The repeal of India’s central agricultural laws is so widely seen as a negative for prospects of further economic recovery that it may be fitting to set the record straight at the start of this new year. The good news is that agricultural reform, defined as opening up marketing channels for agricultural produce, was well underway even before the three central laws came into force. The bad news is that there’s still a lot of avoidable confusion about the exact state of the game in that process.
States were the appropriate jurisdiction to legislate on trade in agricultural produce, as in any case it was state laws enacted over 50 years ago that restricted the purchase of agricultural produce to licensed traders in Agricultural Market Produce Committee (APMC) market yards. Had given. A model act to do away with APMC-controlled governance was drafted by the Center in 2017 for the states. The 2017 model is a laudably comprehensive and carefully worded legal provision, which protects farmers as it steps towards greater freedom of sale from every conceivable abuse of the sale.
In December 2019, the 15th Finance Commission, in its interim report, encouraged states to enact laws based on the 2017 blueprint, promising rewards in their final report. Since Ramesh Chand was a member of both the Finance Commission and NITI Aayog, the Center categorically agreed that the states are the appropriate legislative authority. This thinking seems to have changed with the enactment of three central laws in 2020.
By 2019, how many states had already gone with the 2017 blueprint? The Union Agriculture Ministry presented a detailed table at a conference of state agriculture ministers in July 2019 showing that 22 states had given farmers the freedom to sell their produce to private traders, a key element enabled by the 2017 model law. . Kerala and Manipur never enacted an APMC law, and Bihar repealed its APMC law in 2005. This leaves only three states out of the current Indian total of 28 that have not given farmers the freedom to sell to private traders: Haryana, Madhya Pradesh and Tamil Nadu.
Sadly, we cannot conclude that freeing farmers from the clutches of APMC monopony was complete, except in those three states, because in the same presentation of July 2019, only four states were given the full implementation of the 2017 template. The following are named as follows: Arunachal Pradesh, Uttar Pradesh, Chhattisgarh and Punjab. Other states may not have followed the 2017 blueprint in every detail. Another explanation could be that those states did not comply with the Act with the notification of the rules. But without notification (the point at which any laws are administratively recognized), how can 22 states list them as freeing farmers to sell to private traders? The matter remains confused.
Let me explain why I judge the 2017 Model Act so highly. Many laws, both the Center and the states, omit details about procedures for rules, which can easily be changed by administrative notification, without having to refer back to the legislative body for changes in the law. The 2017 template was exceptional for including procedures for determining market fees, and specifying the uses for which revenue from these charges could be put into law without taking away from regulations.
Based on the 2017 blueprint, there was no compulsion on the states to make their own laws. There are the first and very successful examples of states that have voluntarily followed a standard template on which to base their own legislation. The Fiscal Responsibility and Budget Management (FRBM) Act enacted by the states in 2005 was one such act. Another example was the model VAT law which was introduced to the states in the same year. Even in the case of agricultural laws, it was only a matter of time before all states would have seen the benefits of enacting (and notifying) the laws based on the 2017 blueprint.
The equivalent central law of 2020 is much smaller than the 2017 model, as it does not go into the painstaking detail of securing farmers’ rights as the 2017 template.
The 2020 ACT also had two major departures. One was that it had categorically refused to levy market fees. This was most puzzling, as agricultural market yards require a lot of initial investment and maintenance. If no market fee is levied, the investment and maintenance has to be entirely borne by the government or private traders. If it is the latter, the agricultural market can easily turn into a local monopoly. The same was likely against the 2017 Model Act.
The second departure was that the central law required all traders in agricultural produce, except farmer organisations, to hold a Permanent Account Number (PAN) for income tax. Apart from the merits of that requirement, it should have been in a Finance Bill rather than an Agriculture Bill.
I’ve only seen marketing legislation out of three created due to space constraints. The essential point is that the 2017 model is still in force, providing a secure legal basis for farmers to open markets in a non-exploitative manner.
Indira Rajaraman is an economist
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