The Three Farm Acts and Agri-Tech Law in India

Agri-Tech, as the name goes, is an industry that involves the collaboration of modern technology and innovative agricultural methods to achieve efficiency and attain profits from the sale of produce.

This Article shall at first discuss the way the companies (read start-ups) are trying to revolutionize and tap into the agrarian economy that is India and then delve into the regulations that were attempted by the Parliament in 2020.

The general mode of Operation

These companies have amalgamated the ‘ancient’ practice of agriculture and modern technology to bring about solutions that create more yield, more variety of crops, better infrastructure for supply/sale and bridge the information gap between farmers and modern agricultural practices.

Source- Inc42

These companies delve into employing industry experts and scientists to work with the roster of farmers. They look to leverage data and create products that facilitate innovation in farming practices without hampering the quality and quantity of the produce. Another form of business is carried out by delivering farm produce directly to customers through dedicated logistical teams and a refined supply chain.

Another goal of these companies is to reduce the carbon footprint and impose efficient use of resources (like water, cattle, and fertile belts). Most of these companies are against the use of industrial fertilizers that end up administering chemicals into foods that people consume daily.

As of now, there are 1495 AgriTech start-ups in India[1]

The problem with the agriculture sector in India:

1. Lack of Agricultural sector data, leading to over-cultivation of certain crops and lower cultivation of certain other crops, unsecured loans devoid of due diligence.

2. Most holdings are Small farm holdings (SFH). There has been a 70% decrease in the average farm holding area since the 1970s[2].

3. Lack of penetration of framer producer organisations and price-realisation by farmers.

4. Lack of ecosystem for facilitating Agri-credit and support from industry experts and leaders.

The legal framework:

The problem with this sector is that the law relating to land and farming practices differ from state to state and sometimes, from one region to another (based on geographical location, climate and rules given by local statutory bodies.

As of now, there is not a consolidated Act that covers the intersection between Big Tech and Old Agriculture. Different State Land Acts need to be looked at for regulatory compliance while operating an AgriTech firm.

In the 1960s and 1970s, India started adopting Agricultural Produce Marketing Regulations (APMR) which subsequently resulted in the model law of the Agriculture Produce Marketing (Regulation) Act 2017.

Here are some of the highlights from the model law:

• Legal persons, growers and local authorities are permitted to apply for the establishment of new markets for agricultural produce in any area. Under the existing law, markets are set up at the initiative of State Governments alone. Consequently, in a market area, more than one market can be established by private persons, farmers and consumers.

• Promotion of public-private partnerships in the management of agricultural markets.

• Provision made for the establishment of consumers’/ farmers’ markets to facilitate the direct sale of agricultural produce to consumers.

• Provision made for resolving disputes, if any, arising between private market/ consumer market and Market Committee.

• Under Section 14, “there will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC)”

An attempt at reform- Three Farm Acts enacted by the Government

In September 2020, the legislature passed three new Acts seeking to fundamentally change the way the agricultural sector and AgriTech industry will evolve in due time. However, these bills (subsequent Acts) were met with nationwide protests by the farmers who felt hard done by, by these attempted reforms.

Here's a general overview of the acts and what they tried to achieve.

1. Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (Farmer’s Produce Act) [now repealed (2021)]

-------Under Section 3, any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the inter-State or intra-State trade and commerce in farmers’ produce in a trade area.

For this, any person who holds a PAN ID from the Income Tax Dept. can establish and operate electronic trading/transaction platforms. This is subject to the implementation of guidelines for fair practices in the mode of trading, fee structure and other technical parameters. [As under Section 5]

--------Section 4 provides for the Trade and commerce of scheduled farmers’ produce. The traders have to abide by the Central Govt, mandated registration requirements, modalities of a trade transaction and mode of payment in an area [4(2)]

Additionally, every trader shall make his payments during a transaction on the same day or within 3 working days [4(3)]

Under Section 6,

“No market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produce in a trade area”

----------Section 8 provides for dispute resolution between farmers and traders through conciliation – making use of ADR mechanisms to efficiently resolve the problem at very nominal costs on the part of the farmers.

Under Section 9,

A designated official like the Agriculture Marketing Adviser, Directorate of Marketing and Inspection shall be in charge of taking cognizance of any breach of the provisions of this Act. To this effect, he can:

1. Pass an order for the recovery of the amount payable to the farmers and traders;

2. Impose a penalty as stipulated in sub-section (2) of section 11; or

3. Suspend for such period as he deems fit or cancel the right to operate as an electronic trading and transaction platform”

Section 11 provides the penalty for contravention of the provisions of the Act:

“(1) Whoever contravenes the provisions of Section 4 or the rules made thereunder shall be liable to pay a penalty which shall not be less than 25,000 Rs. but which may extend up to 5, 00,000 Rs., and where the contravention is a continuing one, a further penalty not exceeding five thousand rupees for each day after the first day during which the contravention continues.

(2) If any person, who owns, controls or operates an electronic trading and transaction platform, contravenes the provisions of Sections 5 and 7 or the rules made thereunder shall be liable to pay a penalty which shall not be less than 50,000 Rs but which may extend up to 10, 00,000 Rs, and where the contravention is a continuing one, a further penalty not exceeding ten thousand rupees for each day after the first day during which the contravention continues.”

2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 – [‘Contract Farming Act’]

Key definitions

• Section 2(c): "electronic trading and transaction platform"

"means a platform set up to facilitate direct and online buying and selling for the conduct of trade and commerce of farming produce through a network of electronic devices and internet applications"

• Section 2(g): “Farming agreement”

“a written agreement entered into between a farmer and a Sponsor, or a farmer, a Sponsor and any third party, before the production or rearing of any farming produce of a predetermined quality, in which the Sponsor agrees to purchase such farming produce from the farmer and to provide farm services.”

• Section 2(h): “Farming Produce”: Includes

1. "Foodstuff, including edible oilseeds and oils, all kinds of cereals like wheat, rice or other coarse grains, pulses, vegetables, fruits, nuts, spices, sugarcane and products of poultry, piggery, goat, fishery and dairy, intended for human consumption in its natural or processed form;

2. Cattle fodder, including oilcake and other concentrates;

3. Raw cotton, whether ginned or unginned;

4. Cotton seeds and raw jute "

Other relevant provisions

Under Section 3, a farmer may enter into a written farming agreement in respect of any farming produce. Each such agreement should provide for:

The terms and conditions for the supply of such products, including the time of supply, quality, grade, standards, price and such other matters and, any terms related to the supply of farm services. The burden of legal compliance in the latter shall be borne by the farm service provider [3(1)]

Under [3(2)] the minimum period for the farming agreement shall be for one crop season or one production cycle of livestock and the maximum period shall be 5 years.

---------Section 11 provides for the mutual termination of the farming agreement for any reasonable cause.

---------Section 4 empowers the parties to determine the quantity, grade and standards which are compatible with agronomic practices. Social standards for the farmers may also be developed as a condition in farming agreements.

Section 5 provides for pricing of the farming produce: It states that every farming agreement shall explicitly provide for:

“(a) A guaranteed price to be paid for such produce;

(b) A clear price reference for any additional amount over and above the guaranteed price, including bonus or premium, to ensure the best value to the farmer and such price reference may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices:

Provided that the method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement.”

Section 8 provides that no farming agreement can be entered into for the purpose of:

1. Any transfer or mortgage of the land of the farmer.

2. Raising any permanent structure or making any modification to the farmer’s premises (unless the sponsor agrees to remove the same and return the land to its original form).

In case such structure is not disposed of by the sponsor, it shall vest in the farmer after the conclusion of the agreement

Under Section 9, farming agreements can be linked with insurance or other credit instruments under any scheme of the Govt. or any financial service provider to ensure risk mitigation.

Under Section 12, every State Government may notify a Registration Authority where each and every farming agreement shall be registered.

Dispute Resolution Mechanism under the Act

This Act mandates the use of conciliation to resolve disputes under Section 13. After failing to conciliate, the dispute shall be resolved in a summary manner by the Sub-divisional Magistrate within 30 days of such failure to conciliate under Section 14.

3. Essential Commodities (Amendment) Act, 2020 (EC Amendment Act):

The Essential Commodities Act 1955 [EC Act] was enacted to regulate the supply of commodities that are essential to ensure fair prices for the customers and guard the black marketing and hoarding of the same.

The EC (Amendment) Act was then passed to de-regulate certain commodities under the ambit of the Act of 1955.

It restricts the Government from:

(a) Regulating foodstuff such as cereals, pulses and other commodities except in extraordinary circumstances; and

(b) Imposing of the stock limit based on price rise except when the retail prices increase by 50% for non-perishables and 100% for horticulture. [3]

We shall discuss the Essential Commodities Act of 1955 along with its amendment in 2020 in the subsequent articles under this category.

Till then, check out the other posts under this Category by clicking HERE

Resources:

[1] https://tracxn.com/explore/AgriTech-Startups-in-India

[2] Vishnu Padmanabhan, “The land challenge underlying India’s farm crisis,” Livemint, October 15, 2018, https://www.livemint.com/Politics/SOG43o5ypqO13j0QflaawM/The-land-challenge-underlying-Indias-farm-c

[3] The Essential Commodities (Amendment) Act, a change was made to Section 3 of EC Act 1955.