Farm Sector Reforms: The States-Led Fixes Nobody Is Talking About

On 15 May, amidst the growing chorus of ‘Atmanirbhar Bharat’, the Finance Minister announced structural reforms intended to empower farmers and revolutionise trade in agriculture. While the ruling party at the Centre deemed the reforms historic, the Opposition termed them ‘black laws’.

Given the dramatics that followed the passage of the three farm bills, it would be interesting to chronicle as to how some state governments had already begun pushing some of the much needed reforms in the sector.

In fact, it may even be argued that states had begun the process of bringing about vast changes in the legal regimes governing the farm sector much before the Union government.

Here are some examples:

In 2019, Tamil Nadu became the first state to enact a law on contract farming, allowing farmers to partner with private entities through agreements to decide the rate and the quantity of produce before cultivation.

Following this, the states of Punjab and Odisha promulgated separate contract farming laws.

In total, 19 states have already amended their APMC Acts (Agriculture Produce Markets Act) to provide for contact farming. Now, the central law establishes a national framework for the same.

On 14 May, 2020 Karnataka amended its APMC Act to enable farmers to sell their produce at APMC yards or at private markets. It also allowed private companies and consumers to purchase directly from farmers.

The states of Uttar Pradesh, Gujarat and Madhya Pradesh have also adopted similar measures.

The Centre’s objective to establish an ecosystem that ensures freedom of choice relating to the sale and purchase of agricultural produce is analogous to the amendments of 17 states that have already facilitated the establishment of private market yards.

In June 2020, the state of Odisha amended its laws to provide for geographically restriction-free trade and transaction of agricultural produce across the state and country. The central law also promotes barrier-free interstate and intrastate trade of farmer’s produce to reduce the transportation and marketing costs.

The states of Bihar, Kerala and Manipur along with the Union territories (except Chandigarh) have no APMC acts. In Sikkim, the APMC Act is not implemented. It can be argued that the prevailing systems of these states are comparable to the reforms introduced by the centre.

Therefore, it would be right to conclude that the reforms introduced by the Union government correspond with the actions of many state governments. The central laws provide national frameworks through the calibration and integration of the existing policies.

The Federal Challenge

With some states having themselves pushed changes we also have other states claiming that the recently passed laws are constitutionally invalid.

A Congress MP from Kerala, TN Prathapan, has already filed a plea in the Supreme Court against the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.

The chief minister of Punjab, Captain Amarinder Singh has termed the legislations as a total violation of the nation’s federal structure and has also promised to challenge the validity of acts at the apex court.

According to the seventh schedule of the constitution, ‘Agriculture’ is a state subject. The argument of the opposition seems to be that the Centre, by promulgating the agriculture reforms, has encroached upon the state’s jurisdiction under the constitution.

However, Article 249 of the constitution confers upon the Parliament the power to legislate on any subject in the State list, if the Centre regards the interference necessary “in the national interest”. In this instance, the liberty and emancipation of the Indian farmer should qualify as national interest.

Additionally, interstate trade and commerce falls under the Union List, while entry 33 of the Concurrent List provides the Centre and the states powers to control production, supply and distribution of products of any industry, including agriculture.

The issue lies in the conflict between the legislative powers of the states and the Centre.

While the Centre will have to justify its interference in a subject for which a comprehensive state law already exists, there is no dispute with regards to the hierarchy of laws. Article 254 (1) of the Constitution essentially states that when there is a conflict between the state law and the Central law on a subject enumerated in the Concurrent list, the law of the Parliament, that is the central law, shall prevail. This establishes the constitutionality of the centre’s farm legislations.

The supremacy of the Central laws also gains relevance with Opposition-ruled states trying to bypass the reforms.

The Rajasthan government has passed administrative orders through the State Agricultural Marketing Directorate to designate warehouses of Food Corporation of India (FCI) and State warehousing corporation as mandis, thereby retaining its powers to charge mandi fees.

The Directorate is constituted under Rajasthan Agriculture Produce Markets Act, 1961.

Section 2 (viii) of this act states that the state government can declare any area as a “market area”, at any time, through a notification in the official gazette – either by excluding any area from the market area or including any other area in the market area.

This was done to neutralise the impact of the then Farmers' Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020 which designated all areas out of the purview of APMC mandis as trade zones where the transactions could not be taxed by the State.

The Rajasthan government is exploiting a loophole in section 2(m)(ii) of the Ordinance, which excludes warehouses notified as market or deemed markets under each state APMC Act in force in India. It remains to be seen that when the matter does present itself, how the honourable courts adjudicate upon the legitimacy of such an administrative order with regards to the established hierarchy of laws.

Additionally, the Congress party intends to utilise Article 254 (2) of the Constitution to pass laws through the state legislatures to negate the effect of the three farm acts. Article 254 (2) allows for state laws that are repugnant with Central laws to prevail if they have acquired the Presidential assent.

However, such an assent is unlikely to be forthcoming.

Adithi Gurkar is a student of Law with an interest in Public Policy and International Relations.