Deciphering India’s New Farm Laws in a Global Context

By Shalini Bhutani | Commentary | October 5, 2020

Two hurriedly enacted new farm laws do not throw up altogether new ideas. These so-called ‘reforms’ in agricultural marketing have been on the cards for much of the last two decades. Among other things, the emphasis two new central laws [Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; and Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020] place on agricultural export and large players are not reformative. Unless global trade rules too are truly reformed to address the concerns of developing countries, the optimism on being able to transform farmers’ lives and livelihoods through barrier-free trade is largely misplaced.

The Central Government has long been attempting to ‘reform’ agricultural marketing on the post-production front. The previous attempts by Central Government on agricultural marketing were in the form of suggesting changes to the state governments through model acts and rules. These included:

  1. Model Act of Agricultural Marketing, 2003.
  2. Model State Agricultural Produce Marketing (Development and Regulation) Rules, 2007.
  3. State/Union Territory Agricultural Produce and Livestock Marketing (Promotion and Facilitation) (APLM) Act, 2017.
  4. State/Union Territory Agricultural Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Model Act, 2018.

State Laws

Agricultural produce is cultivated, harvested, and marketed by farmers in the states. Hence, the logic for agriculture being a state subject to be decided by political units ‘closer to the people’ and to stay more responsive to the ground realities. Existing laws on agricultural marketing in Indian states came into being in the 1960s and 70s.

However, section 12 of the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act or the FPTC Act gives the Central Government the power to issue instructions, directions, orders, or guidelines to any State Government or authority under it. As per Section 14 of the said Act, the provisions of this Act shall have an overriding effect over anything inconsistent contained in any State APMC Act.

This creates a situation in which any global or regional trade rules on the subject of agriculture cannot be discussed at a sub-national level. There is more scope for accountability built into decentralisation, the subject must be debated in the state legislature. But the centralisation is critical for the central government to be able to counter both democratic dissent and diversity across states. The ‘single window clearance’ is what big businesses want for faster approvals and a harmonised pan-India law and policy space.

Though states that have APMCs, already have provisions for export facilitation in their legislation as does the FPTC Act. For instance, in the Rajasthan Agricultural Produce Markets Act, 1961, the director is empowered to grant a license to establish private sub-market yards in a market area for export of agricultural produce; and in the Haryana Agricultural Produce Markets Act, 1961 there is mention of the promotion of agri-processing and agricultural export.

The Assam Agricultural Produce Market Act,1972 was amended in 2006 allowing the Director (appointed by the State Government to discharge the functions under this Act) to issue a registration to traders to purchase agricultural produce by establishing a private market yard or direct from an agriculturist, in one more market area for export of specified agricultural produce (Section 5B). The Rules of 1975 issued under the state Act of 1972 give traders an exemption from payment of cess on goods from agricultural produce that are meant for export. So new laws were not needed for facilitating export.

Export Policy

On 5 December 2018, the Union Cabinet had approved the Agricultural Export Policy (AEP). The Ministry of Commerce is the nodal agency for its implementation. The AEP makes specific reference to reforms in the APMC. While the policy acknowledges that some states have not only adopted the model APMC laws and also made amendments to their existing laws to denotify fruits and vegetables; from the perspective of increasing agricultural exports it envisages more changes, such as asking states to remove perishables from the APMC Act; and standardise/rationalise mandi (market) taxes for largely exported agricultural products.

The AEP also prescribes that states should put a special emphasis on agricultural exports in their state-specific export policies. It envisages Agri Export Zones (AEZs) and encourages the use the ‘market-oriented crops’ and export-oriented (production) clusters, for instance, for organic agricultural produce in the North East.

The new laws in large part can be seen as taking forward this policy. The definition of ‘trader’ in the FPTC Act includes a person who buys a farmers’ produce for several purposes including export. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act (FAPAFS Act) makes clear in its opening text that this is about engaging with agri-business firms, processors, wholesalers, exporters, or large retailers. In its Statement of Objects and Reasons, the law is explained as necessary to ‘give fillip to exports’.

Global Trade Rules

The stated legislative intent of the two new farm laws is to make the marketing of agricultural produce barrier-free, whether inter or interstate, in the country. But when it comes to export there are enough and more barriers other than mere geographical boundaries to cross.

The global trade rules in agriculture are inherently in favour of developed countries and the multinational corporations (MNCs) that they harbour. These rules are made at the World Trade Organisation (WTO). After 25 years of the WTO (1995-2020), it is more than evident that its Agreement on Agriculture (AoA) privileges market access for the agricultural products of developed countries.

India’s agricultural policies are under attack by the developed world in the WTO’s Committee on Agriculture and Dispute Settlement Body. The AEP makes only a passing reference for things to be done ‘in a WTO compatible manner’. The National Commission on Farmers (2006) while recommending agricultural marketing reforms, had also made a recommendation to establish a domestic Indian Trade Organisation (ITO) for the government to be able to make informed decisions on matters such as domestic support to farmers, which in WTO could be considered ‘trade-distorting in the global market’.

Corporate Power

The advertisement by the government in the newspapers defending the new farm laws makes reference to ‘profit by partnering with large and food processing companies’ and farmers being in ‘collaboration with large corporations’.

Since the first generation of APMC laws in states, the power of MNCs worldwide has considerably grown in the area of food and farm sectors. MNCs are the key actors in the global food and farm system and in fact yield considerable influence on rule-making at global trade fora. In the last few years, the world has also witnessed the mega-mergers of some of the agribusiness MNCs. The concentration of power in these large corporations does not bode well for any small producers, leave aside farmers’ freedoms.

Export Risks

The COVID-19 containment measures created an uncertain situation for farmers, despite agricultural activities being exempted from the lockdown. Lockdowns in other countries caused disruption of agricultural supply chains across the world. Exports are not immune to market risks. For instance, while APEDA may be looking to expand exports of high-value agriculture produce, including flowers, the International Flower Trade Association explains how hard-hit the global floriculture industry has been. At one end of the supply chain, women as flower pickers and packers lost their livelihoods, while flower growers not typically covered by the direct benefit transfers for ‘farmers’ suffered complete collapse due to the sudden loss of demand. Also, there are enough studies to show that through its agricultural exports, such as rice, cotton, and maize, India is the world’s largest exporter of water.

So if as the FAPAFS Act states that the primary objective is to ‘de-risk agriculture’, then such a simplistic view of exports must be revisited. The biggest risk of promoting exports of agricultural produce is that the Indian government will not be left with any moral ground by which to defend its large public stockholding of foodgrains, which is contested by many WTO members. This can pose a serious threat to food security for vulnerable populations, going against the letter and spirit of the National Food Security Act, 2013.

Food and Nutritional Needs

Rather than focussing on export-oriented corporate-controlled food and farm, the system needs to be re-oriented locally. Production and marketing have to be organised accordingly. A farmer’s freedom to sell is also interlinked with her freedom to sow and grow, what she considers is important. Else she is reduced to simply being a provider of raw material for MNC products for them to profit from.

In the peak of the pandemic, alternatives to mandis did emerge both with the efforts of CSOs and state governments. Micro/mini mandis and online exchanges ensured that there was not the kind of crowding as in big marketplaces. The central government is also taking some steps to support rural haats into Gramin Agricultural Markets (GRAMs) as venues of aggregation and direct purchase from farmers.

The Right to Food Campaign has demanded that the government should develop mandis at every block level under the decentralised procurement system. It suggests that facilities of storing foodgrains should be made available at the village and panchayat level and purchase of agriculture produce from small and medium farmers should be prioritized. As the Mahila Adhikaar Kisan Manch (MAKAAM) has pointed out, this is also a time to invest in women farmer-friendly marketing alternatives to the otherwise male-dominated APMCs. That will also open the possibilities for marketing other local farmer produce, other than just price supported crops.

The United Nations Special Rapporteur on the Right to Food in his first report suggested that we wind down the AoA leaving us with the General Agreement on Tariffs and Trade (GATT). The GATT provides a lot of flexibility to negotiate new international food agreements that can tackle 21st-century issues and create an equitable and resilient food system.

The new farm laws re-envision agricultural marketing but are only a part of the larger vision for agriculture. They attempt to reorganise trade and commerce of farm produce in the country but do not adequately factor in the global trade rules in agriculture. The re-envisioning of Indian agriculture must be undertaken to respond to the diverse situations on the ground and be designed ground up, supporting the many farmer-centric alternatives to mainstream marketing that are emerging. That will literally also give us the grounds on which to counter unjust trade rules.

Shalini Bhutani is a legal researcher and policy analyst based in Delhi.

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