Information about the Issue:

On 27th September 2020, the Government of India brought in the Farmers’ Produce and Commerce (Promotion and Facilitation) Act, 2020 (hereinafter, referred to as the Act) which introduced a pivotal change in India’s agricultural policies. The Act, essentially, aims to provide freedom of choice to the farmers and traders in selling and purchasing farmers’ produce through alternative trading channels and increasing competition in the market. Thus, it allows for barrier-free trade of farmers’ produce outside the physical premises of the markets notified under the various State Agricultural Produce Marketing Committee laws (APMC laws). 

At the same time, the Act also attempts to exist in consonance with the State APMC laws. This is significant, given that Agriculture and associated subjects are part of the State List under the Seventh Schedule of the Constitution, which means that State governments can make laws in this regard. Therefore, the Act must be in harmony with the State APMC laws.  

Specific concerns associated with the provisions of the Act are mainly related to:

  1. Definition of Terms
  2. Dispute Resolution
  3. Disproportionality of Procedure
  4. Authority of States 

Owing to the aforementioned limitations, in its present form, the Act does not create complete harmony with State APMC laws. As it envisages an entirely new market structure, it is extremely important to root out any visible anomalies or limitations of the Act generally and specifically concerning State APMC laws, without which it might become a cause of confusion or potential ground for unfair and exploitative treatment of farmers at the hands of the traders.  

Legal and Constitutional Limitations of the Act

While the definitions under the Act refer to the farmers and traders that deal in ‘farmers’ produce’, the freedom and rights in the Act are only provided to the ones who trade in ‘scheduled farmers’ produce’. As an implication, it excludes certain farmers and traders from enjoying the purported benefits of the Act.

Under Section 8(7) of the Act, the provisions for various types of relief in case of breach of a contract, are mutually exclusive. This means a relief order can either call for a recovery of money or impose a penalty but not both irrespective of the extent of the loss caused. There are also no specific grounds for the authorities to determine the quantum of time of a restraining order for a trader. This gives the authorities arbitrary power to restrain any trader from carrying out business for an indefinite period. In Municipal Corporation of the City of Ahmedabad v. Jan Mohammed Usmanbhai and Anr however, the SC held that if the power is entrusted in an administrative agency to grant or withhold a trade permit in its uncontrolled discretion, such law infringes fundamental rights of trade under Article 19(1)(g).

One of the conditions under Section 4 of the Act, which allows the authorities to bar permission for trade is non-payment of farmer’s dues within 3 days by the trader. While the non-payment of dues is a contractual violation, the trader can be barred from engaging in trade altogether even at the first such instance. Hence, this penalty is grossly disproportionate given the extent of the violation in question.

According to the Act, only the Central Government is authorized to prescribe and specify procedures, norms, manner of registration, etc., even for intrastate trade. This is in contravention of the Seventh Schedule of the Constitution, and also impacts the efficiency in formulating provisions suitable for States’ diverse agriculture conditions.

What are we doing in this regard?

We have written a letter to the Union Minister of Agriculture and Farmers Welfare; Vice Chairman, NITI Aayog; the Economic Advisory Council to The Prime Minister; Member, NITI Aayog; and the Secretary (DARE) and Director General (ICAR), elucidating our concerns and recommending specific changes in the Act.

Highlighting the fact that the Act purports to achieve desirable aims, we stated that certain provisions can undermine the rights of the farmers and the traders engaging in the new framework of the agriculture market. In this context, our recommendations to modify the Act are as follows:

  1. Modify the definition of the phrase ‘farmers’ produce’ in consonance with the definition of ‘scheduled farmers’ produce’ under Section 2(c) and 2(j) of the Act.
  2. Modify Section 8(7) to make the provisions for relief more flexible by the replacement of the word ‘or’ in the provision with ‘and/or’ to ensure substantive justice.
  3. Add a framework under Section 8(7)(c) that lays the grounds for granting relief in different cases. The monetary amount involved, the previous number of frauds or misrepresentations by parties are some grounds that can play a guiding role in granting such relief.
  4. Restrict the provision of a restraining order to certain grave cases by modifying the language of Section 4 to ensure that it is proportionate to the corresponding violations.
  5. Expand the role of State Governments such that the State-specific challenges can be resolved effectively in line with the constitutional mandate and exercise of the principle of cooperative federalism.

We will continue following up with the government in this regard. We will update this post with further information about the issue.

How can you help?

  • You can share our updates regarding the issue, to help us increase the outreach of this campaign.
  • If you can help us identify any other such laws/policies that need provisional improvements, write to us.
  • You can volunteer to support our advocacy efforts, as per your skill set.

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Important Documents:

  1. Letter to stakeholders by LQF dated 12th October, 2020
  2. Farmers’ Produce and Commerce (Promotion and Facilitation) Act, 2020