The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 20201 received Presidential assent on 24.09.2020, paving way for an alternative market place for the farmers to sell their agricultural produce. The constitutional validity of the Act has already been assailed before the Supreme Court. The author argues in support of the constitutionality of the Act. In India, the available parameters for mounting a legislative challenge are – (i) legislative competence, (ii) violation of Part III of the Constitution, and/or (iii) violation of any other constitutional provision. The validity of the Farmers Produce Act has, therefore, to be tested on these three constitutional anvils.
Legislative Competence
The Farmers Produce Act, in essence, permits trading of agricultural produce in a trade area, defined as a region outside the market yards notified by the States under their respective Agricultural Produce Market Committee Acts (APMC Acts). Earlier, under the APMC Acts, the transaction of sale could take place only within the market area, more specifically within the physically demarcated market/sub-market yards set-up within the market area. The States levied market cess on such transactions of sale, which formed a major source of revenue for them. Under the FPA, the farmers are free to sell their produce outside the market yard as well, without intervention of market committees or commission agents. States have been debarred from levying any cess on such transactions. Thus, the Farmers Produce Act removes the geographical compulsions placed by the APMC Acts. It also deprives the States of a major chunk of revenue by debarring them from levying any cess on such transactions. In doing so, the FPA (a Central legislation) substantially dilutes the rigours of APMC Acts (State legislations). It is therefore essential to examine the validity of FPA from the standpoint of competence of the Parliament to override a State enactment (or any of its provisions) relating to a field ostensibly earmarked for provincial legislatures.
The stated object of APMC Acts is regulation of sale and purchase of agricultural produce and establishment, superintendence and control of markets. Contrary to the popular perception that APMC Acts have been framed under Entry 14 of List II, the Supreme Court in Belsund Sugar Co. Ltd2 traced the source of State’s legislative powers behind APMC Acts to Entries 26, 27 and 28 of List II of the Seventh Schedule. Entry 28 of the State List, relating to Markets and Fairs, enables the States to determine the location of markets, and to provide for its management and maintenance simpliciter. Entry 28, however, by itself does not confer power on the States to regulate sale and purchase of
1 now Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (FPA) 2 (1999) 9 SCC 620 – Belsund Sugar Co. Ltd. vs State of Bihar and other
agricultural produce. The power to regulate sale and purchase is relatable to Entries 26 and 27 of the State List. Both these legislative entries deal with trade and commerce within the State (Entry 26), as well as supply, production and distribution of goods (Entry 27), and are subject to the provisions of Entry 33 of List III. Thus, States are free to regulate trade and commerce, and control supply, production and distribution of goods so long as there is no countervailing enactment under Entry 33 of List III. FPA has been enacted under Entry 33 of List III, which refers to regulation of trade and commerce in, and the production, supply and distribution of, inter alia, foodstuffs, cattle fodder, raw cotton and raw jute. The term “foodstuff” in the context of Entry 33 was interpreted in K. Janardan Pillai3 to mean not only the final product which is consumed, but also the raw food articles which may after processing be used as food by human beings. The wider meaning ascribed to “foodstuff” would take within its fold agricultural produce meant for human consumption, with or without processing. The Parliament can therefore validly regulate trade and commerce in agricultural produce covered by the APMC Acts. As Entries 26 and 27 of the State List are themselves subject to Entry 33 of List III, the power of the State to regulate trade and commerce (referable to Entries 26 and 27, and not Entry 28) would pro tanto get excluded qua the Central legislation under Entry 33 of List III. Thus, it is seen that the Parliament does have legislative competence to enact the Farmers Produce Act, and the State APMC Acts must to that extent yield to the Central legislation. The power to regulate inter State trade and commerce squarely falls within Entries 42, 51 and 92A, 92B and 96 of List I and the Parliament is indeed competent to legislate on the trading of agricultural produce across States.
Violation of Part III Or Fundamental Rights
For FPA to pass constitutional muster under this head, it must meet the threshold of Articles 14, 19 and 21. The mandate of Article 14 broadly requires a legislation to have a legitimate object or goal, and a structural framework that has a reasonable nexus with the object sought to be achieved. The other test of Article 14 assumes the form of manifest arbitrariness and strikes at legislations that are arbitrary, capricious, oppressive or devoid of any underlying principle. The object of FPA is to establish an ecosystem where farmers and traders enjoy freedom of choice relating to sale and purchase of farmers produce which facilitates remunerative prices to the farmers through competitive alternative trading channels. The underlying idea behind the enactment is to secure economic justice for farmers by ensuring remunerative prices for their labour and produce. FPA therefore embodies the vision of Article 46 of the Constitution. The stated goal of the Act cannot be termed illegitimate. Section 3 of FPA removes the geographical prohibition of APMC Acts by conferring freedom on the farmer to carry out inter/intra State trade of farmers’
3 (1981) 2 SCC 45 – K. Janardan Pillai and others vs Union of India and others
produce outside the physical boundaries of market or sub-market yards. The freedom to sell farm produce in open market, independent of the exploitative cartel of commission agents and buyers, has a reasonable nexus with the object of the Act. The test of manifest arbitrariness requires FPA to be tested on the anvil of caprice, arbitrariness and oppression. It has been argued that the unequal bargaining power coupled with the absence of protective umbrella of market area regulation would lead to exploitation of small and marginal farmers at the hands of powerful corporates/buyers, resulting in oppression. The prohibition of trade outside the market area imposed by APMC Acts was in the nature of protective discrimination wherein the State assumed a paternalistic role of protecting the naïve farmer. In Anuj Garg4, in the context of protective discrimination laws the Supreme Court exhorted the State to adopt ways to promote empowerment of women which was a more tenable and socially-wise approach than prohibition. The ratio of Anuj Garg can be extended to FPA as well in that it clearly aims to empower the farmer community by opening up hitherto prohibited avenues of trade. The apprehension that FPA would lead to oppression of farmers at the hands of corporates is in the realm of hypothesis. It presumes gullibility of farmers, and statutes are not invalidated on the basis of (archaic) presumptions. We can therefore safely say that FPA does not offend Article 14.
Article 19(1)(g) promises freedom to carry out trade. The right of a farmer to trade with his agricultural produce is absolute, subject only to restrictions placed in accordance with Article 19(6). Far from being a restrictive measure, FPA actually enlivens the right available to a farmer under Article 19(1)(g) by granting him freedom of trade and removing the restrictions placed by APMC Acts. Clearly, FPA is conceived as a measure to promote farmers right under Article 19(1)(g), and it passes constitutional muster on this score also.
Article 21 is founded on an individual’s right to life and personal liberty. The scope and ambit of right to life has been expanded beyond just animal existence, and a large number of unenumerated rights have been read into it. Likewise, personal liberty connotes an
individual’s autonomy over intrinsic choices that form the core of his/her right to self- determination. It represents an innate space so inviolable that it must be protected from
external influence. The arguments against FPA on this score revolve around the failure to promise a Minimum Support Price (MSP) to the farmers, triggering fears of price rigging affecting a farmers right to livelihood. MSP is a minimum price for any crop that the Government considers as remunerative for farmers and hence deserving of support5. MSP is fixed by the Centre based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). It represents a price at which the Government
4 (2008) 3 SCC 1 – Anuj Garg and others vs Hotel Association of India and others 5 https://indianexpress.com/article/explained/minimum-support-price-msp-farmers-explained-6706253/
purchases foodgrains for supply under the Public Distribution System. Interestingly, MSP does not have any legislative support and is part of the administrative decision making. As such, non-inclusion of MSP guarantee in FPA is only a continuation of the existing pattern. Besides, FPA does not prohibit a farmer from selling in the market area. It only opens up trade avenues for the farmer to negotiate the best price for his crops independently of the APMC mechanism, with an option to fall back on MSP, should the prices outside be subdued or inadequate. A legislative guarantee of MSP under FPA, besides conflicting with the underlying notion of freedom of choice, may actually drive APMC Acts into irrelevance, for no farmer would trade within the market area if assured of MSP even outside6. The availability of freedom to negotiate better trade deals subserves the right to livelihood under Article 21. Right to choose is an inherent facet of personal liberty7, and by providing multiple choices to the farmer, FPA clearly enlivens right to life and personal liberty under Article 21. The Act recognizes the right of the farmer to choose between a market-driven economy and a market-area economy. It acknowledges that a farmer has a right to choose his/her own way of life – a facet of individual autonomy and right to self-determination8.
Violation of any other Constitutional Provision
There are claims that FPA violates the concept of federalism which has been recognized as part of the basic structure of the Constitution. In that sense therefore FPA is alleged to be unconstitutional for breaching the basic structure doctrine. The argument has a fundamental flaw. The doctrine of basic structure is invoked to test the validity of constitutional amendments only. It is not applied to ascertain the constitutionality of ordinary legislations. This doctrine therefore cannot be applied to test the legality of FPA. Besides, the concept of federalism in India has been grossly misunderstood. Within their exclusive spheres, the powers of Parliament and State legislatures are plenary. In the event of an overlap resulting in an irreconcilable conflict, the State has to yield to the Central law, provided the Parliament has competence to legislate on the topic. The presence of a residual Entry 97 in List I further reinforces the notion of Parliamentary supremacy. In ITC Ltd. vs APMC9, the Supreme Court while upholding the supremacy of Parliament, also advised against adopting a construction of legislative entries that denudes the States of its powers to legislate where the legislation in question in pith and substance i.e. in its true nature and character belongs to the State field because that would be destructive of the spirit and purpose of India being a Union of States, or federalism. We have already noticed that FPA, in pith and substance, regulates trade and commerce
6 That MSP helps only a miniscule fraction of farmers, notwithstanding. 7 (2007) 2 SCC 1 – I.R. Coelho vs State of TN, also (2014) 5 SCC 438 – NALSA vs Union of India 8 (2018) 5 SCC 1 – Common Cause vs Union of India 9 (2002) 9 SCC 232
of foodstuffs, etc which the Parliament is competent to legislate under Entry 33 of List III. It does not seek to regulate agriculture as such, a field exclusively reserved for States under Entry 14 of List II. The Constitution clearly envisaged a situation where the States power to regulate trade and commerce under Entries 26 and 27 of List II shall yield to a Parliamentary legislation under Entry 33 of List III. The Parliament cannot be faulted for asserting its sovereignty under the Concurrent List. There is no merit, therefore, in the argument that FPA violates the spirit of federalism.
It would be apposite to note one contentious provision though. Section 6 of FPA debars States from levying any market fee or cess or levy under any State Act with respect to transactions carried out in a trade area. The States derive power to levy cess from Entry 66 in List II. Read with Entry 28, it does appear that States can levy cess within the market area for use of facilities therein. The only restriction on this power would be levy of cess on the trade and commerce of agricultural produce, with the competence of States to regulate such trade and commerce having been abstracted by FPA. As regards other areas, the States shall continue to have competence to levy cess. There could be a direct conflict in case the States expand their market areas to cover the entire region. In such a situation, Section 6 will become vulnerable for curtailing the plenary power of the States under Entry 66. However, being severable, it will not render the whole Act unworkable.
Conclusion
Most of the arguments assailing the validity of the Farm Acts are purely speculative and underpinned by a presumption that the Parliament has enacted these legislations with a malafide intention to further the interests of corporates and industries. The essence of the freshly assented Farm Acts is to provide complete freedom to the cultivators and livestock rearers to sell their produce, livestock and its product to the buyers and through the marketing channel of their choice offering a better bid. The legislations are traceable to Entry 33 in List III which gives Parliament overriding powers to legislate. The incidental overlap, if any, with Entry 14 in List II will not invalidate the legislations.
In view of the aforesaid, it is submitted that FPA passes the test of constitutionality and ought to be upheld by the Hon’ble Supreme Court. Possibility of misuse of power or the trial of FPA resulting in an error in intended performance is not a ground to strike down a legislation, particularly in the area of economic law where the legislature enjoys a far greater play in the joints. Indeed by enacting the FPA, the Center has farmed the strike away from the States.10
