Farm bills 2020: Can Punjab challenge a central law?

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Farm bills and Punjab’s bills against them

• Punjab bills
• About farm bills and associated concerns
• Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020
  • Issues with Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:
• Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
  • Issues with Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
• Essential Commodities (Amendment) Bill, 2020
  • Issues with Essential Commodities (Amendment) Bill, 2020
• Can a state challenge the central laws?

Context: Punjab has passed various farm bills to amend the recent centrals farm laws.

Punjab farm bills

The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services (Special Provisions and Punjab Amendment) Bill, 2020:

• Wheat and paddy sell shall be valid in case the seller pays price greater than or equal to the MSP announced by the central government.
• Punishment of three years and a fine has been proposed if any person or company or corporate house signs a contract wherein the farmer is compelled to sell his produce at less than the MSP.
• In case of any differences with the buyer of his produce, farmers will be empowered to approach a civil court, besides seeking remedies available under the central act.

The Essential Commodities (Special Provisions and Punjab Amendment) Bill, 2020

• It seeks to amend the ‘The Essential Commodities (Amendment) Act, 2020’.
• It seeks to ensure status quo ante as on June 4, 2020 with regard to implementation of the Central Act namely, ‘The Essential Commodities (Amendment) Act, 2020’.

Code of Civil Procedure (Punjab Amendment) Bill, 2020

Another bill seeking an amendment to Section 60 of The Code of Civil Procedure, 1908 was also moved.

• Section 60 of The Code of Civil Procedure, 1908 provides for attachment or decree of various properties such as land of farmers and exempts properties like bonds or other securities for money, debts, share.
• New bill inserts a provision for exemption of agriculture land not exceeding 2.5 acres from Section 60 of The Code of Civil Procedure, 1908.

About farm bills and associated concerns

The Centre passed three Bills — the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill and Essential Commodities (Amendment) Bill.

Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020

Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020 aims to Break the monopoly of government-regulated mandis and provide farmers and traders freedom of choice of sale and purchase of Agri-produce.

Following are salient features Farmers’ Produce Trade and Commerce (Promotion and Facilitation), bill 2020:  

• Trade of farmers’ produce:
  • It allows intrastate and inter-state trade of farmers’ produce outside the physical premises of markets notified under State Agricultural Produce Marketing legislation.
  • In addition to mandis, freedom to do trading at farmgate, cold storage, warehouse, processing units etc.
• Electronic trading: It proposes an electronic trading in transaction platform for ensuring a seamless trade electronically.
• Abolition of cess or levy for sale: The farmers will not be charged any market fee, cess or levy for sale of their produce and will not have to bear transport costs.

Issues with Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:

• Lack of regulatory oversight and reporting: The bill provides for non-APMC markets but do not provide any mechanism for its regulation. There are concerns that lack of regulation might lead to unregulated trade detrimental to the primary purpose of providing market access to farmers. Further, it does not provide proper grievance redressal mechanism.
• Loss in revenue for states: The market fee, rural development fee, and arhatiya’s commission are big sources of revenue for some states. With states not permitted to levy market fee/cess outside APMC areas under the new legislation, Punjab and Haryana could lose an estimated Rs 3,500 crore and Rs 1,600 crore each year respectively.
• Fear over MSP: According to critics, the dismantling of the monopoly of the APMCs is sign of ending the assured procurement of food grains at minimum support prices (MSP).
• Setting Price: APMC continues to set the reference price even for private players. In the absence of APMC, there will be no alternative for a large market that can actually set price signals. Global experience such as, the French dairy producers and the dairy farmers’ co-operatives in the U.S suggest that buyer cartels will start fixing the market price.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 is aimed to provide a legal contract for farmers to enter into written contracts with companies and produce for them.

Key Features of Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020:

• Farming agreement: It provides for a farming agreement between a farmers and buyers (processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc.) before the production or rearing of any farm produce.
• Pricing of farming produce: The agreement should mention the following:
  • The price of farming produce
  • For prices subjected to variation, a guaranteed price for the produce and a clear reference for any additional amount above the guaranteed price
  • process of price determination
• Dispute Settlement: A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes.
• Protection to farmers: Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.

Issues with Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020:

• No mechanism for price fixation: The bill provides protection to farmers against price exploitation, but does not prescribe the mechanism for price fixation. There are concerns that the free hand given to the private sector could lead to corpotirization of agriculture and farmer exploitation.
• Unorganised nature of the farm sector: Given the unorganised nature of the farm sector and farmers’ lack of resources for a legal battle with private corporate entities, there are concerns that formal contractual obligations will eventually be detrimental for poor farmers in the country.
• Lack of assurance about MSP: The bill doesn’t provide any assurance about Minimum Support Price (MSP) in the contract-farming. Critics have opined that there will be no declaration of MSP for all crops, determined by Swaminathan formula of C2 costs plus 50 per cent.
• Fear of intermediaries: Though the bill seeks to eliminate middlemen from the supply chain, the critics have raised concerns that middlemen will operate in the form of sponsors or farm service provider for contract-farming.
• Deprivation of farmers from their land: The legislation provides for “farming agreements” “with insurance or credit instrument”. This will entail credit linkage with mortgaging of farmer’s land. There are concerns that in case the contract suffers a financial loss, a farmer might have to pay debt through their land.
• Subjecting food security to world markets: There are concerns that MNC food giants and their Indian collaborators will integrate Indian agricultural production with world markets. This will reduce the freedom of farmers and undermine food security.
• Threat to India’s food and political sovereignty: There are concerns that companies will promote banned and dangerous GM seeds, terminator seed technology. This will erode India’s seed sovereignty and threaten food and political sovereignty.

Essential Commodities (Amendment) Bill, 2020

• Essential Commodities (Amendment) Bill, 2020 amends the Essential Commodities Act, 1955.
• Aim: To increase competition in the agriculture sector and enhance farmers’ income. It also aims to remove fears of private investors of excessive regulatory interference in their business operations.

Key Features of Essential Commodities (Amendment) Bill, 2020

• Regulation on food items: Under the Essential Commodities Act, 1955, the Government regulates the production, supply and distribution of certain commodities it declares ‘essential’ in order to make them available to consumers at fair prices. The bill removes cereal, pulses, oilseed, edible oil, onion and potatoes from the list of essential commodities.
• Stock Limit: It requires that imposition of any stock limit on agricultural produce must be based on price rise. A stock limit may be imposed only if there is: (i) a 100% increase in retail price of horticultural produce; and (ii) a 50% increase in the retail price of non-perishable agricultural food items.

Issues with Essential Commodities (Amendment) Bill, 2020

• Undermining Food security: Easing of regulation of food items would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase. This could undermine food security since the States would have no information about the availability of stocks within the State.
• Deregulation of food items– As the bill removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities, it will deregulate the production, storage, movement and distribution of these important food commodities.

Can a state challenge the central laws?

Powers of the central government

Article 256 of the constitution of India provides for the obligation of States and the Union.

• The executive power of every State shall be so exercised as to ensure compliance with the laws made by Parliament and any existing laws which apply in that State, and the executive power of the Union shall extend to the giving of such directions to a State as may appear to the Government of India to be necessary for that purpose.
• Thus, under article 256 of the constitution, states are in obligation to Implement the laws framed by the central government.
• Article 257 (1) of the constitution of India provides that state governments shall not exercise their executive powers in a manner that will “impede or prejudice” the exercise of the executive powers of the Union.
• If a state is not implementing the act, Article 355 of the Constitution can be invoked to issue warning to the concerned state which states that the government of every State is carried on in accordance with the provisions of this Constitution.”
• If the state ignores the warning under Article 355 as well, the Centre can impose President’s rule under Article 356.

Rights available to the state government

• If any central law is Infringing upon the rights or powers of a state, then a state can move to the Supreme Court.
• Article 131 confers exclusive jurisdiction on the Supreme Court in disputes involving States, or the Centre on the one hand and one or more States on the other.
• Unlike individuals, State governments cannot complain of fundamental rights being violated thus cannot move to SC or High Courts under Article 32 or Article 226 of the Constitution.

Previous cases

• In 2011, in the State of Madhya Pradesh v. Union of India and Another, the court said that the Central laws can be challenged in the State High Courts and Supreme Court under Article 32 and held that the constitutional validity of a central law cannot be normally challenged under Article 131.
• In the State of Jharkhand vs. State of Bihar and (2014), the Supreme Court upheld Article 131 as an appropriate tool to test the constitutionality of central law. The court ruled that the condition for invoking the court’s jurisdiction under Article 131 was that the dispute should involve a question on the existence or extent of a legal right and not a political one.

Thus, presently, the States can move the Supreme Court under Article 131 if any legal right derived from any statue or the Constitution of India is infringed. Further states cannot question the legality of central law on a political or ideological basis.