Critique of Farm Reform Acts

This document provides a snapshot of the key concerns raised by stakeholders including State Governments with the farmer reform legislations introduced by the Central
Government, namely:

 Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 ("Farmers Produce Act");
 The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 ("Farmers Agreement Act"); and
 The Essential Commodities (Amendment) Act, 2020 ("EC Amendment Act").

collectively referred as "Farmer Acts".

S. No. Provision Concerns Comments

1. Alternate sales channel or end of APMC?

Farmers can sell within or outside any State
to any trader, including through electronic
trading platforms. One nation one
agriculture market.
 APMC channels available
farmers will cease to exist.
to  Farmer Acts neither repeal APMC Acts nor abolish APMC
markets.
 Farmers have an option to sell either in APMC notified
markets or in trade areas that exist beyond the physical
boundary of said APMC markets. An alternate sales channel is
now available for farmers. State APMCs will continue to exist.

 There are various States in India who have repealed their

APMC Acts or do not have such Acts in place. Please see
Annexure A.
2. Overriding effect vis-à-vis APMC Acts

The Farmers Produce Act and Farmers  The ability to trade in APMC  The APMC Acts continue to be valid.
Agreement Act will have an overriding effect markets will be impacted.
with respect to any inconsistent provision  The Farmers Produce Act and Farmers Agreement Act will
contained in any State APMC Act or any override the APMC Acts in areas outside the physical boundary
other law. of APMC markets – where APMC Acts do not apply.
3. Contract farming exposes farmers to produce rejection, restrictive practices of private traders / sponsors / agri-businesses

Farmers can enter into contract farming  Contract farming arrangements  Contract farming already permitted in various States.
agreements with sponsors, aggregators, agri- will not benefit farmers, is a new Arrangements with private traders have seen varied results,

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 businesses, etc. concept. farmers in some States have benefitted from better pricing.

 Traders will reject produce on
various grounds, farmers are ill-
equipped to protect their produce,
and will not get paid for their
efforts.
 Farmers will be paid for efforts in growing the produce and
costs attributable thereto, even if produce is eventually
unusable. They will have discretion to agree on pricing and
terms.
 No coercion on farmers to sell under agreed contracts if he
earns a higher price outside, can simply pay back the advance
and no penalty will be imposed. If the market price falls, trader
cannot exit the contract, and must pay contracted price.

 Sponsor will be liable for minimum and maximum crop

seasons, framers also benefit from price fixing.

 Sponsors are prohibited from acquiring ownership rights or

making permanent modifications1 on farmer's land or premises.
4. No regulatory protection given to farmers under Farmer Acts

Anyone with a PAN card (or other document
as may be notified) can act as a trader or
operate an electronic trading platform for
inter/intra-State trading of agricultural
produce.

5. No taxes levied on trade occurring in trade areas regulated under Farmer Produce Act
 Government has prescribed  The Farmer Acts aims to reduce intermediaries from trading in
inadequate protection for farmers. agricultural produce, so payment for agricultural produce can
There is hardly any regulatory be directly paid to farmers.
intervention envisaged under
Farmer Acts.  Electronic trading platforms must frame guidelines for fair
trade and practices, Government will ask them to provide
 Farmers will now enter into transaction information, from time to time.
bilateral agreements with
medium/large traders with whom  Existing system of APMC licenses/levies did not result in
they are in an unequal bargaining farmers being ultimate beneficiary. 2 Farmers can now sell
position. produce to anyone in an unrestricted manner, without having to
bear intermediary charges.

No taxes levied in trade occurring in private  This will give an unfair advantage  The Central Government has agreed to accommodate requests

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This may be undertaken only if the Sponsor agrees to remove such structure or to restore the land to its original condition, at his cost. If such structure is not removed, the
ownership of the structure will vest with the farmer after conclusion or expiry of the agreement period, as the case may be.
2
Final Report of Committee of State Ministers, In-charge of Agricultural Marketing to Promote Reforms, Ministry of Agriculture at
https://dmi.gov.in/Documents/stminprreform.pdf.

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 trade areas contemplated under the Farmer to private trade areas over APMC for imposition of taxes on trades occurring in the private trade
Produce Act mandis. areas regulated under the Farmer Produce Act, to create a level
playing field with APMC mandis. The Minister of Commerce
& Industry, Mr Piyush Goyal has made a statement to that
effect.
6. Farmers will be susceptible to price abuse

A Price information and Market Intelligence
System will be developed for farmers’
produce, to disseminate relevant information.
 The APMC system is more
favorable to farmers as sale
happen through open auction or
tender system managed by
APMC, so prices are
benchmarked, even if farmers do
not earn these prices all the time.
 Fixed and assured pricing is not available to farmers in APMC
systems as well. Sale price of notified agricultural produce in
APMC markets is determined by tender or auction system, so
prices paid to farmers varies.3 No trader is bound to offer same
pricing to each farmer it deals with, and APMC representatives
charge levies/fees for providing any transaction facilitation.
Entry of more beneficial pricing by other traders is also
restricted due to extensive rules governing market access to
APMC markets. Therefore, it is arguable that no incremental
protection is provided under the APMC system.

 If farmers believe the APMC system is more favorable, there is

no restriction to sell their agricultural produce there.
7. No Minimum Sales Price (MSP) has been provided to farmers

Farmers can negotiate pricing with traders,
agri-businesses. Agreed pricing must be
included in contract farming agreement.
The plan to provide free market access
to farmers will not work unless
farmers are provided MSP.
 MSP is granted by the Central Government under its schemes,
there is presently no law that makes it mandatory. Central
Government has assured the continuance of procurement of
notified crops at MSP under existing schemes framed every
year.

 The APMC Acts do not mention MSP, and traders are not
bound to pay MSP. MSP issue is unrelated to the APMC Acts
or the Farmer Acts. MSP pricing continues to be offered by

3
Electronic Trading System of Sale in Agricultural Produce Market Committees issued by Government of Karnataka and supported by Department of Agricultural Reforms
and Public Grievances, Ministry of Personnel, Public Grievances and Pension, Government of India at
https://darpg.gov.in/sites/default/files/68.%20Electronic%20Tender%20System%20of%20Sale%20in%20Agircultural%20Produce%20Market%20Committees.pdf; Status of
Marketing Infrastructure under Electronic National Agriculture Markets: A Quick Study by NABARD (2018) at
https://www.nabard.org/auth/writereaddata/tender/0904195131Status%20of%20Marketing%20Infrastructure%20under%20Electronic%20National%20Agriculture%20Marke
t_A%20Quick%20Study.pdf.

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8. Timely payment for farmers
The Farmers Produce Act has fixed a Same day payment would have
payment timeline for farmers (maximum addressed delays faced by farmers in
upto 3 days). APMC markets. This gap could have
been fixed under the Farmer Produce
Act.
9. Dispute resolution
In case of a dispute, farmers and traders can  The disputes process does not
opt for conciliation before a 'Conciliation involve APMC
Board'4 appointed by Sub–Divisional representatives/local
Magistrate ("SDM"). intermediaries, who farmers may
be more familiar with.

Marginal farmers may find it
difficult to reach SDMs
(appointed at taluk/sub-district
level).
10. Legislative competence of Parliament – Farmers Produce Act
The Farmers Produce Act will have an  States powers to exclusively 
overriding effect with respect to any legislate on matters of
inconsistent provision contained in any State 'agriculture' and 'markets' (falling
APMC Act or any other law. under List II (State List) of
Seventh Schedule of the 
Provided that the Farmers Produce Act will Constitution of India).
override the APMC Acts in areas outside the
physical boundary of APMC markets –
where APMC Acts do not apply.
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The members of the Conciliation Board will consist of a Chairperson and other members (2 – 4 max.) as the Sub-Divisional Magistrate may deem fit. The other members will have to
be appointed in equal numbers to represent the parties to the dispute.
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Raghu Seeds Farms and Others vs Union of India AIR 1994 SC 533
Central Government to farmers under its crop procurement
cycles for 2020, news reports indicate continued commitment.
Payment delays faced by farmers under APMC systems may
continue for sales made in trade areas under Farmers Produce Act,
however the 3 day' timeline is mandatorily fixed unlike the
inordinate delayed under the current APMC process.
 The Conciliation Board may still have APMC members, or
farmer produce organization (FPO) members’ familiar to
farmers, as members of the Board will be appointed on
recommendation of the parties.
 Local dispute mechanism has been provided to aid timely and
localized closure of issues. Disputes must be decided in a time-
bound manner - within 30 days. Farmers can alternately choose
to approach the Courts.
Article 251 of the Constitution of India accords supremacy to
Central law in case of inconsistency between that and a State
law, for matters under List III (Concurrent List).
A law regulating trade of agricultural products is not
about agriculture but about trade and hence should be
covered by item 33 of the Concurrent list which refers to
trade and commerce in and the supply and distribution of
…"foodstuffs". The SC has held that even seeds are
foodstuff5.
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  The Essential Commodities Act, 1955 has also been
enacted under Entry 33 of the Concurrent list and
foodstuffs have been included in it as essential
commodities. Explanation 1 to Section 3(2) (f) has
detailed provisions for orders made for food grains etc.
under the said Act. The constitutionality of the Essential
Commodities is not in doubt, and guidance may be drawn
from the same.

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Annexure follows

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 Annexure – A

List of States which do not have APMC Acts:

1. Bihar;
2. Kerala;
3. Daman and Diu & Dadra and Nagar Haveli;
4. Lakshadweep;
5. Andaman and Nicobar Islands;
6. Manipur;
7. Jammu & Kashmir; and
8. Ladakh.