions as follows:

(1) Farmers take produce to APMC

(2) Commission agents (first-person farmers gets in connection within APMC mandi )

(3) Traders (from here it goes to the retailer, wholesaler, vendors etc. and at last reaches the customer)

(4) Transaction agents (approaches the farmer and informs him about the selling price of his produce, and charges at least 3-4% market fees from the farmer)

(5) Farmer

This whole process is not transparent, as in the farmer is totally aloof of the process as to how the price of his produce is fixed. By the time the product actually reaches the customer, there is at least a hike of 50% price from what is being paid to the farmer and about 25% of the total produce of the farmer is wasted. For instance, if an apple has reached a customer for Rs.50/- the farmer has got only Rs.5-7/- for it. The rest of the amount is eaten up by middlemen etc. Thus, this is the existing APMC system.

Now two flaws are patently seen in the system, first- who can become a trader? Since the whole AMPC is controlled by the State Government so much believed fact is that only those people who are politically inclined towards the government attain this position. Second- due to numerous middlemen, the consumer is buying the product at a much-inflated price and the farmer is left with no choice but to sell his produce at a low price.  

The APMC act was introduced with a purpose to do away with the exploitation of farmers in the hands of Zamindars and money lenders but with the passage of time, the Act itself has become a means to exploit the farmers. Most of the time, the traders form a cartel and refuse to buy the produce beyond MSP, on the other hand, the production of the farmer is perishable in nature and hence, he is bound to sell it at the lowest cost, quoted by traders. To increase the MSP, farmers of various states have appealed multiple times. Thus, the APMC Act has become counterproductive and failed to fulfil its purpose. Even if we do not come up with a new Farm Bill, still the APMC should be amended for the betterment of farmers. Additionally, the government must interfere a little less in the matters of agriculture to bring in reforms in the hands of private organisations. However, the new mechanism should be well equipped with the problems of the  21st century, such as if the export gets cancelled, who would bear the cost? What should be the consequence if the traders are buying produce in less than MSP?

Findings in the new Farm Bill

On the other hand, the newly passed farm bills will give farmers the freedom to trade across states and empower them to turn into traders of their own products and be in control of the process. The intent behind these three bills is that the new regulation will create an ecosystem where the farmers and traders will enjoy the freedom of choice of sale and purchase of agri-produce and promote barrier-free inter and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. Practice similar to the new farm bill has already been adopted by some states in India such as- Karnataka, Bihar and Maharashtra. These states have figured out a remedy of paying penalty for the foul on part of traders to buy produce lesser than MSP and also they talk about paying remuneration to farmers. The agriculture sector is pretty much monopolised, hence it is the need of the hour that the government should withdraw its involvement because a monopoly for that matter is not healthy for any sector. It is a well-established fact that monopoly benefits only a certain section of people and it eradicates fair play.

Why are some states exceptionally vociferous?

Moving on to see the disparity in the intensity of revolt in various states, for which we need to understand that post-independence, not all states have developed at the same level or at the same pace, hence, some states are referred to as rich states such as Maharashtra, Gujarat, Tamil Nadu and Karnataka whereas, some states are referred as poor states such as Punjab. Therefore, for the development of a particular state, the funds are partially raised by the state themselves and some amount is donated by the Centre.  But this donation is not equal for all states. Suppose, all the States and UTs in India pay Rs. 100/- to Centre, now centre after collecting this amount has to redistribute it while redistributing it will not return Rs. 100/- to each state rather some states may get Rs. 15 or Rs. 40 or Rs. 150, depending on their requirement to develop so if it’s a poor state it may get more than it contributes i.e. more than Rs. 100 and on the contrary a rich state may end up getting lesser than-what it contributed, in this example, less than Rs. 100/-

The amount unreturned from the Centre could have been used for the State’s own development. Now let us apply the same logic in agricultural income. For its development, a States relies on its own income and contribution from the state, but we have noticed that during redistribution some states get less than what they contribute, so the States has to fill the monetary gap created by the Centre. The unreturned amount could be used by the state in its rural development, keeping this in mind, let us see case by case analysis.

Say in Punjab, in turn only Rs. 40 comes in lieu of Rs. 100, but it does need funds to develop its state, for this purpose State levies taxes on mandis, this tax is highest in Punjab, for the current year its value was 1750 crore.

It must be noticed that the tax amount is obtained from the mandis but the new system talks about eradicating the mandi system and creating a sort of ecosystem and the tax levied will not be credited into the state’s piggy bank leading to sufferings in the state development. In 2015, Shanta Kumar Committee gave a finding, which said there are only 6% of the farmers who are actually receiving the benefit of MSP. 94% of the farmers are not even aware of the concept of MSP.    

More than half of all government procurement of wheat and paddy in the last five years has taken place in Punjab and Haryana, according to Agriculture Ministry data. More than 85% of wheat and paddy are grown in Punjab, and 75% in Haryana, is bought by the government at MSP rates. Farmers in these States fear that without MSPs, market prices will fall.

Deduction of power to make law on “Agriculture”

The Seventh Schedule of the Constitution contains entries upon which Centre, State or both together can make laws in relation to any issues (i.e. Union List, State List and Concurrent List). List II; Entry 14 of the Constitution specifically provides power to the State for making laws in any matter relating to agriculture. 

Now, on the other hand, the Constitution provides power to the Union under Article 248 to legislate any matter which is of the State List, in the National Interest. This Article breaks all the distinguishing powers and barriers given in List I, List II or List III and provides ultimate power to the Union for making any law in any respect if they ought to believe that it is in the national interest.

On the basis of my understanding, two questions remain unanswered: 1st, what are the criteria to calculate a matter to fall under National Interest and 2nd whether the constitution-makers, while inserting this Article wanted to shadow List II under the power of Union?  

Recently Union with the assent of the President passed the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 and The Essential Commodities (Amendment) Bill 2020 by the use of Entry 33 in the Concurrent List. This is a clear example of the crossing lines and misuse of the power vested under Article 248 of the Constitution by ultimately weakening the power of the State to make law under List II on the matter relating to Agriculture by maintaining the supremacy of the Union to make laws over matters of Agriculture. In the past also by using Entry 33, List III, the Union passed the Essential Commodities Bill, 1955.

To conclude, the farm bills (now Acts) look beneficial on the face of the farmers but it will be fruitful at the cost of state development. Also, the farmers may not be able to sell their produce at MSP since it will not exist anymore. At the same time, the government must do something to educate the farmers regarding their rights and benefits. Farmer’s reforms and farmer development must not be limited to passing bills but letting it reach them too.

Indian Federal Structure: An Umbilical Cord between Centre and State

In this post, I will be analysing the Indian Federal Structure. The structure of the Indian Constitution is so unique that it is impossible to describe it in simple terms. Here, I will try to go through various Constituent Assembly debates and scholarly views to conclude the real ‘character of the Indian Federal Structure’.

“Personally, I do not attach any importance to the label which may be attached to it-whether you call it a Federal Constitution or a Unitary Constitution or by any other name. It makes no difference so long as the Constitution serves our purpose” – Rajendra Prasad.

The Indian Constitution is sometimes called “federal”, “Quasi-Federal”, “Sui-Generis” or “Cooperative Federalism”. But interestingly the founding fathers themselves refused to adhere to any theory or dogma about federalism. As G. Ayyangar said in the assembly, ‘India had unique problems which were not confronted other federations in history’. (CAD Vol. V, page 38). As we all know, federalism does not have any ‘stable meaning’ or definite concept. Therefore, as L.K. Maitra said the founding fathers have pursued ‘the policy of pick and choose to what would suit them best, what would the genius of the nation best’. The outcome that we see today is sui generis (unique) Constitution.

As Granville Austin says the most singular aspect of the drafting of the federal provisions was the relative absence of conflict between the ‘centralizers’ and the ‘provincialists’. There no discussion on the effect of emergency provisions, distribution of powers between centre-state or over the distribution of revenue (which we see as a problem now due to the implementation of GST). The assembly members wanted more revenue for the states but they settled that the Union should collect the money and then distribute. The federal structure, as we see today, was acceptable to most of the members of the assembly. According to Dr Ambedkar,

“Ours is a Federal Constitution inasmuch as it establishes what may be called a Dual Polity which will consist of the Union at the Centre and the States at the periphery each endowed with sovereign powers to be exercised in the field assigned to them.”

Ambedkar said the Constitution avoided ‘tight mould of federalism’ and could be ‘both unitary as well as federal according to the requirements of time and circumstances’.

Reasons for the Centralizing tendencies: A Historical Account

I. Gandhi v. Nehru?

Gandhi wanted political decentralization where the focus is on the micro-level governance as opposed to centralized government. The idea is derived from the drawback of centralized decision making at the macro governmental levels. According to Gandhi decentralization of political power is the basic requirement for the success of true democracy. The concentration of power in his view distorts all democratic values. So he thought that “possession of power makes men blind and deaf; they cannot see things which are under their very nose, and cannot hear things which invade their ears.” Thus, his linking for decentralization originates from his urge for the shrinking of the state and the deepening of the roots of democracy. He, therefore, asserted that “If India is to evolve along non-violent lines; it will have to decentralize many things. Centralization cannot be sustained and defended without adequate force”.

But the assembly had other ideas and the way in which the Assembly framed these provisions, however, it may be helpful to look at the ‘forces bearing on its decisions’. The conditions precedent to the formation of the constituent assembly urged the members to create a powerful centre to prevent the country from disintegrating. Although the Government of India Act of 1935 gave powers to the provinces, the power was always in the hands of the British (centralised). Here the report of the Joint Parliamentary Committee stated that the central government under the 1935 Act would cease to authority over the matters listed under the provincial list, but ‘in virtue of his (Governor-General) powers supervising the Governors, he will have authority to secure compliance in certain respects with directions which he may find it necessary to give’. This centralizing tendency affected India’s future, as Austin says. The Indian never, in reality, got to participate in the ‘real’ federal process as seen in the USA or Australia.

Further, Nehru said, in contradiction to Gandhi, in 1936 that, ‘it is likely that free India may be a Federal India, though in any event there must be a great deal of unitary control’. Communalism also impacted the Indian federal structure and the effect of communal tensions on plans for a federal structure is evident in the reports of Nehru and Sapru Committee. Nehru in the report said, ‘We are called upon to determine the principles of the Constitution after considering these divergent views’ before us and they recommended for centralized federal structure based on 1919 Government of India Act. In the Sapru committee, the members wanted the provinces to have the ‘residuary power’ (as opposed to Indian Constitution currently which resides this power in Centre). But after the bloodshed of partition, the second report of Union Powers Committee dated 05.07.1947 in Paragraph 2 suggested that,

“It would be injurious to the interests of the country to provide for a weak central authority which would be incapable of ensuring peace, of coordinating vital matters of common concern, and of speaking effectively for the whole country in the international sphere… the Soundest framework for our Constitution is a federation with a strong Centre.” (Page 70-71)

In the meeting of the Negotiating Committee of the Chamber of Princes and the Assembly’s States Committee (08.02.1947), Nehru said we need to deal with the situation which might happen after the partition wherein there would be economic, refugee and food crisis. The new provinces might not be able to bear the strains of the new responsibility, hence, it was feasible to adopt a strong central government which could deal with the problems.

II. Communalism: Community rights over States’ rights

The issue of communal politics since the 1920s till the independence also influenced the demand for a strong centre. The need for communal representation was more important than the bifurcation of power between the provinces (states) and the Centre. The emotional Indian, as Austin calls them, wanted community rights over the states’ rights, which were secondary and never assumed the importance they had in Australia and the USA. Even in 1919 and 1935 Acts, more reliance was placed for community rights (Muslims and Hindus) rather than rights of the provinces. The demand for the partition unified the provinces with the centre. Responsible Indian leaders, already confronted with a fragmented society, believed no new, divisive forces should be introduced.

Cooperative Federalism in India

In my opinion, the Indian state is neither quasi-federal nor completely federal. But what we have adopted is Cooperative Federal structure in which all governments has to understand an essential point that they are not independent rather interdependent and they should act for maximization of the common good [as also put forth by Professor M.P. Jain].

Even the Constituent Assembly religiously embraced ‘cooperative federalism’ which is characterized by the interdependence of federal and regional governments. According to Austin, it “produces a strong central government, yet it does not necessarily result in weak provincial governments that are largely administrative agencies for central policies”. Indian federalism has demonstrated this. Also, Geoffrey Sawer proposes that cooperative federalism has the following characteristics: (a.) Centre and States have a reasonable degree of autonomy [as seen in the distribution of lists]; (b.) Each of the parties can bargain about the terms of cooperation, and; (c.) at least if driven too hard, decline to cooperate. Although these pointers are not directly applicable to the Indian scenario, the Union and the States have shown to work in harmony in avoiding constitutional discord.

One of the benefits of this type of federal structure is, in words of Hon’ble Justice Dipak Misra, that the “national vision as set out in the Preamble to our Constitution gets realized”. The approach of the governments might be different, but the ultimate goal and objective remain the same. This will lead to the strengthening of constitutional functionalism in a Welfare state, like India.

The units of in the Constitution should stress on negotiations for achieving common goals amongst different levels of governments. According to Martin Painter, Australian proponent for Collaborative federalism, says

“The practical exigencies in fulfilling constitutionally sanctioned functions should bring all governments from different levels together as equal partners based on negotiated cooperation for achieving the common aims and resolving the outstanding problems.”

Such an approach requires continuous and seamless interaction between the Union and the State Governments. Under the Indian Constitution, we have Article 263 which establishes the Inter-state council whose duty is to “discuss subjects in which some or all of the States, or the Union and one or more of the States, have a common interest” [like COVID-19, 2020] and to “make recommendations upon any such subject and, in particular, recommendations for the better coordination of policy and action with respect to that subject”. Even the existence for Article 239AA aims for cooperative federalism between NCT of Delhi and the Union, as held in the case of NCT of Delhi v. Union of India. Further, the constitutional vision of cooperative governance is enhanced by the provision made in Article 258 under which the President may, with the consent of a State, entrust to it or to its officers, functions concerning any matter to which the power of the Union extends.

Hence, in conclusion, the Indian Constitution provides a platform for cooperation and deliberation between the states and the Union. The process by which national goals set out in the Preamble and DPSPs are achieved, not by the Union government acting alone, but by some or all of the governments and the territories acting collectively in cooperation. This should be the guiding star to them to move on the path of harmonious co-existence and interdependence.