Title of the seminar paper

Structural reforms and Governance of Agriculture in India

By

Nikhila Katupalli (2018057)

5 Year Integrated B.A., L.L.B. (Hons.) Course

UNDER THE SUPERVISION OF:

Prof. Vishnu Kumar

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

NAYAPRASTHA, SABBAVARAM, VISAKHAPATNAM- 531035,
ANDHRA PRADESH, INDIA.

Date of Submission: 29.03.23

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CERTIFICATE

This is to certify that the dissertation entitled “Structural reforms and Governance of
Agriculture in India” for the Seminar Paper in Law and Agriculture to Damodaram
Sanjivayya National Law University; Visakhapatnam is a record of original work done by
Ms. Nikhila Katupalli under my supervision and guidance to my satisfaction.

SIGNATURE OF THE GUIDE

Visakhapatnam
Date:

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TABLE OF CONTENTS:
Abstract:.................................................................................................................................4

Chapter 1- Introduction to Agricultural reforms....................................................................5

 Background................................................................................................................5

 Pre-Independence Period...........................................................................................8

 Post-Independence.....................................................................................................9

Chapter-2 Consolidated Agricultural Legislations...............................................................10

 Legislations and Reforms in Input Management:....................................................10

 Fertilizer legislations................................................................................................11

 Seed legislations.......................................................................................................14

 Protection of Plant Varieties and Farmers’ Rights Act, 2001:.................................17

 Pests and pesticide legislations................................................................................18

Chapter 3- Labour Laws in Agriculture:..............................................................................23

Chapter 4- Legislations on Agricultural marketing:............................................................26

Chapter 6- Agriculture under a federal structure in India....................................................28

Chapter 7- The New Farm Laws..........................................................................................32

 Why do need Policy reforms in Agriculture?..........................................................32

 Implications of the New Farm Laws:.......................................................................35

Chapter 8- Conclusions and way forward............................................................................40

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LITERATURE REVIEW

Books, journals, articles and web articles are taken into reference for conducting this study.

 Indian Agriculture Towards 2030 Pathways for Enhancing Farmers’ Income,

Nutritional Security and Sustainable Food Systems by Dr Seema Bathla and Mr Siraj
Hussain: This Discussion paper released by NITI Aayog exhaustively and critically
analyses the structural problems and the necessary reforms in Indian Agriculture.
 Emergence and Development of Agricultural Legislations in India by Sachin VR:
This article elaboratively enumerates all the legislations related to Agriculture related
to seeds, fertilisers, plant varieties etc.
 State of Agriculture in India by Tanvi Deshpande (March 2017): This discussion
paper released by the famous Thinktank PRS Legislative, provides state by state
statistics in the country, along with information on the different sectors in Agriculture.

OBJECTIVE OF THE PAPER

The objective of this project to understand and analyze the relavant problems and such
reforms to tackle the problems in Agriculture.

SIGNIFICANCE OF THE PAPER

The significance of this project is to critically review the Structural issues and governance
issues in Agriculture in our country,

RESEARCH METHODOLOGY

This project follows descriptive, analytical and explanatory methods of study.

THE SCOPE OF THE PAPAER

The scope of the project is restricted to the Indian context of Agricultural Laws

Research question

 Governance of Agriculture in India is optimum.

 Structural reforms in the Agricultural sector of our country have served their purpose.

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Abstract:

Indian agriculture has made tremendous strides since Independence. A country with
recurring food shortages and dependence on food imports is now not only self-sufficient but
a net exporter also. The agriculture has slowly shifted from subsistence to semicommercial,
and the traditional systems have been replaced by improved production systems, which are
technology-driven. At the time of First Five-Year Plan in 1952, the foodgrain output was
around 50 million tonnes and population was nearly 360 million. In 2007–08, the total
foodgrains production exceeded 230.8 million tonnes and the population was around 1,138
million. The average growth rate of food production has been well above population growth
rate. This transformation in Indian agriculture has been possible by technology development,
adoption, policies, and hard work of farmers, supported by the legislative measures with
codified laws for observation in agricultural and allied activities. Although agricultural
legislations in the country was the legacy of British, real efforts were commenced only after
1947 to alter the economic condition of farmers and status of farming through legislative
measures. The democratic governments of states and centre had moved in a large way to
remove the most unhealthy impediments to the progress of the agrarian sector. Since Five-
Year Plans became an integral part of the development process, agricultural legislations
also became portion of a purposeful national effort for changing the socio-economic
condition of the society. The paper covers agricultural legislation under following broad
categories—land legislations and reforms; legislation and reforms of input management
[legislations, related to fertilizer, seed, pests and pesticides, genetically modified organisms
(GMOs), agricultural biotechnology and other inputs]; labour laws in Agriculture;
legislation in agricultural marketing and concluding with suggesting the way forward.

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 Chapter 1- Introduction to Agricultural reforms

Background

An examination of India’s agricultural development since Independence brings to light the

structural and institutional reforms that have been effected. The most significant advances
were: consolidation of land holdings, public investment in agriculture and major and medium
irrigation systems, improved price and procurement policies and regulated marketing of agri-
produce. In addition, the availability of institutional credit improved as a result of changes in
the financial architecture comprising commercial banks, regional rural banks and
cooperatives. The Food Corporation of India (FCI) enabled easy procurement of wheat and
paddy at pre-announced minimum support prices (MSP) while the establishment of regulated
wholesale markets facilitated the sale of produce under the Agriculture Produce Market
Committee (APMC) Act, 1966. Stocking limits for cereals and pulses prescribed under the
Essential Commodities Act (ECA), 1955 helped check hoarding. 1 The government also
enlisted agri-input companies for uninterrupted supply of seeds, fertilizer, pesticides and
other inputs to farmers at prices lower. than their existing market rates, assuring them timely
payment and compensation for any loss incurred.

The political unanimity for a state-led model of development and the proactive interventionist
policy of the Centre transformed Indian agriculture. Two northern states – Punjab and
Haryana – were pioneers in the adoption of the High Yielding Varieties (HYVs) of seeds, and
allocation of sizeable area to wheat and paddy during late 1960s and the 1970s. In due course,
a few southern states, notably Andhra Pradesh and Tamil Nadu, also witnessed higher
innovation, private investment and production of diversified and value-added products. The
Green Revolution took agriculture on to a higher growth path and India achieved the
overriding goal of food security and self-sufficiency, which significantly contributed to lessen
hunger and rural poverty. These achievements were followed by impressive successes in the
White and Yellow Revolutions during the 1980s.2 Unfortunately, by that time, productivity
growth in agriculture had started to decline due to the reduction in public investment on
1
Kannan, E., Bathla, S. and Das, G.K. 2019. Irrigation governance and the performance of the public irrigation
system across states in India. Agricultural Economics Research Review. 32 (Conference Number): 27-41.

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major and medium irrigation projects, delay in the completion of existing projects and the
emergence of anti-dam movements.

The diminishing returns from public investment in irrigation also set in, along with an
unsustainable use of natural resources. The government’s efforts to support agriculture
through subsidised inputs failed to accelerate productivity of land and provide alternative
occupations to rural households. Even during the economic reforms of the 1990s, agriculture
remained a neglected sector with insignificant policy interventions. It was only towards the
end of the 1990s when the Centre gave handsome increases to the MSP of wheat and paddy
and encouraged exports of rice and other commodities, that the terms of trade (agriculture
price relative to industry price) became favourable to agriculture. India’s comparative
advantage was identified in cotton, groundnut seed, soybean seed, protein meals, spices and
basmati rice.

To realise the potential of these crops in the global markets and be compatible with the
stipulations under the Agreement on Agriculture (AoA) of the World Trade Organisation
(WTO), the government reduced farm protection by lowering tariffs as well as non-tariff
barriers. However, as envisaged, an increase in exports could not help revive agricultural
growth. Cereals exports became uncompetitive owing to increase in their support prices. The
exports were also affected by price volatility in the global markets, transboundary threats,
surge in imports and higher competition. 3 Agriculture continued to face serious challenges
including uneven regional growth, rising fiscal constraints, mounting subsidies, failing
institutions that manage public canals, increasing fragmentation of holdings, labour-intensive
farming, and depleting groundwater and solid nutrients.

These were serious impediments for sustained agricultural growth and farmers’ livelihoods.
From the early 2000s, the Centre focused on structural changes through increased budgetary
outlays towards major, medium and micro irrigation projects, rural infrastructure, fertilizer
and power subsidies, various flagship programmes, including that on irrigation, and the
initiation of income support schemes for farmers. 4 The MSPs of food grains were hiked and
far reaching reforms were initiated in the marketing of agri-produce, the major ones being
2
Joshi, P. K. and Kumar, A. 2016. Transforming agriculture in eastern India: challenges and opportunities, in C.
Ramasamy and K. Ashok, Vicissitudes of Agriculture in the Fast Growing Indian Economy – Challenges,
Strategies and the Way Forward (pp. 125 - 150). New Delhi, Academic Foundation.
3
Birthal, Pratap S., Roy, Devesh, Khan, Md. Tajuddin and Negi, Digvijay Singh. 2015. Farmers’ preference for
farming: evidence from a nationally representative farm survey in India. The Developing Economies 53(2):
122–34. June.
4
Chand, R. and Kumar, P. 2004. Determinants of capital formation and agricultural growth: some new
explorations. Economic and Political Weekly. 39(52): 5611–16

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allowing inter-state grain movement and contract farming under the aegis of the Model
APMC Acts of 2003 and 2017.

These measures, however, could not make uniform progress across states. In some, private
investment increased, and the transition began. In others, especially in the eastern regions
which also lacked public investment in irrigation, roads and other infrastructure and
marketing support, stagnation continued. Implementation of the Bringing Green Revolution
to Eastern India (BGREI) programme initiated during 2010/11 (now a sub scheme of
RAFTAAR-Rashtriya Krishi Vikas Yojana) helped in the adoption of technology, building of
assets, farm renovation, seed production and distribution, backed with the procurement of
paddy at MSP. Agriculture growth did pick up in the eastern states but they continued to face
low levels of productivity and risks relative to other states due to variations in weather and
commodity prices

The output price increases barely corresponded with the rise in input costs and resulted in an
agrarian crisis in many regions.5 The worst affected were smallholders and rural labourers
who not only lack technical know-how and access to finance but also have low risk-bearing
capacity to shift to non-farm activities. Agriculture, with 15 percent share in the national
income, still absorbs more than 45 percent of the labour force, indicating limited success in
achieving structural transformation. India’s structural transformation process is atypical, due
to the slow pace of reallocation of labour from a low productivity sector, namely agriculture,
to high productivity sectors. It is also characterised as “stunted,” with the exiting labour
moving primarily into the rural non farm and informal sector instead of industry and services
and also becoming increasingly `casualised’. The COVID-19 pandemic in 2020 has added a
new dimension to the entire gamut of issues that the agriculture sector has been facing for
long.

Government intervention in this sector is considered necessary to boost production as well as

to maintain supply in order to keep commodity prices at manageable levels. The Centre has
spearheaded institutional reforms backed with a financial stimulus in order to reinvigorate
private investment, infrastructure development and post-harvest technology.6 It has also
passed three Acts with the objective of addressing the structural weaknesses inherent in the

5
Bathla, S and Kumai, Y. 2017. Investment behaviour of farmers across Indian States: determinants and impact
on agriculture income in Seema Bathla and Amaresh Dubey (eds) Changing Contours of Indian Agriculture:
Investment, Income and Non-farm Employment. Singapore, Springer Nature.
6
Bathla, S., Joshi, P.K. and Kumar, A. 2020. Agricultural growth and rural poverty reduction in India: targeting
investments and input subsidies. Singapore, Springer Nature.

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sale, marketing and stocking of agri-produce being governed under the state-run APMC
markets. Since agriculture is a subject in the state list of the Constitution of India, it is
important to consider how the states should amend their existing policies and institutions and
adapt to the new Central laws so as to raise the income levels of farmers and ensure
sustainable agriculture.

Pre-Independence Period

There was no good legislation system during the pre-independence period. British followed
the tax system of Mughals more formally. 7 For that purpose, following acts were passed by
the British government during pre-independence viz., Land acquisition act (1894), Indian
forest act in 1927, and 1930 Indian sale of goods act. Land Acquisition Act came into force
from 1st March 1894 and extended to the entire country except for Jammu & Kashmir. The
land acquisition bill (2007) was passed again in Lok-Sabha in 2009 to protect the interests of
poor farmers whose lands are acquired to set up industries. 8 Indian Forest Act was passed in
1927 “An Act to prevent overexploitation and consolidate the law relating to forests, the
transit of forest produce and the duty leviable on timber and other forest-produce” (Indian
Forest Act).

However this act also focused to protect wildlife and to check deforestation for agriculture
and other purposes. But the British government was more interested in the tax from these
forest produce. Indian Sale of Goods Act was passed in 1930 to define and amend the law
relating to the sale of goods (The Sale of Goods Act). This act is regarding rules and
regulations of selling goods in the entire country except in Jammu & Kashmir enforced since
1930. When we look into overall legislations of agriculture, mainly there could find 'Land
legislation and reforms', 'Legislation reforms of input management', 'Labour laws in
agriculture', 'Legislation on agricultural marketing', 'Legislations in livestock sector',
'Legislation of agriculture credit and finance' and 'Legislation in co-operative sector'. During
the British period i.e., pre-independence period three predominant revenue systems are found
viz., Zamindari system, Ryoywari system, and Mahalwari system.

Post-Independence

7
Acharya, S.S. 2017. Effective implementation of agricultural price and marketing policy for doubling farmers’
incomes: doable priority actions. Agricultural Economics Research Review. 30 (Conference number):1-12.
8
Tiwari, S. and Surya, S. 2019. State of State Finances. New Delhi, PRS Legislative Research.

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Period This is the time from where the true efforts were started in a real sense of social justice
to all citizens of the country. Immediately after the independence, the country was in a high
level of poverty. Unemployment, low productivity levels with issues of food insecurity and a
thick population made situations even worse.9 The following major actions were made to
taken care of all problems. In 1955, the abolition of intermediaries those who played a role in
between the actual cultivator and the government (for example zamindars) were made.

This step was taken by the government to remove them and made available the lands to real
cultivators. The states formulated the legislative measures to abolish such kinds of tenures
and made actual cultivators have direct contact with the government. This made a burden to
the government as the compensation and pension schemes that need to be formulated to take
care of landholders. The positive effects were found, like the direct connection of farmers
with government, increased revenue collection from rural areas, and improved employment.
It also found a hike in productivity and production levels in the agricultural sector. The
tenancy reforms are made to protect the tenant farmers from the landlords (money lenders).

The tenant farmers were losing their properties due to the higher interest rates which made
them fall into indebtedness and poverty. Then the common problem was found that the land
was a scarce resource.10 But there was more number of farmers who were willing to cultivate
as per the report of the committee headed by professor D. R. Gadgil. This institutional
problem was a threat to agricultural progress and social justice. To solve this, the ceiling on
agricultural land holdings was made with an intension to remove very clearly visible
inequality in society. Also to meet the land needs of landless people for cultivation thereby
increasing the self-employment of rural people. The ceiled limits for landholding were 9
acres for fully irrigated land with public irrigation source facility for three seasons (entire
year) for annual or perennial crops, 18 acres for irrigated lands with public irrigation source
facility for two seasons for two crops, 27 acres for irrigated lands with public irrigation
source facility for one season for one crop and 54 acres for completely unirrigated land.
Bhoodan or Gramdan movement was initiated by Acharya Vinoba Bhave in 1950 and spread
over different states of the country. The intention is to collect the lands from the landowners
who had excess and to distribute the collected land to the landless peasants in that particular
village. To facilitate this process ‘Bhoodan Board’ is established.
9
Birthal, Pratap S., Roy, Devesh, Khan, Md. Tajuddin and Negi, Digvijay Singh. 2015. Farmers’ preference for
farming: evidence from a nationally representative farm survey in India. The Developing Economies 53(2):
122–34. June.
10
Terway, Prerna. 2020. Production and distribution aspects of input subsidies in Indian agriculture: a case
study of Jharkhand. Thesis submitted to Jawaharlal Nehru University, New Delhi (unpublished).

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The Bhoodan board had its fund and started to collect land donated by any state or central
government, private sector or any individual to distribute to landless. Then the state passed an
act called Bhoodan or Gramdan Act, to distribute the collected land legally. 11 With this law
the ownership rights of 18 lakh hectares land were given to the landless peasants.
(http://shodhganga.inflibnet.ac.in). Administration of Land Acquisition Act 1894 amended
many times and the land acquisition (amendment) bill 2007 was passed in the Lok Sabha in
the year 2009. Industries are important to boost up the economy and to improve capital
investments. Often agricultural lands were acquired from the poor farmer to establish
industries by dominant business class. Therefore, this bill was passed to protect the interest of
farmers. This act ensures the rehabilitation to the individual or families who are affected by
any public or private projects while acquiring land to set up industries.

Chapter-2 Consolidated Agricultural Legislations

Legislations and Reforms in Input Management:

In the mid-sixties, the course of Indian agriculture drastically altered for good. The green
revolution was set in and for the first time food security was achieved by the combination
technology, which was economically viable and inspiring to the farmers. Good water services
and extensive supply of improved seeds including hybrid technology, fertilizers, pesticides
and electricity, and adoption of public policies in terms of input-output pricing and marketing
made it further possible.12 The green revolution not only gave the requisite food security but
also gave much needed self confidence to a beleaguered nation which was often reeling under
the impacts of drought, calamities, shortages and supply-chain disruption.13 What is very
important is the transformation of agrarian input-industry into a full-fledged business. Seed
industry, fertilizer industry and pesticide industry grew at rapid speed and began competing
with world players. This, therefore, needed the logistic legal support from government for fair
play and genuineness. Although water and electricity are crucial inputs for modern
agriculture, their legislations are not covered in details, as again a spate of Laws for their use
vary from state to state.

11
Singh, Pritam. 2016. How centre-state relations have shaped Punjab’s development pattern in Lakhwinder
Singh and Nirvikar Singh (eds), Economic transformation of a developing economy - the experience of Punjab,
India. Singapore, Springer Nature.
12
Ibid
13
Supra note 8

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Fertilizer legislations

Various legislations on fertilizers in India are inherited from “Entry – 33” of list III
(Concurrent List) of VII Schedule of the Constitution which empowers the Central
Government to regulate trade, commerce and the production, supply and distribution of any
product or any industry, where the control by the Union is declared by Parliament (by law), to
be expedient in public interest. In exercise of this power, the Parliament enacted the
Industries (Development and Regulation) Act, 1951 (IDRA). 14 The Section 2 of the IDRA
declares that it is expedient in public interest that the Union shall take under its control the
industries specified in its First Schedule.

Section 3 of the ECA empowers the Central Government to make order providing for
regulating or prohibiting the production supply and distribution of any essential commodity
and trade and commerce therein so as to maintain or increase its supply or for securing its
equitable distribution and availability at fair price, etc.15 Government of India has been all
along conscious of the need for ensuring the availability of right quality and adequate
quantity of fertilizers, at right time and at fair price to the farmers in all parts of the country.
As a result, the Central Government promulgated the following orders in exercise of the
powers conferred under Section 3 of the ECA to regulate manufacture, quality, sale,
distribution, price movement, etc. of fertilizers.

Since then, a lot of changes in fertilizer technology, production and distribution system has
taken place. A number of new products like micronutrients also came into the market. Need
was also felt to make the provisions of the FCO more stringent and up-to-date so that the
fertilizer quality control machinery is more effective. This led to several amendments in the
FCO, 1957. Subsequently, an overall review of the FCO, 1957 was conducted by the ‘FCO
Review Committee’ set up by the Central Government.16 Finally, the revised FCO called
FCO, 1985 was issued on 25 September 1985, which came into force with immediate effect.
The objectives of the FCO are to protect the interest of the farmers as well as that of genuine
traders/manufacturers from the exploitation by unscrupulous elements. These are achieved by
ensuring the availability of fertilizers of right quality and at right time by regulating their
quality, price, distribution, sale etc.

14
Agricultural Statistics at a Glance (1980 to 2017). New Delhi, Ministry of Agriculture and Farmers’ Welfare.
15
Patnaik, P. 2018. Trends of centre–state relations in India under the neo-liberal regime. Studies in People’s
History. 5 (1): 83–91
16
Sahoo, N. 2015. Centre-State Relations in India. ORF Occasional Paper 62, March. New Delhi, Observer
Research Foundation.

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The enforcement of the FCO is entrusted to the state governments, who have been vested
with adequate powers in this regard. Till July 2003, specifications of 80 fertilizers have been
notified by the state governments.17 Sale of fertilizer in 11 groups has been laid down in the
FCO. Besides, a number of drags of mixture of fertilizer have been notified by state
governments. Sale of fertilizers not conforming to the prescribed standards such as non-
standard, adulterated, spurious, fake, etc. has been prohibited and made punishable offence. It
has been made obligatory for all the manufacturers, importers, pool handling agencies,
dealers etc. to make a memorandum of intimation to the notified authority of the concerned
state government as fertilizer dealers (except industrial dealers who are to be registered with
the Central Government). Provisions for inspection, withdrawal, analysis of fertilizer
samples, detention/seizure of stocks, and debarment have been made.

Any violation of the provisions of FCO is punishable under ECA, and has been made
cognizable and non-bailable offence and attracts penalties like suspension/ cancellation of the
certificate issued under FCO and/or imprisonment up to seven years, with or without fine.
Important features of the structure of FCO, 1985, include: definitions, price control,
allocation of fertilizers, import of decanalized fertilizers, manufacture of mixtures of
fertilizers, packing/marking of containers, minimum laboratory facilities to be maintained by
manufacturers, disposal of non-standard fertilizers, sale/use of fertilizers for non-
agricultural/industrial purposes, authorization of wholesale and retail dealers and sale of
fertilizers, registration of industrial dealers, provision for referee laboratory, maintenance of
books and accounts and submission of returns, other restrictions on manufacture, import, sale,
storage, distribution, etc.; enforcement agencies, inspectors – powers and responsibilities:
search/seizure, drawal of samples and analysis, reanalysis (clause 28, 29 and 30, 32 and
Schedule –II Part –A); and Part B, fees and advisory committees, minimum laboratory
facilities to be maintained by notified laboratories, specification for provisional fertilizers,
punishment–suspension/ debarment/cancellation; and appeals and prosecution. Fertilizer
(Movement Control) Order: The Fertilizer (Movement Control) Order (FMCO), 1969 was
first issued on 31 December 1960 and came into force on 1 January 1961. This was revised
on 23 October 1967. Subsequently, FMCO, 1973, was issued on 25 April 1973, which came
into force on the date of its publication. The order was subsequently ammended 15 times and
the last amendment was in 2001.

17
OECD. 2015. China in Agricultural Policy Monitoring and Evaluation 2015. Paris, OECD Publishing. doi:
http://dx.doi.org/10.1787/agr_pol-2015-10-en

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The objective of FMCO is to ensure the equitable distribution of fertilizers in different states.
The enforcement of this order has been entrusted to the state government. The main features
of the FCO, 1973, are as under: Definition: For purpose of FMCO, 1973, the term fertilizer
has the same meaning as in Clause 2 (h) of FCO, 1985, but includes, by and large, all those
fertilizers which are decontrolled by the government from the movement restrictions. At
present, all low analysis nitrogenous fertilizers namely ammonium sulphate, ammonium
chloride, calcium ammonium nitrate (25% N and 26% N), all phosphatic, potassic
complexes; micronutrients and fortified fertilizers are exempt, and are outside the purview of
FMCO. Thus, only urea, zincated urea, anhydrous ammonia and mixture of fertilizers are
subject to control under FMCO. Prohibition on export of fertilizers from one state to another
(Clause 2).

The export of fertilizers from one state to another is prohibited. The prohibition does not
apply in cases where the export of fertilizer, except physical and granulated mixtures of
fertilizers, is done in accordance with the authority issued by the Central/State Government.
In case of export of physical and granulated mixtures of fertilizers, permissions of both
exporting and importing state governments are necessary.

Search and seizure (Clause 4): The Inspector of Fertilizer, appointed under FCO, or a police
officer not below the rank of head constable, is empowered to enter and search any place or
vehicle, etc. used for export of fertilizer and also to seize any stock of fertilizer along with the
vehicle etc. used for the purpose, so as to ensure the compliance of the provision of FMCO.
Punishment. For violation of any provision of FMCO, a court case under the ECA, 1955 has
to be filed. The cases for violation of FMCO are to be tried by the Court of 1st Class
Magistrate.

ECA Allocation Order: With a view to securing equitable distribution and availability of
fertilizers to the farmers in time, the Central Government issues an order every six months
before the onset of each cropping season allocating the total production of a manufacturing
unit to different areas/districts/states. These allocation orders are called ECA Allocation
Orders for respective seasons.

The ECA Allocation Orders are issued keeping in view the requirements of different areas.
These Orders specify the quantities of fertilizers produced by the manufacturing unit to be
sold in specified areas/districts/states, and within specified time. At present, ECA Allocation

14 | P a g e
Orders are issued with regard to urea, as other nitrogenous and P and K fertilizers are
decontrolled.

The non-compliance/violation of the ECA Allocation Order by the manufacturing unit results
in the stoppage of various incentives in the form of subsidy given to the manufacturer by the
Central Government, besides the penal action as per ECA, 1955.

Seed legislations

Until 1966, there was no Central Legislation on Seeds. The Seeds Act was enacted in 1966 to
ensure that farmers get good quality seeds. Quality is ensured through variety development.
Seed legislation provides notification of varieties/kinds of crops, certification, labelling of
seeds, seed testing; and the Seeds (Control) Order, provides licensing of dealers, display of
stock etc.18

Seeds Act, 1966: Seeds Act, 1966 and Seeds Rules, 1968 provide certification and minimum
quality standards of notified kinds/varieties.19 The seed legislation authorizes formation of
advisory bodies like Central Seed Committee, Central Seed Certification Board and its sub-
committees, Seed Certification Agencies, Seed Testing Laboratories, Appellate Authorities,
etc. Seed quality control as envisaged in the Act is to be achieved through pre-and post-
marketing control, voluntary certification and compulsory labelling of notified kind/varieties.

The notification of the varieties is done under Section 5 of the Seeds Act in consultation with
the Central Seed Committee. Minimum limits for germination, physical and genetic purity of
varieties/hybrids have been prescribed and notified for labelling the seeds of notified
kind/varieties under Section 6(a) of the Seeds Act. Size, colour and content of the label are
also notified under Section 6(b) of Seeds Act.

Seed testing/analysis: There is a provision to set up a Central Seed Laboratory and State Seed
Laboratory to discharge functions enshrined under Section 4(1) and 4(2) of the Seeds Act. At
present, there are 108 Seed Testing Laboratories, 23 State Seed Certification Agencies and 35
Seed Law Enforcement Agencies. For obtaining uniformity in seed testing at national level,
the Government of India, Ministry of Agriculture, Department of Agriculture and
Cooperation has started the National Seed Research and training Centre (NSRTC) at Varanasi
18
Satyasai, K. J. S. and Singh, Aparajita. 2021. Food processing industry in India: regional spread, linkages and
space for FPOs, in S. Bathla and E. Kannan (eds), Agro and Food Processing Industry in India - Inter-sectoral
Linkages, Employment, Productivity and Competitiveness. Singapore, Springer Nature (in press)
19
. NITI Aayog. 2016. Evaluation study on efficacy of minimum support prices (MSP) on farmers. Report No.
231. New Delhi, NITI Aayog Development Monitoring and Evaluation Office.

15 | P a g e
(Uttar Pradesh) during 2005. The NSRTC is serving as Central Seed Testing Laboratory
(CSTL) as well as Referral Laboratory for court for the entire country. During 2005-06, 3.84
lakh seed samples were tested in the Seed Testing Laboratories of different states, out of
which 38,649 seed samples were found to be sub-standard.20

The functions of the Central Seed Testing Laboratory is to initiate testing programme in
collaboration with the State Seed Laboratories designed to promote uniformity in test results
between all seed laboratories in India. A lot of financial support has been given by the
Ministry of Agriculture, Government of India to seed labs since Sixth Five-Year Plan. The
State governments could appoint seed analysts through notification in the Official Gazette
under Section 12 of the Seeds Act, defining his geographical area of jurisdiction.
Appointment of Seed Inspector. The state governments, under Section 13 of the Act may
appoint such persons as it thinks fit, having prescribed qualification through notification as
Seed Inspectors, and define the areas within which they shall exercise jurisdiction for
enforcing the Seed Law.

Seed Inspectors appointed under relevant provision have adequate power under Section 14 of
the Seeds Act to draw the samples of notified kind/varieties of seeds from the source where
the seeds are being sold. Seed Inspectors can seize the stock of the seed, and issue stop sale
order in case the seed under reference contravenes the Act and Rules. Penalty.

If any person contravenes any provision of the Act or Rules, or prevents a seed inspector
from taking sample under this Act, or prevents a seed inspector from exercising any other
power conferred on him, such person could be punished under Section 19 of the Act with a
fine of Rs 500 for the first offence. 21 In the event of such person having been previously
convicted of an offence under this Section, there is provision for imprisonment for a term,
which may extend to 6 months, or with fine, which may extend to Rs 1,000 or with both.

Seeds (Control) Order, 1983: The Ministry of Civil Supplies through an order dated 24
February 1983 had declared the seed for sowing or planting of food crops, fruits, vegetables,
cattle fodder and jute to be essential commodities in exercise of power conferred by Section
2(a)(viii) of Essential Commodities Act, 1955. It was followed by the issue of Seeds
(Control) Order dated 30 December 1983 by the Ministry of Agriculture, Department of

20
Singh, R.B. 2019. Agricultural Transformation – A Roadmap to New India. New Delhi, National Academy of
Agricultural Sciences.
21
Sen, Tapas K. 2016. Public finances and development: the case of Punjab in Lakhwinder Singh and Nirvikar
Singh (eds), Economic Transformation of

16 | P a g e
Agriculture and Co-operation in exercise of powers contained in Section 3 of Essential
Commodities Act which deals with Central Government’s power to control and regulate
production, supply and distribution of essential commodities.

A number of Seeds Dealers’ Association and Bodies had challenged the order in the High
Court on the ground that seeds of the above mentioned categories do not constitute essential
commodities.22 However, the Supreme Court in its order dated 20 October 1993 upheld the
validity of the Seeds (Control) Order. After consideration of all relevant aspects, it was
decided that the order be implemented by the state governments with effect from 01 July
1994. The Seeds (Control) Order 1983 had been notified as per Gazette Notification GSR 932
(E) dated 30 December 1983. The notification under reference holds good and remains
operative.

Joint Secretary (Seeds), Government of India, Ministry of Agriculture, Department of

Agriculture and Co-operation has been appointed as Seed Controller for implementation of
the Seeds (Control) Order. During 2005-06, a total of 62,381 seed samples were drawn by the
notified seed inspectors and 72 cases were taken up for prosecution. Issue of license. It is one
of the legal instruments, being enforced to check the supply of inferior seeds of notified and
unnotified seeds to the farmers. All persons carrying on the business of selling, exporting and
importing seeds will be required to have a license to carry on the business in accordance with
terms and conditions of license granted to him.23

Based on such inquiry, as it thinks fit, the licensing authority may grant or refuse the license
in provisions of the Order. A holder of license shall be eligible for renewal. Seeds Bill, 2004:
An outline of the Seeds Bill, 2004 has been prepared on the basis of the recommendation of
the Seed Policy Review Group and consultations with the seed experts and the stakeholders.
The Seeds Bill, 2004 has been approved by the Cabinet and introduced in the Rajya Sabha
and the same has been referred to Parliamentary Standing Committee on Agriculture.

The Committee has recommended several modifications in the Bill. These are being
examined in consultation with the relevance ministries/departments of the Government of
India. The salient features of the proposed

22
. RBI. 2019. Report of the Internal Working Group to Review Agricultural Credit, Reserve Bank of India,
September 13, 2019. https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/WGREPORT101A17FBDC1442
37BD114BF2D01FF9C9.PDF.
23
Singh, Pritam. 2016. How centre-state relations have shaped Punjab’s development pattern in Lakhwinder
Singh and Nirvikar Singh (eds), Economic transformation of a developing economy - the experience of Punjab,
India. Singapore, Springer Nature.

17 | P a g e
Seeds Bill, 2004 include compulsory registration of varieties based on performance that
ensures the quality of seeds, accreditation of Indian Council of Agricultural Research (ICAR)
centres, State Agricultural Universities (SAUs) and private organizations to conduct the
performance trials, maintenance of national register of varieties, provision for self
certification (accreditation of organizations for certification), accreditation of private seed
testing laboratories, regulation of export and import of seeds, regulation of horticultural
nurseries, exemption for farmer to save, use, exchange, share or sell their seeds without
registration and brand names; enhancement of penalty for major and minor infringement,
provision of compensation to the farmer; and inclusion of provision to regulate the
Genetically Modified (GM) crops and ban on terminator seeds.

Protection of Plant Varieties and Farmers’ Rights Act, 2001:

Authority for the act and registry. There is a provision for an Authority for protection of plant
varieties and farmers’ rights at national level (Chapter II (Sec.3–11)) and also a provision for
a registry. The Authority shall be an independent and permanent body vested with exclusive
authority for implementation of the Act. It shall have a broad-based composition comprising
scientists, state representatives, farmers/tribals, women’s organizations etc.

There shall also be a Standing Committee on farmers’ rights. A registry shall also be there in
the Authority for facilitating the registration of plant varieties along with provision of branch
offices. A national register of plant varieties shall be maintained.

Implementation of legislation on Plant Varieties and Farmers’ Rights Protection:

The scheme for implementation of legislation on Plant Varieties and Farmers’ Rights
Protection was launched during the Ninth Five-Year Plan. The Bill was passed by both the
Houses of Parliament and was assented to by the President of India in October 2001. The
implementation of this Legislation involves the setting up of a Plant Varieties and Farmers’
Rights Protection Authority, which will give effect to the provisions of the Act.

Objectives of the legislation: The objectives are (i) to stimulate investments for research and
development both in the public and the private sectors for the development of new plant
varieties by ensuring appropriate returns on such investments; and (ii) to facilitate the growth
of seed industry in the country through domestic and foreign investment, which will ensure
the availability of high quality seeds and planting material to Indian farmers. Salient features
of the legislation. (i) The legislation extends to all categories of plants except micro-

18 | P a g e
organisms, (ii) in order to be eligible for protection, a variety must be new, distinct, uniform
and stable; and (iii) the legislation contains provisions for compulsory licensing in the public
interest. Farmers will continue to enjoy their traditional rights to save, use, exchange, share
and sell their produce of the protected variety with the only restriction that the farmers will
not be able to sell branded seed of the protected variety for commercial purposes.

Researchers will remain entitled for use of any variety registered under the Act for
conducting experiment or research, or the use of any variety for the purpose of creating other
varieties. There is also provision for protection of different kinds of already existing varieties,
which is supported by a provision for ‘essentially derived varieties’ for honoring the
contribution of an earlier breeder. Other important provisions include benefit sharing with
owners of earlier protected varieties, and compulsory licensing to get the production of seed
of a registered variety undertaken in situations when the reasonable requirements of the
public for seed have not been satisfied. The Rules under the “Protection of Plant Varieties
and Farmers’ Rights Act, 2001” have been notified in the Gazette.

The Protection of Plant Varieties and Farmers’ Rights Authority was set up to administer the
Act. The Chairman of the Authority has been appointed. The Central Government has so far
notified 15 crops with their genera, viz. Black Gram, Bread Wheat, Cotton (Tetraploid),
Cotton (Diploid), Chickpea, Field Pea, Green gram, Jute, Kidney bean, Lentil, Maize, Pearl
Millet, Pigeon pea, Rice and Sorghum eligible for registration of varieties.

Pests and pesticide legislations

Pesticides: Import, manufacture, sale and distribution of pesticides is regulated under the
Insecticides Act, 1968 and Insecticides Rules, 1971. The Act is now referred as the
Insecticide (Amendment) Act, 2000.24 There is a provision for registration of pesticides at the
Central Government level and licensing for manufacturing and sale of pesticides by states/UT
Governments after registration. The Registration Committee constituted under Section 5 of
the Insecticides Act, 1968 registers pesticides only after satisfying itself regarding their
efficacy and safety to human beings and animals.25

If the pesticides are used as per the guidelines contained on their labels and leaflets, they do
not cause any damage to human beings, animals or the environment. The Act provides for
24
. Gulati, A. and Bathla, S. 2001. Capital formation in Indian agriculture: revisiting the debate. Economic and
Political Weekly 36 (20):1697-1708.
25
OECD-ICRIER. 2018. Agriculture Policies in India. OECD Food and Agricultural Reviews. Paris, OECD
Publishing.

19 | P a g e
notification of four important functionaries for this purpose, viz. Licensing Officer, Appellate
Authority, Insecticide Inspector and Insecticide Analyst, to ensure that only genuine/quality
pesticides are dispensed/distributed in the market. Stringent administrative/legal action is
taken against defaulters of law by the State/Union Territories. 26 Further, the government has
set up a Task Force in the Department of Agriculture and Co-operation to get pesticide
samples drawn for analysis, to check quality thereof by the notified Central Insecticide
Inspectors.

There is a network of 49 State Pesticide Testing Laboratories and 2 Regional Pesticide

Testing Laboratories of the Central Government, and the Central Insecticides Laboratory,
established under Section 16 of the Insecticides Act, 1968 to test and analyze the quality of
insecticides. About 50,000 samples are drawn and tested annually. These State Pesticides
Testing Laboratories (SPTLs) are located in 20 states and one union territory with a total
annual capacity of 51,440 samples.

The manufacturing and sale licensing are given by state governments. Central and state
governments are both responsible for quality control, and for the purpose, there are
laboratories at centre, state and regional levels. Under the Act, there are two statutory bodies.
One, the Central Insecticide Board, which is constituted under Section 4 of the Insecticides
Act, 1968. The Chairman of the Board is Director-General of Health Services, Ministry of
Health and Family Welfare, Government of India.27 The functions of the Board are to advise
central and state governments on technical matters, viz. (i) safety measures necessary to
prevent risk to human beings, animals and the environment in manufacture, sale, storage,
distribution, use etc.; (ii) assess suitability for aerial application, (iii) specify shelf-life, (iv)
advise residue tolerance limit and waiting period, (v) suggest colourization, (vi) recommend
inclusion of chemicals/substances in the schedule as insecticide, and (vii) other functions
incidental to these matters. Another statutory body is Registration Committee (RC)
constituted under Section 5 of the Insecticides Act, 1968. Agriculture Commissioner,
Government of India, is the Chairman of the Registration Committee.

The function of RC is to register the pesticides after satisfying itself regarding efficacy of the
pesticide and its safety to human beings, animals and the environment. It also registers
26
Satyasai, K. J. S. and Singh, Aparajita. 2021. Food processing industry in India: regional spread, linkages and
space for FPOs, in S. Bathla and E. Kannan (eds), Agro and Food Processing Industry in India - Inter-sectoral
Linkages, Employment, Productivity and Competitiveness. Singapore, Springer Nature (in press).
27
Hoda A., Rajkhowa, P. and Gulati A. 2017. Unleashing Bihar’s agriculture potential: sources and drivers of
agriculture growth. Working Paper 336. New Delhi, Indian Council for Research on International Economic
Relations.

20 | P a g e
pesticides after scrutinizing the formulae, verifying claims of efficacy and safety to human
beings and animals, specify the precautions against poisoning and any other function
incidental to these matters.28 Before the registration of any pesticide, the registration
committee also evaluate data on various parameters such as chemistry, acute toxicity, long-
term and supplementary toxicity, shelf life, persistence in water, soil and environment; and its
efficacy. After being satisfied with these data, the Registration Committee registers the
pesticides. Under the provisions of the Insecticides Act, the pesticides are registered under
the following sections.

Section 9 (3)(b): Any new molecule/pesticide which have to be registered for the first time in
the country is registered provisionally for a period of 2 years on such conditions as may be
specified by the registration committee. This registration is for data generation and
commercialization is not permitted under this Section.

Section 9 (3): After fulfilling the pending enquiry or the conditions as specified by the
registration committee while registering the pesticide provisionally, the pesticide may be
registered regularly under this section. It is a permanent registration, and commercialization
is permitted.

Section 9 (4): If an insecticide has been registered regularly under Section 9(3) on application
of any person, then any other person desiring to import or manufacture insecticide on
payment of prescribed fee be allotted a registration number and granted a certificate of
registration in respect thereof on the same conditions on which the insecticide was originally
registered. Data requirement for registration of any pesticide includes various parameters of
chemistry, bioefficacy, toxicity and packaging. Onus of data submission lies with the
applicant. It varies with the nature of pesticide, type of material (technical or formulation),
and purpose of registration (domestic consumption or export).

The states and union territory (UT) authorities monitor the quality of pesticides in their
respective state/UT by appointing the insecticide inspectors. The insecticide inspectors
collect samples for analysis and send to the insecticide analysts for testing; (iv) Registration
of Safer Formulations-the adverse effects due to pesticides are not only caused by active
ingredient but also solvents, carriers, emulsifiers and other constituents of the formulation.
Considering this, a number of safer formulations, viz. emulsifiable wettable (EW), flow able,
soluble liquids and granules are registered for use.
Gulati, A. and Chopra, Kanchan. 1999. Reform of the subsidy regime: implications for the agricultural sector.
28

A consolidated report of IEG, ISEC & IIM, Ahmedabad. September (unpublished).

21 | P a g e
Government keeps on reviewing those registered pesticides for their continued use or
otherwise in the country, which is known to cause hazards to human health and environment.
Based on such review, use of 27 pesticides and 4 formulations of 3 other pesticides have been
banned, restrictions have been imposed on 7 other pesticides and 18 pesticides have been
refused registration.

Pests: The Destructive Insects and Pests Act, 1914 passed by the Central Government
provided for measures against entry of pests and diseases from other countries into India.
Suitable provisions also exist in the Act for preventing the spread of pests and diseases from
one state to another within the country. For implementing the provisions relating to the
prevention of the entry of injurious pests and diseases, a chain of plant quarantine and
fumigation stations have been established at all import airports, seaports and land frontiers.

The state governments have also passed suitable legislations for dealing with the epidemics
of plant diseases and pests. In exercise of the powers conferred by sub-section (1) of Section
3 of the Destructive Insects and Pests Act, 1914 (2 of 1914), the Central Government made
the Plant Quarantine (Regulation of Import into India) Order, 2003 for the purpose of
prohibiting and regulating the import into India of agricultural articles mentioned therein. The
Order provides for: general conditions for import (permit for import of plant and plant
products etc.), special conditions for import, post-entry quarantine, appeal and revision,
power of relaxation, repeals and savings, etc. The details of text of the Order have been made
available at website www.quarantine.india.org for the benefit of importers. Plant quarantine
legislations Plant quarantine is a government endeavour enforced through legislative
measures to regulate the introduction of planting material, plant products, soil, living
organisms etc. in order to prevent inadvertent introduction of pests and pathogens harmful to
the agriculture of a region and if introduced, prevent their establishment and further spread.

As early as in 1914, the Government of India passed a comprehensive Act, known as

Destructive Insects and Pests (DIP) Act, to regulate or prohibit the import of any article into
India likely to carry any pest that may be destructive to any crop, or from one state to
another.29 The DIP Act has since undergone several amendments. In October 1988, New
Policy on Seed Development was announced, liberalizing the import of seeds and other
planting material. In view of this, Plants, Fruits and Seeds (Regulation of import into India)
Order (PFS Order) first promulgated in 1984 was revised in 1989.

Chand R., Pavithra, S. 2015. Fertiliser use and imbalance in India: analysis of states. Economic and Political
29

Weekly. 50(44).

22 | P a g e
The PFS Order was further revised in the light of World Trade Organization (WTO)
Agreements, and the Plant Quarantine (Regulation of Import into India) Order 2003
[hereafter referred to as PQ Order], came into force on January 1, 2004 to comply with the
Sanitary and Phytosanitary Agreement. Till August 25, 2009, 14 amendments of the PQ
Order were notified and five draft amendments were prepared, revising definitions, clarifying
specific queries raised by quarantine authorities of various countries, with revised lists of
crops under the Schedules VI, VII and quarantine weed species under Schedule VIII. The
revised list under Schedules VI and VII now include 677 and 286 crops/ commodities,
respectively, and Schedule VIII now include 31 quarantine weed species. The PQ Order
ensures the incorporation of “Additional/ Special Declarations” for import commodities free
from quarantine pests, on the basis of pest risk analysis (PRA) following international norms,
particularly for seed/ planting material.

The Directorate of Plant Protection, Quarantine and Storage (DPPQS) under the Ministry of
Agriculture is responsible for enforcing quarantine regulations and for quarantine inspection
and disinfestation of agricultural commodities. The quarantine processing of bulk
consignments of grain/ pulses etc. for consumption and seed/ planting material for sowing are
undertaken by the 35 Plant Quarantine Stations located in different parts of the country and
many pests were intercepted in imported consignments. Import of bulk material for sowing/
planting purposes are authorized only through five Plant Quarantine Stations. There are 41
Inspection Authorities who inspect the consignment being grown in isolation in different
parts of the country. Besides, DPPQS has developed 21 standards on various phytosanitary
issues such as on PRA, pest-free areas for fruit flies and stone weevils, certification of
facilities for treatment of wood packaging material, methyl bromide fumigation etc.

Also, two Standard Operating Procedures have been notified on Export Inspection &
Phytosanitary Certification of plants/plant products and other regulated articles and post-entry
quarantine inspection.30 The National Bureau of Plant Genetic Resources (NBPGR), the nodal
institution for exchange of plant genetic resources (PGR) has been empowered under the PQ
Order to handle quarantine processing of germplasm including transgenic planting material
imported for research purposes into the country by both public and private sectors. NBPGR
has well-equipped laboratories and green house complex. A containment facility of CL-4
level has been established for processing transgenics. At NBPGR, adopting a workable

30
Supra note 8

23 | P a g e
strategy, a number of pests of great economic and quarantine importance have been
intercepted on exotic material, many of which are yet not reported from India.

If not intercepted, some of the quarantine pests could have been introduced into our
agricultural fields and caused havoc to our agriculture. Locust control and research: This
scheme is implemented through Locust Warning Organization (LWO), established in 1939,
and was amalgamated with the Directorate of Plant-Protection, Quarantine and Storage in
1946.31 This organization is responsible for monitoring and controlling the desert locust over
an area of 2.0 lakh km in the Scheduled Desert Area (SDA) of Rajasthan, Gujarat and parts of
Haryana. Locusts have been an ever impending threat to India, being an international pest
they need international co-operation for effective control strategy. The monitoring and
control of locust in SDA is an international obligation. Locust control work requires
community approach, depends on high intelligence, quick communication of information and
education of staff through trainings and readiness of equipments and expert deployment of
resources.

Chapter 3- Labour Laws in Agriculture:

Important sections in the rural population that can benefit from welfare measures are
agricultural labourers, an overwhelming majority of whom live below the poverty line. The
practical method by which they can be helped to achieve a higher standard of living is only
by improving their levels of income. For this purpose, the Government of India enacted the
Minimum Wages Act, 1948. It is applicable inter alia to employment in agriculture. This Act
was amended in 1954, 1957 and 1961 and was extended to Jammu and Kashmir in 1970. The
Act empowers the states to fix the minimum wages for various categories of agricultural
workers.32 The implementation of the various provisions of the Minimum Wages Act, 1948,
in agriculture, is beset with considerable difficulties because of the nature of work,
fragmentation of holdings, payment of wages in kind, borrowings by the agricultural labour,
vagaries of weather, traditions and customs, lack of adequate organization among the
agricultural labour and illiteracy among the employers and the employees alike.

The following laws are also applicable to the agricultural labourers: (a) Payment of Bonus
Act, 1965, applicable to agricultural labourers (is not excluded from the purview of the
31
Hoda A., Rajkhowa, P. and Gulati A. 2017. Unleashing Bihar’s agriculture potential: sources and drivers of
agriculture growth. Working Paper 336. New Delhi, Indian Council for Research on International Economic
Relations.
32
Terway, Prerna. 2020. Production and distribution aspects of input subsidies in Indian agriculture: a case
study of Jharkhand. Thesis submitted to Jawaharlal Nehru University, New Delhi (unpublished).

24 | P a g e
Minimum Wages Act); (b) Employees’ Provident Fund and Family Pension Act, 1972; (c)
Payment of Gratuity Act, 1972; (b) and (c) Acts do not cover agricultural labour as a class by
itself, but both the Acts are applicable to labourers employed by plantations, fruit orchards,
etc.; (d) The Industrial Disputes Act, 1947- applicable to labourers on agricultural farms run
on commercial lines; the Act does not apply to other labourers engaged in agriculture; (e) The
Trade Unions Act, 1926 which provides for the registration of unions; the Act is applicable to
registered unions of agricultural workers; and (f) The Workmen’s Compensation Act, 1923 is
applicable inter alia to workers employed in farming with tractors and other contrivances
driven by steam or other mechanical power or by electricity.

The Kerala Agricultural Workers Act, 1974, has introduced a new dimension in legislation
for agricultural labour. This enactment provides for the security of employment and welfare
of agricultural workers.33 An important feature of this Act is the setting up of the Agricultural
Workers Provident Fund to which both the employer and the employee make contributions at
a given rate. The landowner or the employer shall not reduce the wages of any agricultural
labour by reason only of his liability for a payment of contribution to the fund.

The enactment also fixes the number of hours at 8 that an adult worker is required to put in
per day. No adolescent or child is to work for more than 6 hours per day. The periods of work
on each day shall be so fixed that no period shall exceed 4 hours continuously, and no
agricultural labourers works for more than 4 hours before he has a rest for at least half-an-
hour. Conciliation machinery is conceived in the Act to deal with cases of dispute on the
issue of wages. The Act provides for punishment of various offences varying from
imprisonment for a term that may extend to 6 months or fine, which may extend to Rs 1,000
or both.

The Act also provides that the executive authority of every local body shall prepare a register
of agricultural workers residing within the jurisdiction of the local authority and the Act
enjoins on every land-owner that he shall maintain such registers and records as may be
prescribed by the rules. This enactment has been brought into force recently. The Bonded
Labour System (Abolition) Ordinance, 1975 came into force with effect from 25 October
1975. The Ordinance provided for the abolition of the bonded labour system with a view to

33
RBI. 2019. Report of the Internal Working Group to Review Agricultural Credit, Reserve Bank of India,
September 13, 2019. https://rbidocs.rbi.org.in/rdocs//PublicationReport/Pdfs/WGREPORT101A17FBDC1442
37BD114BF2D01FF9C9.PDF.

25 | P a g e
preventing the economic and physical exploitation of the weaker section of the people and the
matters connected therewith or incidental thereto.

The Ordinance has since been replaced by an Act of the Parliament on 9 February 1976.
Rules under this Act were finalized and published on 28 February 1976. The National Policy
on Skills Development, 2009 approved by the Union Cabinet in February 2009 aims at
empowering all individuals to enable them to get access to decent employment and to
promote inclusive national growth. Further, the policy promotes public-private partnership to
ensure that the needs of the industry are met.

The Union Cabinet has approved the National Policy on Safety, Health and Environment at
Workplace in 2009 to address the issue of securing health and safety of workers in the
country as envisaged in the Constitution. It provides general guidelines for all stakeholders
such as Governments, inspection authorities, employers, research and development
institutions, educational institutions, etc. for developing a safety culture and environment at
all work places. The policy envisages actions for improving safety, health and environment at
workplace by providing for a statutory framework, administrative and technical support,
system of incentives, prevention strategies and their monitoring and inclusion of safety health
and environment aspects in other related national policies. It also spells an action programme
comprising development of standards and codes of practices, encouraging compliance by
stakeholders, increasing awareness, promoting and proving for research and development,
knowledge and skill development, practical guidance and providing financial and non-
financial incentives. The provisions of the policy would be reviewed every five years, if
necessary.

Chapter 4- Legislations on Agricultural marketing:

An organized marketing service in the country started in 1935 with the establishment of a
central organization, the office of the Agricultural Marketing Adviser to the Government of
India, now known as the Directorate of Marketing and Inspection in the Ministry of
Agriculture, Government of India. A series of measures, such as the Agricultural Produce
Market Act, the Weights and Measures Act, the Agricultural Produce (Grading and
Marketing) Act, etc. have been enacted for the marketing of agricultural produce in more
orderly manner beneficial to the farmers.34 Under these measures, marketing practices are

34
. Sharma, V. P. 2013. The role of fertilizer in transforming agriculture in Asia: a case study of the Indian
fertilizer sector. Ahmedabad, Centre for Management in Agriculture, Indian Institute of Management.

26 | P a g e
regulated, marketing charges are clearly defined and specified, unwarranted deductions are
prohibited, correct weighments are ensured, suitable arrangements for the settlement of
disputes regarding quality-weighments, deductions, etc. are made, reliable and correct
information of prices is supplied and suitable quality standards and standard contracts for
buying and selling are enforced.

The Agricultural Produce Market Act exists in all the states and the union territories, except
in Kerala, Manipur and the union territories of Andaman and Nicobar Islands, Dadra and
Nagar Haveli, Lakshadweep, and Daman and Diu, to protect the farmers from exploitation by
middlemen and traders. So far, 7,418 agricultural produce markets have been regulated under
the different State Agricultural Produce Market Acts in the country. 35 Studies indicated that
the institutions of regulated markets set up to strengthen and develop agricultural marketing
in the country have, however, achieved a limited success in providing transparent and
efficient marketing practices, development of required infrastructure, etc. The restrictive legal
provisions did not augur well with competitive market structure.

The Government of India under the Ministry of Agriculture appointed an expert Committee
in December, 2000 followed by an Inter-Ministerial Task Force on agricultural marketing
reforms to review the present system and make it more efficient and competitive. The
recommendations of the Task Force were discussed with the State Governments. On request
from states/union territories, a Model Act was developed to assist the states in removing
barriers, whether legal or policy induced, which introduced inefficiencies and monopoly rents
in the functioning of agricultural markets. It also provides for establishment of direct
purchase centres, promotion of public-private partnership in management and development of
markets along with contract farming, etc.

The Model Act has been circulated to all states/union territories for further follow up action
as the subject matter falls within their purview.36 The feedback received by the Department
indicated that Madhya Pradesh, Tamil Nadu, Himachal Pradesh, Andhra Pradesh, Sikkim and
Nagaland have amended their respective Acts on the lines of Model Act and other state
governments/union territories administration had initiated action for amending their State
Marketing Regulation Acts.

35
Singh, Lakhwinder and Singh, Nirvikar. 2016. Economic transformation and development experience of
Indian Punjab – an introduction in Lakhwinder Singh and Nirvikar Singh (eds), Economic transformation of a
developing economy - the experience of Punjab, India. Singapore, Springer Nature.
36
Reddy, A. (2016). Status of Market Reforms in India. Indian Farming 66(8): 33–37.

27 | P a g e
The Agricultural produce (Grading and Marking) Act, 1937 (amended in 1986) provides for
the grading and marking of the agriculture and allied commodities. Agricultural produce has
been defined to include all produce of agriculture or horticulture, and all articles, food or
drink, wholly or partly manufactured from any such produce, and fleeces and the skins of
animals. The Act has a provision for making Rules to carry out the provisions of the Act. Till
day, 119 Grading and Marking Rules covering 181 commodities have been notified.
Standards prescribed under the provision of the Act are popularly known as ‘Agmark’
standards. The purity standards under the provision of Prevention of Food Adulteration
(PFA) Act, 1954; Prevention of Food Adulteration (1st Amendment) Rules, 2002; Prevention
of Food Adulteration (Amendment) Rules, 2006; Prevention of Food Adulteration (5th
Amendment) Rules, 2008 and Bureau of Indian Standards (BIS) Act, 1986; The Bureau of
Indian Standards Rules, 1987; The Bureau of Indian Standards (Certification) Regulations,
1988 are invariably taken into consideration while framing the Agmark standards.

Certification of commodities notified under the provision of the Act is carried out on
voluntary basis. Grading is carried out in accordance with the standards notified, following
meticulous procedure of sampling, testing, packaging, marking and sealing as per the
instructions issued under the Act and Rules.37 It serves a means of describing the quality of
commodities to be purchased or sold by the buyers or sellers all over the country and abroad.
This establishes a common trade language and avoids the need for physical checking and
handling at many points. The system of grading and quality control under Agmark
certification benefits both the sellers and buyers in view of the fact that the government acts
as the third party to guarantee quality of the products with this certification mark.

Vegetable oils, ghee, spices, wheat atta, besan, honey, pulses, etc. are popularly graded and
certified under Agmark. More than 10,000 authorized packers are attending to grading and
certification of agricultural commodities.38 Agmark standards are being harmonized with
standards framed by international organizations such as Codex Alimentarius Commission and
International Organization for Standardization keeping in view the requirement of World
Trade Organization. All the fresh fruits and vegetables exported to European Union are to be
inspected and certified by the Directorate of Marketing and Inspection. For this purpose,
grade standards of 18 fruits and vegetables have been formulated and harmonized with the
standards of European Union and Codex.

https://www.justia.com/real-estate/agricultural-law/ accessed on 9th November 2019

37

Nene, Y.L. (2002). “Modern Agronomic Concepts and Practices Evident In Kautilya's Arthasastra” (c. 300
38

BC). Asian Agril. History. 6(3): 231-242

28 | P a g e
The Food Safety and Standards Authority of India (FSSAI) has been established under the
Food Safety and Standards Act, 2006 as a statutory body for laying down science based
standards for articles of food and regulating manufacturing, processing, distribution, sale and
import of food so as to ensure safe and wholesome food for human consumption. According
to the new food safety guidelines being drafted by the FSSA, there may be provisions of
testing and tracing the origin of the food products right back to firm level. Now we have Food
Safety and Standards (Amendment) Act 2008.

Chapter 6- Agriculture under a federal structure in India

The power, functions and responsibilities of the Centre and the states are primarily governed
by the Constitution of India. The subjects that each can legislate on and administer are set out
in three lists – Union, State and Concurrent list. There is, however, an asymmetry in the fiscal
relations, with the states having larger expenditure responsibilities than the Centre but lesser
sources of revenue.39 The fact that the fiscal deficit and the revenue deficit of states has been
growing due to an excess of their budget expenditure (excluding borrowings) over budget
receipts and revenue expenditure over revenue receipts. A shortfall in the revenues over the
requirements reflects the inefficiency of the respective governments to meet their regular or
recurring expenditures. States finance their expenditures through their own tax and non-tax
resources, transfers from the Centre (their share in the net proceeds of the Centre’s tax
revenues set out by the Finance Commissions), grants and transfers for implementation of
Centrally sponsored schemes4 (CSSs) and borrowings. States have, over the years, been
demanding a larger share in the tax revenue of the Centre as well as greater flexibility and
autonomy in the implementation of CSSs (as these come with conditions attached to them,
failure to meet which results in withholding of funds.

Successive Finance Commissions have tried to give more financial autonomy to the states –
the Fourteenth Finance Commission increased their share in the pool of taxes from 32 percent
to 42 percent.40 However, states continue to feel less empowered in decision-making. Coming
specifically to Centre-state relations in the primary sector, adopted both the constitutionalist
and issue-oriented approach. 6 Under both, the issue of fiscal federalism assumes importance
as it has implications for devolution of funds to states and possible ways to resolve the
39
Kanagarathinam, M. "Problems of unorganized (agricultural) workers in Coimbatore." International journal of
HRM and Research 4.6 (2014): 87-90.
40
Subbireddy, K. B., K. G. Kanjariya, and A. N. Tharun. "Carbon dioxide under high pressure: A safe method
for the stored grain pest management." International Journal of Agricultural Science and Research 7.3 (2017):
427-432.

29 | P a g e
conflicts that may arise due to the criterion adopted to share revenues and the use of various
types of taxes by different levels of government.

The Constitution places agriculture and allied activities and irrigation (including flood
control) sectors under the jurisdiction of states (Items 14 to 17 in List II of the Seventh
Schedule). However, the Centre plays a vital role in these sectors in many ways. Through the
Union Budget, it provides financial outlays to the Indian Council of Agriculture Research
(ICAR) to disburse funds to the State Agricultural Universities for research and development.
It provides funds for inter-state rivers and fisheries outside territorial waters. The expenditure
on fertilizer and food subsidies is borne entirely by the Centre, with the objective of real-time
monitoring of commodity prices, production and other factors that may result in food
insecurity.41 Similarly, it bears the entire cost of procurement of food grains at MSP and its
distribution through fair price shops under the public distribution system (PDS).

From 1970 to 1980, it executed ‘Operation Flood’ (White Revolution) to create a nationwide
milk grid. The National Dairy Development Board was permitted to retain money received
from the sale of skimmed milk powder and butter oil gifted by the European Union through
the World Food Programme.42 Though the Centre implements several programmes to meet
the national goals of food security, elimination of hunger, malnutrition and poverty, and
financially supports states in such endeavours, the discontent of the states has endured.
Almost every state is confronted with revenue deficits and resorts to borrowings, either from
the Centre or from other funding sources to meet the revenue shortfalls.

The fiscal burden of states has also been increasing due to farm loan waivers and initiation of
income support schemes,7 similar to that of the Central government’s Pradhan Mantri Kisan
Samman Nidhi (PM-KISAN). A few state governments allocated between 9 percent and 43
percent of their agriculture budget to targeted income and investment support schemes. This
combination of expenditure on loan waivers and income support schemes has resulted in
higher cutbacks, in particular on investments in agriculture and irrigation. Even if the Central
funds are available to the states, they come with certain conditions, which states may not able
to fulfil and, hence, be unable to spend the allocated amount.

41
Patel, Thaneswer, et al. "Socio-economic and environmental changes with transition from shifting to settled
cultivation in North-Eastern India: an ergonomics perspective." International Journal of Agricultural Science
and Research 3.2 (2013): 117-136.
42
http://shodhganga.inflibnet.ac.in/bitstream/10603/66477/17/17_chapter%2011.pdf accessed on 9th November
2019

30 | P a g e
For instance, under RAFTAAR, a few states have not spent the allocated amount under two
heads - micro irrigation and machinery - perhaps due to lesser requirements by the farmers
for these, indicating that states may be given some autonomy to redirect such expenditures
(Bathla and Kannan 2020).43 Based on the recommendations of the Fourteenth Finance
Commission, the Centre increased the share of states in the net proceeds of its tax revenues.
In 2015/16, the Centre initially decided to reduce its share in all CSSs, which was in the
range of 75 percent to 100 percent, to a uniform 50 percent, which meant states would have
to bear a higher share of the expenditure. Several schemes of the Ministry of Agriculture and
Farmers’ Welfare (MoAFW) were to follow this changed pattern of funding. However,
following protests by state governments, the Centre constituted, in March 2015, a sub-group
of ten Chief Ministers and one Lieutenant Governor on rationalisation of CSSs. On 17
August 2016, the Government revised the sharing pattern based on the recommendations of
the sub-group. The existing 66 CSSs were merged into 20 core schemes, six core of the core
schemes and two optional schemes.

The Centre’s share of funding stayed at 100 percent in the core schemes. For the other two
categories, the Centre bore 90 percent of the expenditure in the case of the eight north eastern
states and the Himalayan states of Uttarakhand, Himachal Pradesh and erstwhile Jammu and
Kashmir; these states were to contribute 10 percent of the expenditure. In the case of all other
states, the sharing ratio was fixed at 60:40 between the Centre and states respectively. In
another significant change, the funds for CSSs were now to be routed through the budgets of
state governments instead of the earlier practice of the Centre directly releasing the funds to
the implementing institutions.

The APMC Act of 1966 and related regulations restricted fair competition not just within the
states but also within the wholesale markets, popularly known as mandis. Restrictions were
imposed on the number of new licences issued to traders within a mandi, and a separate
licence was required for every mandi. So constricting was the implementation of the Act by
most states that, over time, it prevented the entry of new market players within APMCs and
even outside. APMCs also discouraged contract farming as companies have to register with
mandis, pay market fee and levies without receiving any services, and often face restrictions
on stock holdings of produce. In many places, the auction of produce was seen as opaque,
resulting in denial of fair competition and prices to farmers.

43
Scheeren, B. R., et. al. (2010). Physiological quality of soybean seeds and productivity. Revista Brasileira de
Sementes, 32(3), 35-41.

31 | P a g e
All this explains why agri-markets continue to be less competitive and inefficient in terms of
proper discovery of commodity prices, have low margins for producers and high margins for
wholesalers. The Centre, in several Union Budgets, proposed reforms to improve the
marketing system. A few states, namely Punjab, Karnataka and Maharashtra, have amended
their APMC Acts, encouraged contract farming, and introduced direct farm-to-kitchen
models, but clear-cut rules on these have mostly been missing.

A breakthrough came in June 2020 when the Centre promulgated three ordinances (which
were later legislated into Acts by the Parliament in September 2020) with the objective of
enabling one common market for agri-produce across the country, freeing farmers from
stringent restrictions on selling their produce anywhere, enabling them to enter into contracts
with processors, aggregators or other agencies for better prices, lowering their risks and
enabling them to earn a higher income. These laws have been criticised by some state
governments on the grounds of having been bypassed and that they would have the effect of
(a) reducing or doing away with grain procurement at MSP, (b) reducing market fees earned
from transactions and (c) putting agriculture in the hands of the private (corporate) sector. In
sum, the Centre has never been disconnected from agriculture, as the Constitutional
provisions would suggest.

Agriculture serves certain national development goals and thus requires considerable
handholding, especially during times of natural calamities and market risks. States, in turn,
lack resources and are highly dependent on the Centre for funds and grants. 44 Both have to
work in tandem, even if there are conflicts in their respective agriculture policy agendas.
Marketing is a key example, where states have built a monopoly and earn significant
revenues from levies, taxes and cess on transactions in the wholesale/regulated markets
without realising the adverse impact this has on price stability, efficiency, farmers’ income
and the formation of supply chains. However, states also have their compulsions. With no
revenues from tax on land and agriculture income, they have a high level of dependence on
mandi fees and taxes. Their reliance on the Centre for financing of the agriculture and
irrigation sectors will, therefore, continue in the future as well. The question of whether such
interventions are seen as an assault on the federal structure and autonomy of the states will
remain.

44
Chand, R., Prasanna, L., & Singh, A. (2011). Farm size and productivity: Understanding the strengths of
smallholders and improving their livelihoods. Economic and Political Weekly, Review of Agriculture, 46(26 &
27), 5–11.

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The Centre follows the recommendations of Finance Commissions on the sharing of revenues
with the states.45 However, the level of agriculture development differs across the states and a
onesize-fits-all approach in the Central government’s agriculture policies may not suit the
specific needs of states. For instance, grants under CSSs have conditions attached to them and
the states lack flexibility to modify spending in line with their requirements. Institutions such
as the InterState Council and NITI Aayog should be involved in resolving disagreements, if
any. In order to ensure proper spending of assigned grants, there needs to be more
coordination within the existing institutional structure to prevent overlapping or duplication
of schemes and their effective implementation.

Chapter 7- The New Farm Laws

Why do need Policy reforms in Agriculture?

There are at least ten significant reasons for initiating reforms in the agriculture sector. The
major policy reforms of 1991 did not cover agriculture. Initially, many thought these reforms
were useless, they would harm the country, and were being undertaken due to pressure from
the World Bank and IMF. So, nobody felt concerned about the exclusion of the agriculture
sector from the 1991 reforms agenda.

After a few years, it was found that the growth rate of the Indian economy had started
accelerating, driven by the non-agriculture sector. Consequently, India entered the league of
modern, emerging economies instead of sinking into that of the third world. This was
attributed to liberalization, lesser control of the government on economic activities, and
dilution of inspector raj and licence/permit raj.46 However, agricultural growth remained
stuck at the earlier level––with negative growth in agriculture income in five out of 12 years
following 1990–91. No wonder, the gap in the agri-income of a farmer and that of a non-
agriculture worker increased from Rs 25,398 in 1993–94 to Rs 54,377 by 1999–2000. In the
next ten years, the income of a non-agriculture worker exceeded that of a farmer by Rs 1.42
lakh.

45
Gulati, A., & Juneja, R. (2020). Farm mechanization in Indian agriculture with focus on tractors. ZEF-
Discussion Papers on Development Policy No. 297, University of Bonn, Center for Development Research
(ZEF), Bonn, available at: https://hdl.handle.net/20.500.11811/9508.
46
Pingali, P., & Khwaja, Y. (2004). Globalization of Indian diets and the transformation of the supply side
system. Agricultural and Development Economics Division, FAO of United Nations.

33 | P a g e
The favourable effects of the 1991 policy reforms on the 03 non-agriculture sector and the
growing disparity between agriculture and non-agriculture incomes caught the attention of
some experts and they started speaking about the need for reforms in the agriculture sector.
This was followed by a series of papers, committee reports and books emphasizing the need
for bringing reforms in agriculture marketing, liberalizing trade, and attracting modern capital
and investments into logistics and food value chains. Some clear template for reforms in
agriculture emerged around the year 2000. The need for policy reforms in agriculture was
further necessitated by the liberalization of agriculture trade due to WTO agreement and
rising cases of farmers’ suicides and agrarian distress.47

The second reason relates to imbalance between domestic demand and supply. India is
accumulating a large surplus of some commodities and at the same time importing huge
quantities of edible oil and pulses. Even the import of fruit and vegetables, which can be
grown in the country and fetches good income, has been increasing. The reasons are the poor
state of market facility, post-harvest infrastructure, and logistics and high risks in returns
from oilseeds and pulses.

The third reason is the pressing need for improving export competitiveness of Indian
agriculture. The growth rate of India’s population is decelerating whereas that of agriculture
has increased to a record level. The declining population growth rate has lowered the growth
rate in domestic demand for some food groups and aggregate food to a certain extent.
According to the emerging scenario of demand and supply, India will be required to sell 20–
25% of the incremental agri-food production in overseas markets in the coming years. This is
not possible in the “business as usual” setting, which involves a long chain of intermediaries,
small market lots, and high transaction costs. The country is witnessing the accumulation of a
large surplus of grain and sugar, which is getting increasingly dicult to dispose of in the
overseas markets due to poor price competitiveness of our produce. We need to reduce the
logistics cost which is about 15% to at least half, to make our products competitive.

Fourth, agricultural segments such as horticulture, milk and fishery––where market

intervention by the government is either nil or very little show 4–10% annual growth.
Compared to this, the growth rate in cereals––where MSP and other interventions are quite
high remained 1.1% after 2011–12. This 04 clearly indicates that in recent times liberalized

47
Chand, R. (2019). Transforming agriculture for the challenges of 21st century. Think India Journal, 22(26).
Presidential Address to 102nd Annual Conference of Indian Economic Association, AERO University, Surat

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markets are more favourable to agricultural growth than government support and intervention
in markets.48

Fifth, India is dominated by small holdings that typically have small surpluses. Most of these
farmers lack scale, resources, and the ability to take price risk to go for high-value crops. It is
not economically viable for them to take a few kilos of fruit and vegetables to the market as
these crops mature in lots.49 If such farmers get markets close to production, like milk
collection centres, and have price assurance, they will be encouraged to diversify towards
high-value crops.

Sixth, despite the development of communication, road networks and other trade
infrastructure, agri-markets remain fragmented––somewhere glut and price crash, somewhere
shortage and high prices. There is also poor integration of prices between the harvest and lean
months. Farm to retail price difference shows unjustified spread. The reason is low
investments in storage and warehouses and dominance of local traders in the market.

Seventh, the growth of food processing needs to be accelerated to (i) match with the rising
demand; (ii) pull agri-diversification; and (iii) create more jobs in the rural economy. For this,
processors need raw material of desired quality and at the desired time. Buying so many
small lots of different quality in scattered markets adds to the cost of raw materials. This
requires new arrangement and partnership between processors and producers.

Eighth, with the rise in specialization and commercialization of agriculture, most of the
output of several crops produced in a state is consumed outside than within it. 50 This supports
efficient and barrier-free interstate trade in the spirit of one nation one market.

Ninth, investment and capital formation in agriculture, which is so essential for the progress
and growth of any sector, has seen an unhealthy trend in recent years––the growth rate fell
from close to 10% per year during 2002–03 to 2011–12 to 2% in the following decade. The
private corporate sector has almost avoided the sector and constitutes less than 2% of the total
investments in agriculture and less than 0.5% of the total annual investments of the corporate
sector in the Indian economy. There is a pressing need to revive investments in agriculture to
modernize the sector.

48
Pavitra, S., & Chand, R. (2015). Fertilizer use imbalance in India: Analysis of states. Economic and Political
Weekly, 50(44).
49
Joshi, P. K., Birthal, P. S., & Minot, N. (2006). Sources of agricultural growth in India: Role of diversification
towards high-value crops. MTID Discussion Paper 98. International Food Policy Research Institute.
50
Shiva Vandana & Gitanjali Bedi, 2002 Globalisation of Agriculture, Food Security and Sustainability in
sustainable Agriculture and Food Security Sage Publications, New Delhi

35 | P a g e
Lastly, farmers are forced to seek remunerative prices through MSP and government
procurement because of their disillusionment with the existing marketing system.
Government intervention through procurement-backed MSP is needed and justified in
selected cases like staple foods for food security. However, expanding MSP through
procurement to all crops involves very heavy fiscal cost––nearly one third of MSP to back
MSP through procurement. The Central government had ordered states procurement of pulses
and oilseeds at MSP and sharing the costs and losses with it. 51 But states did not opt for this
due to fear of heavy losses. This necessitates that farmers are given more and better options
and a competitive environment to get better deals for their produce in the open market.

Implications of the New Farm Laws:

Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020 (FPTC
Act)

The FPTC Act, enacted by the Central government, gives the freedom to sell and buy farm
produce at any place in the country––within APMC mandis or outside them. To promote e-
commerce in agriculture, the new law also allows the setting up of an electronic platform for
the sale and/or purchase of farm produce.52 The Act also has a provision to prescribe
modalities for the registration of traders and trade transactions in trade areas. Thus, if the new
system does not work satisfactorily, then the government can intervene to regulate the
system. Due to inadequacies of the APMC markets, more than half of the marketable surplus
is sold outside the mandis. Such deals lack transparency and fairness as they are in violation
of APMC regulation; due to their underhanded nature, there is also the constant fear of being
busted upon by APMC officials.

The new Act legalizes such transactions, which is favourable for farmers. The best part of the
new Act is that it allows direct purchase from farmers at their doorstep or farm, as is the case
with milk. For the first time, farmers will have the opportunity to quote the price for their
produce.53 Although these changes might appear too good to be true, if reforms are
encouraged in the right direction by the states, it won’t take long for farmer producers or their
FPOs to become “price dictators” rather than remaining “price takers”. 08 Another relevant
question is how smallholders will benefit from the new Act. Our farm size is getting smaller
51
Directorate of Agriculture, Punjab, 2002 Agriculture in Punjab, SCO No. 85-88, Sector34A, Chandigarh
52
Sridhar V, 2004 An Agrarian Tragedy Frontline, Vol. 21, No. 13, June 13 - July 2, 2004
53
Research Foundation for Science - Removal of Quantitative Restrictions and its Technology and Ecology,
2003 Disastrous Impact on Farmer’s Livelihood and Food Safety, RFSTE, New Delhi.

36 | P a g e
day by day. If we want our farmers to diversify to produce high-value crops, they need price
assurance and outlet to sell small lots. Crops like fresh vegetables and fruit do not mature on
the same day and are thus harvested in small lots over time. This requires a collection facility
or sale opportunity near the farm as is the case with dairy production throughout the country.

FPTC will facilitate the creation of the required ecosystem for diversification at small farms.
Traditional supply chains involve six to seven transactions between the production point and
end use (farm to fork).54 Each transaction involves cost and margin, leading to a large price
spread between producers and consumers. FPTC will result in compressing the value chains
and eliminating excessive intermediation. In many cases farmers will be able to sell their
produce directly to consumers through their groups. The new policy environment will create
business opportunities for the rural youth, including farmers’ children, in agriculture trading,
as witnessed in denotified crops and the dairy sector.

Farmers’ Empowerment and Protection Agreement on Price Assurance and Farm

Services Act 2020

The Farmers’ Empowerment and Protection Agreement on Price Assurance and Farm
Services Act––or the Agreement on Price Assurance and Farm Services (APAFS)––is greatly
simplified and an improved version of the Contract Farming Act that has already been
adopted by 20 states. The new Act shifts the balance in the favour of farmers. It removes the
complicated system of registration/licence, deposits, and various other compliances in
contract farming provisions in various states.

Contract farming has been practiced in India at a limited scale in specific cases for a long
time. The State of Punjab has been a pioneer in initiating this practice. It facilitated
multinational company PepsiCo in 1988 to start contract farming for the production of fruit
and vegetables in the state. This initiative did not meet its objective and remained
unsuccessful.55 However, no fallouts were reported due to this arrangement. In contrast to
this, another multinational corporate giant, Nestle, has been enjoying a very successful
partnership with farmers in the Moga district of Punjab in the dairy (milk) sector since 1961.
More than one hundred thousand farmers supply milk to Nestle in Moga in the partnership
mode, which is almost similar to what is provided in “Agreement on Price Assurance and

54
Shiva Vandana, Radha Holla Bhar, Corporate Hijack of Food How World Bank and Afsar H. Jafri and
Kunwar Jalees, 2003 WTO are pushing The Poor To Starvation, RFSTE, New Delhi.
55
Viswanathan, P.K. George Informal Labour Market and Structural Devolution, K. Tharrian and Joseph
Thomas, 2003 Economic and Political Weekly, August 2, 2003.

37 | P a g e
Farm Services” Act. Nestle provides technical guidance to milk producers and supplies inputs
such as feed, medicine and vaccines, and veterinary services. Nestle has created a
sophisticated supply chain at a price announced every week based on the fat and solid content
in the milk.

Though “corporate” has become a much maligned word in the current farmers’ agitation,
Nestle’s partnership with dairy farmers in Punjab is a classic example of great success and
economic transformation. Likewise, there are scores of success stories involving formal
contract farming in almost all states. Documentary evidence points to a lot of benefits for
farmers through contract farming. Obviously, there are also failures, such as the PepsiCo
experience in Punjab.56 If farmers don’t find contract farming beneficial, they can leave it
willingly and without any hassle. Also, there have been no reports of firms taking control of
farmers’ lands or any other assets by misusing any provision of contract farming. In a
nutshell, experience of contract farming proves it is advantageous for farmers.

The Agreement on Price Assurance and Farm Services (new act) between farmers and
sponsors, i.e. agri-business firms, is restricted to (i) an assured price to be paid to farmers as
agreed between them and the sponsor prior to production and (ii) to provide farm services
and inputs to the farmers, if so desired, on mutually agreed terms and conditions. As per the
Act, production of desired quality produce will be undertaken by farmers and not by the
sponsor. The role of the sponsor is restricted to buying the produce at the price agreed in
advance and supplying inputs and services. The new agreement is much simpler than the
existing contract farming practices and many clauses have been kept in favour of farmers.
This is totally different from corporate farming, where production activity is undertaken by
the business firms. The new Act has no provision for leasing out land by the farmers in any
manner to the sponsor or firm. As per the Act, the sponsor is prohibited from acquiring
ownership rights or making permanent modifications on farmers’ lands or premises.

Therefore, apprehensions like corporates usurping the lands of the farmers, or forcibly taking
their assets by manipulating the agreement are totally misplaced. In order to protect farmers
from the costly and long process of legal redressal of grievances, the agreement provides for
dispute resolution through the sub-divisional authority (SDM) and collector or additional
collector as the appellate authority.57 No action for any recovery of dues against farmers shall
56
Remesh Babu P., 2004 Labour Relations in Small Holding Plantations : The Case of Rubber Tappers in
Kerala V.V. Giri National Labour Institute, Noida (U.P.), NIL Research Studies Series No. 053/2004.
57
Vackayil, Joseph 2004 Treat Should Scrap Patents on 64 Major Crops Financial Express, 26th April, 2004,
New Delhi.

38 | P a g e
be initiated against land of the farmer. In case the sponsor fails to pay the farmer, there is a
provision for penalty extending to one and a half times the amount owed. If a farmer reneges
into the agreement, the recovery shall not exceed the actual cost incurred by the sponsor on
account of any advance payment or cost of input supplied by him. State governments have
been given the power to make rules for carrying out provisions of the Act, such as
registration of a farming agreement.58 The Act keeps scope to remove any difficulty in giving
effect to the provisions of this Act.

Essential Commodities (Amendment) Act

The Essential Commodities Act has been modified for agriculture and food, including
cereals, pulses, potato, onion, edible oilseeds and oils. The modification says that the Central
government may regulate the supply of the above commodities only under extraordinary
circumstances, which may include war, famine, extraordinary price rise and natural
calamities.

The modification lays down a transparent criterion on imposing or regulating stock limit,
which is 100% increase in retail price of horticulture produce or 50% increase in retail price
of non-perishable agri-food over the price prevailing in the preceding 12 months or average
price of last five years, whichever is lower.59 This modification incorporates predictability in
government action to invoke ECA based on a price trigger rather than mere perception or
whim. The Act in no way dilutes the power of the government.

Policy reforms in agriculture continue to be a hot topic in public discourse since the last two
decades. For several years, academic experts, stakeholders, and farmers’ leaders pleaded for
reforms in pre-budget consultations and meetings with NITI Aayog and the erstwhile
Planning Commission. At the political level, the election manifestos of the two biggest
national political parties, Congress and BJP, also promised to liberalize agriculture markets to
free farmers from the shackles of APMC regulations.60 The reason for this was obvious. The
“business as usual” approach was yielding only incremental changes whereas the sector
needed transformative ones to address agrarian distress, create avenues for remunerative
employment of the rural youth, raise farmers’ income to meet their aspirations, and create a

58
Chand Ramesh & Linu Mathew, 2001 Subsides and Support in, Is WTO providing Level Playing Field in
Agriculture, Economic and Political Weekly, 11th August, 2001, Vol. XXXVI, No. 32.
59
Goerge G., 2003 Food Standards and New Market Access, Time for a New Engagement, Business Line, 11th
September, 2003.
60
Supra note 23

39 | P a g e
favourable environment for new-age agriculture that matches the changing demand scenario,
compete with global agriculture and is also sustainable.

In fact, what was needed for agriculture was clearly known, the Central government has
shown political courage to implement that across India. Coming to the acts, the Farmers’
Produce Trade and Commerce Act offers farmers the choice to sell their produce within
APMC markets or outside them; to private channels, integrators, FPOs, or cooperatives;
through a to intervene in the market for price control. 61 This is evident from the action taken
by the government in imposing stock limit on onions on 23 October 2020, i.e. after the
enactment of the modification in the Essential Commodities Act. Thus, the criticism that a
free hand has been given to stockists and market manipulators is totally unfounded. In the
past ECA has been invoked to cool down high food prices for consumers. This obviously has
an adverse effect on prices received by producers. The commodities of farmers’ interest like
fertilizers and seeds have not been touched by the modification in ECA. But, surprisingly,
agitating farmers’ groups are opposing the modification even though it is clearly in their
interest, it will encourage investment in warehouses, cold storages, pack houses, and logistics
and will help in reducing food wastage, violent fluctuations in prices and price crashes due to
gluts.

Chapter 8- Conclusions and way forward

This chapter provided a historical perspective of the key reforms initiated in Indian
agriculture and the structural changes that have taken place with the objective of highlighting
some important governance issues for further action. The paper began by delving into the
relationship between the Centre and the states in the devolution of funds and their shared
responsibilities towards agriculture development.

Though under the Constitution of India, agriculture and irrigation fall within the jurisdiction
of states, the Centre has a crucial role to play in the form of release of funds/grants, subsidies
and price support for agriculture inputs and output and pursuing the national development
agendas of food and nutrition security, elimination of poverty and hunger. In doing so, it is
important that the Centre should give flexibility to states in strategising action plans to
encourage farmers and the private sector that are suited to their particular requirements. There
is a strong need for convergence of various schemes and hence effective coordination across
Central ministries for which an empowered group of ministers should be formed.
61
http://www.legalserviceindia.com/articles/tena_agr.htm accessed on 1st November 2019.

40 | P a g e
Within the States, cabinet sub-committees on agriculture and related departments (including
of irrigation and power) should be constituted. Almost every state in India is confronted with
a fiscal crisis, and the brunt of the resource crunch has largely been borne by agriculture and
irrigation, indicating a lower priority accorded to this sector in the expenditure policy. Public
investment, which has always been skewed towards major and medium irrigation, has to be
synchronised with the changing investment requirements of farmers, such as micro irrigation,
storage, mitigating post-harvest losses, soil health and allied activities. This will intensify the
‘crowding in’ effect of public investment on private household investment. Government
spending on input and output subsidies is much higher than that on investment; it is important
to target such support towards the less developed states/regions and small and marginal
farmers for higher productivity as well as alleviating poverty.

Replacing the existing price support system with direct income support to farmers or
encouraging them to use neemcoated urea and solar pumps has to be backed with a
corresponding increase in public investments in the agriculture sector. Direct income support
may assure efficiency in input use and financial autonomy to farmers, but the amount of cash
transfers has to be estimated and aligned with the existing cropping pattern in each state as
well as usage of inputs and presence of tenants and sharecroppers. Similarly, the recently
introduced marketing reforms laws – FAPAFS Act, FPTC Act and the ECA – can yield the
desired results only if adequate investments are made in rural and marketing infrastructure
and adequate flow of credit and extension services to farmers is ensured. The way forward for
States is to initiate reforms in agri-markets and create an enabling environment that
incentivises the cooperatives, agri-businesses and private companies to enter the sector and
also undertake investments in handling perishables.

Institutional support can be taken from various industry forums, export houses, NAFED and
the National Centre for Cold-chain Development. 62 Subsequent to the enactment of these
laws, states have initiated measures in their respective markets, whereas some like Punjab,
Haryana, Uttar Pradesh, Rajasthan and Tamil Nadu opposed these laws mainly on grounds of
loss of revenue and the apprehension that this will lead to the Centre reducing grain
procurement at MSP, leading to a fall in the market price of grains. States do have autonomy
to bring suitable changes in the laws but it is important that they frame rules for registration
and code of conduct for trade as well as procedures for trading on newer, even online,

62
Singh, Pritam. 2008. Federalism, nationalism and development: India and the Punjab economy. London,
Routledge.

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platforms, which can also be linked to e-NAM. In Punjab and Haryana, a major proportion of
market arrivals of wheat and paddy (about 99 percent in the case of Punjab) are procured by
government agencies. In Punjab, such transactions attracted market development fee (MDF)
and rural development fee (RDF) of 3 percent each. In Haryana, the MDF and RDF fee was 2
percent each. In both the states, the arhatiyas were paid 2.5 percent of MSP as commission.

The marketing boards of Punjab and Haryana earned about INR 35 billion and INR 16 billion
respectively on this account.63 The Centre has since decided not to pay the MDF on paddy
procured in the kharif marketing season 2020-21 (October to September). The difference in
fees between APMC mandis and other markets has already prompted other state governments
to reduce the fee within the former. Within days of the Centre notifying the FPTC Act, the
Government of Punjab reduced the MDF and RDF on basmati paddy from 2 percent to 1
percent each. Similarly, Haryana also reduced MDF and RDF on wheat and rice from 2
percent each to 0.5 percent each. Madhya Pradesh too reduced the mandi tax from 1.70
percent to 0.5 percent. On 6 November 2020, Uttar Pradesh reduced the mandi tax from 2
percent to 1 percent.

It is hoped that the enactment of the FPTC law will force state marketing boards to upgrade
infrastructure in the existing regulated markets and make operations in these more efficient
and transparent. Even though their income may decline due to the reduction of fees, it is
possible that the state governments will provide them required funds from the budget.

Since the difference in tax between trade area and APMC will now be just about 0.5 to 1.5
percent, it is possible that mandis will continue to be the preferred places for trading. APMCs
own large tracts of land, mostly in towns and cities. So far there have been few cases of
public private partnership to create modern infrastructure for sorting, grading, drying and
storage in these. It is possible that state governments will look for private collaborations to
modernise the facilities within APMCs so that they remain competitive. In our opinion,
private players may not venture into agri-business/marketing in the short run.

However, in the medium to long term, they can be expected to engage in agri-marketing,
provided state governments facilitate such business practices and develop adequate
infrastructure. We expect that by 2030, exporters and processors may set up their own
purchase centres in the trade area which will provide facilities specific to a particular
commodity or group of commodities. In all likelihood, both food grains and perishable
63
Table 7.2, Agricultural Statistics at a Glance 2015,
http://eands.dacnet.nic.in/PDF/Agricultural_Statistics_At_Glance-2015.pdf.

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horticulture produce will attract investment. This could be higher in the case of perishables,
due to relatively less quantum of arrivals as well as the additional space required for their
transactions.

Even before the enactment of the FPTC Act, fruits and vegetables have largely been traded
outside the APMCs. In the last few years, states like Delhi and Maharashtra had delisted them
from the purview of the APMC Act. The emerging ecosystem of startups may see investment
flowing into the establishment of value chains connecting producers with the processors and
consumers. The amended ECA will hopefully reduce regulatory interference in business
transactions.

The latest example of such interference is the Centre using the powers under the Act in
October 2020 to impose stock holding limits on onions, stipulating that the wholesalers
cannot store more than 25 tonnes and retailers not more than two tonnes. India’s surpluses for
most agricultural produce are marginal. India is a large importer of some commodities like
edible oils and pulses and any natural calamity can cause damage to pulse crops, resulting in
shortages. In the last three years, India had to allow import of maize (in 2019) as well as
onion and potato (in 2020). From 2000 to 2015, the government has often resorted to
restrictions on the movement, stocking and export of wheat, maize, chickpea, potato, onion,
sugar, cotton and milk (OECD-ICRIER 2018). Due to such adhocism, India may not be seen
as a reliable exporter. The amendment in the ECA is seen as a step towards making the
regulatory regime more predictable so that private investment can be attracted into the agri-
supply chain.

At present, the private sector is reluctant to make any investment as the government can
suddenly impose stock limits or restrictions on the movement and export of agricultural
produce. If India’s crop productivity increases and the demand-supply situation improves, it
is possible that the private sector may see opportunities to invest in the creation of
infrastructure as well. A successful export-oriented supply chain of grapes and buffalo meat
has already been created almost entirely by the private sector. By 2030, if there are surpluses
in agricultural produce, such investment can be expected in other areas as well.

The Agriculture Export Policy, 2018 already provides an assurance that organic produce and
processed agricultural products will not be subject to any export restriction by way of
minimum export price, export duty, ban on export, export quota, export capping, export
permit etc. However, the government has retained the powers to impose export restrictions on

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primary produce or non-organic produce.64 States must also devise some ways to record
commodity stocks available with the private agencies, perhaps through registration with the
WDRA. The FAPAFS Act aims to bring uniformity in contract farming. India already has a
successful model in poultry and seed production. Under the contract system, aggregators
provide extension services, including feed and medicines to small farmers who provide space
and labour to grow one-day old chicks, also provided by the aggregators.

The marketing risk is not borne by the farmers. It is estimated that about 66 percent of India’s
poultry production is under contract arrangements.65 Most of sugarcane production is also
through a form of contract farming under which an area is reserved for supplying sugarcane
to sugar mills. The farmers are assured of the FRP with the mills having to pay the SAP,
which is higher than the FRP in some states. This system of assured marketing has, however,
provided a perverse incentive to farmers to grow sugarcane even in water-stressed regions.
As a result, India produces more sugar than required for its domestic consumption.

In case of perishables, a few companies entered into contracts with farmers in several
commodities for both retail and value addition but their penetration is still very low. This is
despite the fact that the farmers in selected regions in Haryana and Himachal Pradesh got at
least INR 100 to INR 150 per quintal34 more for their produce from Mother Dairy-SAFAL
compared to those selling to commission agents/traders.

It is hoped that a legal framework for contract farming can provide the much-needed fillip
and scaling up to these arrangements. In addition, it may encourage the production of better
quality and high value produce.

Going forward, one can expect that by 2030, Indian farmers will have sufficient incentive to
enter into contracts for export-oriented agriculture and horticulture produce which will meet
international standards of quality and food safety. Since contract farming has the potential to
bring businesses and farmers together, it can enable the farmers to use better practices,
including more appropriate use of fertilizers and pesticides. It can introduce appropriate
technology in farming and in allied occupations like dairy, fisheries and beekeeping etc. It
can also incentivise farmers to conserve water by adopting micro irrigation and fertigation
practices. It is, therefore, imperative for states to strengthen institutional support, provision of
64
Fourth Advance Estimates of Production of Food grains for 2015-16, Directorate of Economics and Statistics,
Ministry of Agriculture, August 17, 2015
65
Second Advance Estimates of Production of Food Grains for 2016-17, Directorate of Economics and
Statistics, Ministry of Agriculture and Farmers Welfare, February 15, 2017,
http://eands.dacnet.nic.in/Advance_Estimate/2nd_Advance_Estimate_ENG.pdf.

44 | P a g e
credit and extension services that instil confidence among small and marginal farmers to
engage in contract farming.

Bibliography:
1. Kannan, E., Bathla, S. and Das, G.K. 2019. Irrigation governance and the
performance of the public irrigation system across states in India. Agricultural
Economics Research Review. 32 (Conference Number): 27-41.
2. NITI Aayog. 2016. Evaluation study on efficacy of minimum support prices (MSP)
on farmers. Report No. 231. New Delhi, NITI Aayog Development Monitoring and
Evaluation Office.
3. OECD-ICRIER. 2018. Agriculture Policies in India. OECD Food and Agricultural
Reviews. Paris, OECD Publishing.

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 4. Singh, R.B. 2019. Agricultural Transformation – A Roadmap to New India. New
Delhi, National Academy of Agricultural Sciences.
5. Sharma, V. P. 2013. The role of fertilizer in transforming agriculture in Asia: a case
study of the Indian fertilizer sector. Ahmedabad, Centre for Management in
Agriculture, Indian Institute of Management.
6. Terway, Prerna. 2020. Production and distribution aspects of input subsidies in Indian
agriculture: a case study of Jharkhand. Thesis submitted to Jawaharlal Nehru
University, New Delhi (unpublished).
7. Agricultural Statistics at a Glance (1980 to 2017). New Delhi, Ministry of Agriculture
and Farmers’ Welfare.

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