Agriculture: Issues Related to Minimum Support Prices (MSP), WTO and Subsidies

Pricing policy and WTO

1. Minimum Support Price
2. Additional bonus announced by Center and States
3. Commission for Agriculture Cost and Prices (CACP)
4. Criticism of MSP
5. MSP on Minor forest produce (MFP)
6. Levy procurement System
7. WTO and Subsidies
8. India is faced with a complicated situation as on one hand there is record production of cereals and on the other hand there have been trends of stagnant high inflation even when FCI godowns are overstocked. Many blame India’s minimum selling price policy for this situation. It has two unintended negative impacts; one is growth in agriculture is not dictated by demand of economy, other is persistent inflation. There are many other interventions which are isolated/unintegrated and lack broad vision of sector as a whole. Further, India has challenge to align domestic markets with international markets as exports of agriculture products can bring more prosperity to country side. It is said that 1% increase in Agro exports results in Inflow of 8500 crores in the sector. In this sense we can’t ignore WTO negotiations. These are to be negotiated while taking care of sovereignty and food security of India. 
   
   1. Minimum Support Price
   MSP initially was started as a safety net for farmers through a guarantee that if there produce is left unsold in the market, will be bought by the government. Another purpose was to incentivize farmer to produce more crops so as to ensure food security in India.
   An ideal environment for this is one in which market prices are higher than support prices. When new crop comes to the market it will be sold at market prices and a situation was possible where on fulfillment of needs of consumers and industry, surplus is left with farmers. This will happen when production is more than demand. Such situation will result in crash of prices of agri products. It is this time when government should ideally intervene and purchase unsold stocks.
   This policy took off in 1960’s and at that time Procurement prices were announced at beginning of sowing season, along with MSP. Procurement price was one under which government will buy the crop which it needs to maintain buffer stock or for PDS. Once quantity required has been purchased, farmers could only sell at MSP, which were kept lower than Procurement Prices. Procurement prices were always kept lower than Market Prices. So preference of farmer was to sell in this manner – 1^st: Market, 2nd: Government at Procurement Price, 3^rd: Government at MSP.
   From very beginning these prices were skewed in favour of food grains mainly Rice and Wheat. Soon growth rate of production of these food grains outpaced Growth Rate of population and demand. This was time when government should have changed its policy to diversify Farm basket more toward, protein rich crops or horticulture, but this didn’t happen and patronage to Cereals continued. In 1990’s government started announcing only MSP which was also procurement price. This was so because by this time MSP was a big political plank and majority of farmer community was comfortable with Rice and Wheat due to their comparative high yields. If MSP was greater or equal to procurement prices or market prices, there is obviously no need of procurement prices. Since then MSPs has seen constant upswings.
   1. Additional bonus announced by Center and States
   Apart from MSP, center often announces additional bonuses on the crops. Over the MSP and bonus of Central Government, states also declare additional bonus. Problems are same but become aggravated. Recently government took step in this regard by – limiting procurement from states that declare additional bonus, to the level of requirement of PDS and other schemes. Not all quantity offered will be brought now.
   
   1. Commission for Agriculture Cost and Prices (CACP)
   Originally created as Agricultural Price Commission in 1960’s to recommend Minimum Selling prices for 11 crops and later it was renamed as CACP. It was a move to provide minimum floor price for these crops. It was felt that a government buying agency is prerequisite for effective implementation of MSP and Food Corporation of India was also created for procurement of foodgrains. Later for procurement of pulses and oilseeds, ‘National Agricultural Cooperative Marketing Federation of India Ltd’ (NAFED) created. So prices are recommended by CACP for all products, foodgrains are procured by FCI and pulse and oilseeds are procured by NAFED. However, horticulture, vegetables, fruits or dairy products have no such support.
   As of now MSP is recommended for 24 crops under 5 groups viz. Kharif Crops, Ragi crops, Sugarcane, raw jute and copra.
   For sugarcane instead of MSP, ‘fair and remunerative price’ is declared. It depends upon recovery percentage which varies from state to state. For other crops one MSP is declared for whole India. In beginning practice was to declare regional prices. This was so because Input costs and returns of crops vary from region to region. But later uniform MSP system was restored on ground that it alone could lead to comparatively efficient use of resources in line with their comparative advantage.
   Other issue is of data on which commission relies. In this case ‘Directorate of Economics and statics’ gives inputs about cost of cultivation to CACP. This data is assimilated over a long period and there is time lag of about 2 years. So MSP fixed this year will be based on data captured 2 years back. This at times has given significant variations in computation of MSP. To remedy this CACP use an adjustment factor taking into account Inflation, but this is not effective.
   MSP is based on economic criteria such as demand and supply situation, trends in domestic and international market prices, cost of production, inter-crop price parity, terms of trade between agriculture and non-agriculture sectors, trade policy in agriculture, effect on general price level, and so on.
   It should be noted that ‘cost of production’ is just one of the factors taken into account and is not a sole factor. Few years back Swaminathan Committee recommended that MSP should be cost plus 50% mark up, but this was not implemented. Other Important factors which is considered is ‘demand in the economy’ this was added to terms of reference in 2009. As discussed in the beginning non sync of MSPs with demands of economy was realized and this step was taken.
   However, methodology of CACP doesn’t have any specific weights attached to various given factors and MSP is influenced by Subjective discretion of members. CAG also criticized methodology on grounds of non-transparency.
   
   
   Note that Jowar, which is a coarse grain, has its MSP higher than Rice. Cultivated area under Jowar was on persistent decline and to arrest this decline its MSP was raised substantially in 2011.
   
   
   MSP regime is often criticized on ground of –
   Distorted Production
   Recent trends by NSSO indicates shift in pattern of food consumption from cereals to protein rich foods, but no such remarkable shift is seen in sowing or production patterns. For e.g. India is largest producer and consumer of pulses in the world, but still 25 % of the pulses consumed are imported.
   Huge Stocks
   This resulted in ‘Open ended procurement’ which means government can’t decide quantity it wants to buy. How much ever grains are offered by farmers to gov. has to purchase. So now government has huge stocks which are almost double the requirements for Buffer stock, PDS and Other government schemes such as Midday Meal Scheme.
   Out of control Inflation
   As we have seen initially MSP and procurement prices were kept lower in relation to Market Prices. So lower the market prices, even lower were MSP and procurement prices. Situation now is that Market prices are dictated by MSP which remains most of the time higher. This brings market prices atleast on par with MSP. Data suggests an obvious directly proportional link between hike in MSPs and Food Inflation.
   Only 1/3^rd of the total cereal production is left for open market after government procurement and captive consumption by the farmers. This creates shortage in open market and abundance in government godowns.
   Also, inflation in crops not covered under MSP is because of other reasons. As we have seen there is shift in consumption pattern toward non cereal foods, but no corresponding growth in production. As a result there is demand supply mismatch. So growth in non-cereal production is compromised in favour of crops that fetch higher yields, which is out of sync with market demand.
   Backwardness in Agriculture
   Any industry grows when it adapts to a competitive environment. If farmers get market signals from the market about upcoming trends of demands of consumers, total supply in economy, new technologies, export opportunities or import vulnerabilities, they will find out more profitable crops, technologies and will keenly adapt. Present system creates glut in market of particular crops. It leads to intensive farming year after year, which degrades soil. Farmers rely on political pressure to remedy their problems, instead of adapting to market. This all keeps private investment away for the sector.
   Notwithstanding all this, it is unquestionable that our farmer needs support. Question under debate is what sort of support should farmer get? Currently farmers besides numerous other input subsidies are getting crop specific support. This means that our policy makers dictate agricultural product mix, which otherwise is domain of consumers. For this it is essential that –
   1. Support should be Crop Neutral as has been recommended by many experts on the topic. If all farmers get same monetary support despite of crops produced, then they are better placed to diversify their crops as per demands of the market. This can be done by changeover to Income support from MSP.
   2. Farmers should get support at the time of distressed market prices. 1^st preference of farmers should be to sell in market. At price which should be higher than MSP
   MSP on Minor forest produce (MFP)
    The MFP gatherers are mostly poor who are unable to bargain for fair prices. Govt. of India has decided to introduce the scheme of “Mechanism for Marketing of Minor Forest Produce (MFP) through Minimum Support Price (MSP) and development of value chain”. The scheme is designed as a social safety net for improvement of livelihood of MFP gatherers by providing them fair price for the MFPs they collect.
   The scheme has been started with following objectives
   • To provide fair price to the MFP gatherers for the produce collected by them and enhance their income level
   • To ensure sustainable harvesting of MFPs.
   • The Scheme will have a huge social dividend for MFP gatherers, majority of whom are tribals.
     It is a holistic scheme for development of MFP trade including its value chain and necessary infrastructure at local level. The MSP scheme seeks to establish a framework to ensure fair returns for the produce collected by tribals, assurance of buying at a particular price, primary processing, storage, transportation etc while ensuring sustainability of the resource base
     Levy procurement System
     State Governments/UT Administrations issue levy orders in exercise of the powers delegated to them under the Essential Commodity Act, 1955 after obtaining the prior concurrence of Central Government.
     The aim is to increase procurement for government’s buffer stocking and distribution through PDS. Rice millers are mandated to supply a certain proportion (levy) of processed rice to the FCI at a fixed processing margin.
     The percentage of rice is fixed by the state governments taking into account requirements of the Central Pool, domestic consumption and marketable surplus. The centre fixes the prices of levy rice, which are typically below the market price, before the Kharif Marketing Season (KMS) commences. The quantum of levy varies across states and ranges between 30 per cent and 75 per cent.
     In nineteen of the 23 states/Union Territories that impose the levy it is 50 percent or more; it is 60 per cent in Uttar Pradesh and 75 per cent in AP, Haryana, Punjab, Uttrakhand and Odisha thus leaving little rice for the open market. Kerala is the only state that has no system of levy.
     The adverse effects that rice levies have on the markets are obvious: they discourage rice millers’ investment, increase private traders’ transactions costs, breed corruption, and create rents for special interests. Since millers are not allowed to sell in the open market until levy requirement is met and because market price is generally higher than levy price, it creates various avenues of corruption in the foodgrains marketing chain. Further bad quality is supplied to government (such as broken rice) which otherwise would have fetched low prices.
     Until last year sugar was also under levy and non-levy obligations, on recommendations of Rangarajan committee these were removed. Under Non levy obligations Sugar mills were given fortnightly, monthly, half yearly quotas for sale of sugar. This was because sugarcane is seasonal crop and about 90% of sugar is produced in just two months. Unregulated sale can create avenues for hoarding and big price fluctuations.
     WTO and Subsidies
     WTO’s agreement on agriculture was concluded in 1994, and was aimed to remove trade barriers and to promote transparent market access and integration of global markets. Agreement is highly complicated and controversial; it is often criticized as a tool in hands of developed countries to exploit weak countries. Negotiations are still going on for some of its aspects.
     Agreement on agriculture stands on 3 pillars viz. Domestic Support, Market Access, and Export Subsidies.
   1. Domestic Support – It refers to subsidies such Guaranteed Minimum Price or Input subsidies which direct and product specific. Under this Subsidies are categorized into 3 boxes –
      1. Green Box – Subsidies which are no or least market distorting includes measures decoupled from output such as income-support payments (decoupled income support), safety – net programs, payments under environmental programs, and agricultural research and-development subsidies.
         Such as Income Support which is not product specific. Like in India farmer is supported for specific products and separate support prices are there for rice, wheat etc. On the other hand income support is uniformly available to farmers and crop doesn’t matter.
         US has exploited this opportunity to fullest by decoupling subsidies from outputs and as of now green box subsidies are about 90% of its total subsidies. It was easy for USA because it doesn’t have concern for food security. Further, it has prosperous agro economy, and farmers can better respond to markets and shift to other crops. But in India, domestic support regime provides livelihood guarantee to farmers and also ensures food security and sufficiency. For this MSP regime tries to promote production of particular crop in demand. And this makes decoupling Support with output very complicated.
         USA was also in position to subsidies R&D expenditure in agriculture as almost all the farming in US is capitalist and commercial. Big agriculturists spend substantial amount on technology upgradations and R&D. But in India about 80% of farming is subsistence and hence, India & other developing countries can use this opportunity.
      2. Blue Box– Only ‘Production limiting Subsidies’ under this are allowed. They cover payments based on acreage, yield, or number of livestock in a base year.
      ‘Targets price’ are allowed to be fixed by government and if ‘market prices’ are lower than farmer will be compensated with difference between target prices and market prices in cash. This cash shall not be invested by farmer in expansion of production.
      Loophole here is that there no limit on target prices that can be set and those are often set far above market prices deliberately. USA currently isn’t using this method, instead here EU is active.
      1. Amber Box– Those subsidies which are trade distorting and need to be curbed.
      The Amber Box contains category of domestic support that is scheduled for reduction based on a formula called the “Aggregate Measure of Support” (AMS).
      The AMS is the amount of money spent by governments on agricultural production, except for those contained in the Blue Box, Green Box and ‘de minimis’.
      It required member countries to report their total AMS for the period between 1986 and 1988, bind it, and reduce it according to an agreed – upon schedule. Developed countries agreed to reduce these figures by 20% over six years starting in 1995. Developing countries agreed to make 13% cuts over 10 years. Least – developed countries do not need to make any cuts.
      As we can note that Subsidies were bind to levels of 1986-1988, there was inequality at very beginning of the agreement. At that time subsidies which latter came under ‘Amber Box’ were historically high in western countries. In developing countries, including India these subsidies were very limited. It is only now under pressure of Inflation in prices of agricultural Inputs, and wide differences between market prices and Minimum support Price, subsidies have grown to this level. In effect developed countries are allowed to maintain substantially higher amount of trade distorting subsidies.
      De-Minimis provision
      Under this provision developed countries are allowed to maintain trade distorting subsidies or ‘Amber box’ subsidies to level of 5% of total value of agricultural output. For developing countries this figure was 10%.
      So far India’s subsidies are below this limit, but it is growing consistently. This is because MSP are always revised upward whereas Market Prices have fluctuating trends. In recent times when crash in international market prices of many crops is seen, government doesn’t have much option to reduce MSP drastically. By this analogy India’s amber box subsidies are likely to cross 10% level allowed by de Minimis provision.
      Bali Summit, Trade facilitation and Peace Clause
      These provisions are not agreed to by India yet and for this Negotiations are going on. This matter was taken up in recent Bali meet and an interim peace clause was reached at. Developed countries made an attempt to couple negotiations on this issue with another issue of ‘Trade facilitation’. Under a package, ‘Trade facilitation’ was agreed to by all nations and for revision of limits under de minimis provisions; a ‘Peace clause’ was agreed at. Please clause gave countries 4 year times to adjust to the limit and avoid sanctions.
      Date for ratification of Bali agreement was 31 July, 2014, on which India declined to ratify unless a ‘permanent solution’ is reached. After this in November, India – US reached understanding in which time limit of 4 years was removed and in return Trade Facilitation was agreed to by India.
      Notably in Deal at Bali, Developed countries were able to woo under developed countries on basis of a ‘Special Package’ for them directed toward Social and physical infrastructure. India as a result was isolated in all this, only South Africa extended some support to India’s stand
      Trade Facilitation requires member countries to invest in Infrastructure that facilitates Imports and exports, simplify custom procedures and remove other non-tariff barriers.
      It should be note that development of Infrastructure is already a priority for government and it is much desirable in agriculture too, as India is net exporter of agri products. But issue was of 4 years of ‘peace clause’, which now stands removed.
      ‘Trade facilitation deal’was marketed by developed countries as a progressive and much needed deal for good of all type of countries. It is being said that it will boost up Global GDP by $ 1 Trillion and will add millions of new job. This argument has a little or no empirical backing and it is feared that western supplier will invade domestic markets of developing and underdeveloped countries. ‘Trade facilitation’ along with ‘special package’ is like saying that gains of developed countries will be so big, that losses of under-developed countries will be lucratively compensated by them.
      
      
      Market Access: The market access requires that tariffs fixed (like custom duties) by individual countries be cut progressively to allow free trade. It also required countries to remove non-tariff barriers and convert them to Tariff duties.
      Earlier there were quotas for Imports under which only certain quantities of particular commodities were allowed to Import. This is an example of Non-tariff Barrier.
      India has agreed to this agreement and substantially reduced tariffs. Only goods which are exempted by the agreement are kept under control.
      Maximum tariff has been bonded as required by WTO, under which a higher side of tariffs is fixed in percentage that should never be surpassed. Generally actual tariffs are far below this high limit. This makes custom policy transparent and tariffs can’t be fixed arbitrarily.
      If India is able to diversify its production and add value by food processing, then this is a win-win deal for India. A number of commodities are exported to West and low tariffs in west will benefit Indian suppliers.
      Export Subsidy: These can be in form of subsidy on inputs of agriculture, making export cheaper or can be other incentives for exports such as import duty remission etc. These can result in dumping of highly subsidized (and cheap) products in other country. This can damage domestic agriculture sector of other country.
      These subsidies are also aligned to 1986-1990 levels, when export subsidies by developed countries was substantially higher and Developing countries almost had no export subsidies that time.
      But USA is dodging this provision by its Export credit guarantee program. In this USA gov. gives subsidized credit to purchaser of US agricultural products, which are to be paid back in long periods. This is generally done for Food Aid programs, such as (Public Law-480) under which food aid is send massively to under developed countries. India also received this Aid in 1960’s. But this is only at concessional rates and credit options. But this results in perpetual dependence on foreign grain in recipient countries and destroys their domestic agriculture. So this is equally trade distorting subsidy, which is not currently under ambit of WTO’s AOA.
   There is little doubt that subsidies and support to agriculture should be controlled and better targeted. WTO negotiations also claim to work towards this direction, but inherent conflicting and vested interest of few countries are too influential in WTO. Many allege that WTO’s agreement on agriculture is just a tool for neo-imperialism in hand of MNCs. Every country has different requirements and different product mix, so enough flexibility is must in any agreement. Further, right to food is a global movement and is guaranteed by numerous UN conventions. So, ensuring food security is a domestic concern of a nation, international community can just advice but can’t coerce other sovereign country. Thus, India has to made its expenditure much more effective, with dynamic policy and resist any outside pressure which is misdirected towards negative results for Indian people.
   In last few years, due to global slowdown, there was very low Inflation (or even deflation) in International commodity prices. At same time prices in India was reeling under double digit food inflation. This indicates toward highly distorted agro economy not only in India, but globally. In WTO negotiation there should be constant pressure on developed countries to align their total subsidies to developing countries. System of Amber, blue, green box should be considered for change and preferably it should be done away with as it gives leeway to developed countries to carry on with distorting subsidies.

ARTICLE 21 AND JUDICIAL ACTIVISM

Article 21 states: “No person shall be deprived of his life or personal liberty except according to procedure established by law.” 

In this connection it may be mentioned that when the Indian Constitution was being framed the Constitutional Adviser Mr. B.N. Rau went to America and met Justice Frankfurter, the celebrated Judge of the U.S. Supreme Court, to seek his advice.  Justice Frankfurter advised that the Indian Constitution should not have a due process clause as that had created a lot of difficulties in America.  Hence following his advice, and following the language used in the Japanese Constitution, only procedural due process was adopted in the Indian Constitution, and not substantive due process.  Also, before the word `liberty’ the word `personal’ was added to clarify that liberty did not include liberty of contract.

In A.K. Gopalan v. State of Madras, AIR 1950 SC  27 the Indian Supreme Court rejected the argument that to deprive a person of his life or liberty not only the procedure prescribed by law for doing so must be followed but also that such procedure must be fair, reasonable and just.  To hold otherwise would be to introduce the due process clause in Article 21 which had been deliberately omitted when the Indian Constitution was being framed.

However, subsequently in Maneka Gandhi v. Union of India, AIR 1978 SC 597     this requirement of substantive due process was introduced into Article 21 by judicial interpretation.  Thus, the due process clause, which was consciously and deliberately avoided by the Constitution makers, was introduced by judicial activism of the Indian Supreme Court.

Another great arena of judicial activism was begun by the Indian Supreme Court when it interpreted the word `life’ in Article 21 to mean not mere survival but a life of dignity as a human being.

Thus the Supreme Court in Francis Coralie vs. Union Territory of Delhi[49] held that the right to live is not restricted to mere animal existence. It means something more than just physical survival. The Court held that:

“… the right to life includes the right to live with human dignity and all that goes along with it, namely, the bare necessaries of life such as adequate nutrition, clothing and shelter and facilities for reading, writing and expressing one-self in diverse forms, freely moving about and mixing and comingling with fellow human beings.”

The ‘right to privacy’ which is a new right was read into Article 21 in R. Rajagopal Vs. State of Tamil Nadu.[50] The Court held that a citizen has a right to safeguard the privacy of his own, his family, marriage, procreation, motherhood, child bearing and education, among other matters.

The Supreme Court also ruled that the right to life guaranteed under Article 21 includes the right to livelihood as well.[51] The right to food as a part of right to life was also recognised in Kapila Hingorani Vs. Union of India[52] whereby it was clearly stated that it is the duty of the State to provide adequate means of livelihood in the situations where people are unable to afford food. The Court has also held that the right to safe drinking water is one of the Fundamental Rights that flow from the right to life.[53] Right to a fair trial,[54] right to health and medical care,[55] protection of tanks, ponds, forests etc which give a quality life,[56] right to Family Pension,[57]right to legal aid and counsel,[58] right against sexual harassment,[59] right to medical assistance in case of accidents,[60] right against solitary confinement,[61]right against handcuffing and bar fetters,[62] right to speedy trial,[63] right against police atrocities, torture and custodial violence,[64] right to legal aid[65] and be defended by an efficient lawyer of his choice,[66] right to interview and visitors according to the Prison Rules,[67] right to minimum wages[68] etc. have been ruled to be included in the expression of ‘right to life’ in Article 21. Recently the Supreme Court has directed providing a second home for Asiatic Lions vide Centre for Environmental Law V. Union of India (writ petition 337/1995 decided on 15.4.2013) on the ground that protecting the environment is part of Article 21. The right to sleep was held to be part of Article 21 vide In re Ramlila Maidan (2012) S.C.I.1. In Ajay Bansal vs Union of India , Writ Petition 18351/2013 vide order dated 20.6.2013 the Supreme Court directed that helicopters be provided for stranded persons in Uttarakhand.

 Thus we see that a plethora of rights have been held to be emanating from Article 21 because of the judicial activism shown by the Supreme Court of India. However there can be grave reservations about some of these orders. One wonders whether there will be any limit to the number of such rights created by court orders.

Right to freedom of expression provided by Article 19 of the Constitution is one of the widely construed rights. Thus, the right also brings within its ambit the freedom of press and publication in the print media[70] and the right to participate in the public communicative systems.[71]

The importance of this right in democracy gained importance when the judiciary struck down the Ordinance that amended the Representation of People Act, 1950 that allowed the candidates non-disclosure of assets stating that in the context of exercise of voting rights in democracy, the right to know the assets, liabilities and past criminal records cannot be restricted by the right to privacy of the candidates.[72]

Furthermore, though Directive principles only talk about socio-economic rights which are not enforceable, creative interpretation by reading them into the Fundamental Rights (which are enforceable) formed a major step in developing these new rights and above all advocating the rights of the unrepresented masses became much easier. In the case of Unni Krishnan Vs. State of A. P.[73] it was held that the right to education is a Fundamental Right under Article 21 as it ‘directly flows’ from right to life. Thus the Court interpreted Article 21 in the light of Article 45 wherein the State is obligated to provide education to its citizens upto 14 years of age.[74] Similarly in M. C. Mehta Vs Union of India[75] the Supreme Court relying on Article 48-A[76] gave directions to the Central and the State Governments and various local bodies and Boards under the various statutes to take appropriate steps for prevention and control of pollution of water.

In Vishakha Vs. State of Rajasthan,[77] the judiciary expressly laid down the law regarding sexual harassment at the work place. In Sakshi Vs. Union of India,[78]the provisions of in camera proceedings were made applicable in cases of rape victims keeping in view their needs in the absence of specific legislative provisions.

Another instance where the judiciary was needed to come to the rescue of the its people was the case of Lata Singh Vs. State Of U.P. & Another,[79](authored by the writer) where the Supreme Court taking note of the deep rooted caste system of the country came down hard on the relatives of a newly married couple who resorted to violence and harassment as a way of showing their anger on the boy and girl marring outside their caste or religion. Appropriately exercising judicial activism the Court held:-

“This is a free and democratic country, and once a person becomes a major he or she can marry whosoever he/she likes. […] We, therefore, direct that the administration/police authorities throughout the country will see to it that if any boy or girl who is a major undergoes inter-caste or inter-religious marriage with a woman or man who is a major, the couple are not harassed by any one nor subjected to threats or acts of violence, and anyone who gives such threats or harasses or commits acts of violence either himself or at his instigation, is taken to task by instituting criminal proceedings by the police against such persons and further stern action is taken against such persons as provided by law.”

            In a subsequent decision, Bhagwan Dass Vs. State (NCT) of Delhi, 2011(5) Scale 498, again authored by the writer, the Supreme Court mandated death sentence for `honour killing’ i.e. killing of young men and women who married outside their caste or religion, or in their same village, thereby `dishonouring’ the parents or their caste.

The most recent case on judicial activism was the case of Aruna Ramchandra Shanbaug Vs. Union of India and Others.[80] Aruna Shanbaug, a nurse in 1973, while working at a Hospital at Mumbai, was sexually assaulted and has been in a permanent vegetative state since the assault. In 2011, after she had been in this status for 37 years, the Supreme Court of India heard the petition to the plea for euthanasia filed by a social activist claiming to be Aruna’s friend. The Court turned down the petition, but in its landmark judgment (authored by the writer) it allowed passive euthanasia i.e. withdrawal of life support to a person in permanently vegetative state, subject to approval by the High Court.

Judicial Over Activism

            Of late the Indian judiciary appears to have become overactive, and is often accused of judicial overreach.  This accusation was usually leveled by politicians or others outside the judicial system, until in 2008 it was leveled by Justice A.K. Mathur and the writer (as Judges of the Supreme Court) in Divisional Manager, Aravalli Golf Course v. Chander Haas.

The Indian Supreme Court surely came a long way since Anwar Ali Sarkar Vs. State of West Bengal,[81] and A.K. Gopalan Vs. State of Madras where the judiciary refused to indulge in making judicial policy and instead exercised judicial restraint keeping in mind the Doctrine of Separation of Powers. However, the pendulum later swung to the opposite direction.   Thus, in Maneka Gandhi vs. Union of India AIR 1978 SC 593 the 7 Judge Bench of the Indian Supreme Court, while overruling the 5 Judge Bench decision in A.K. Gopalan’s case introduced the due process clause in the Indian Constitution by a judicial pronouncement.  In S. P. Gupta Vs. Union of India,[82] it was held that:

“He [the judge] has to inject flesh and blood in the dry skeleton provided by the legislature and by a process of dynamic interpretation, invest it with a meaning which will harmonize the law with the prevailing concepts and values and make it an effective, instrument for delivery of justice.”

Similarly, in the case of Supreme Court Advocates on Record Vs. Union of India,[83] it was held that:

“It belongs to the Judiciary to ascertain the meaning of the constitutional provisions and the laws enacted by the Legislature.”

Judicial Legislation

            The traditional theory of positive jurisprudence laid down that law making is the task, of the legislature, not the Judge. The Judges’ task was only to adjudicate disputes between the parties on the basis of the law made by the legislature, though where the law was not clear (or its plain meaning led to some absurdity) the judge could interpret it, but he must not make law.

            When I asked the Chief Justice of the Canadian Supreme Court Mrs. Beverley McLaughlin (this was when I was on the bench of the Indian Supreme Court) her view about judicial legislation she described it as an ‘Oxymoron’. However in fact it is an extremely complex issue which cannot be dismissed so summarily.

            Positivist jurisprudence proceeded on the assumption that the legal order was ‘gapless’ and that by proper logical inferences a correct decision could always be derived from the existing body of law. According to the analytical school of Austin, which is still strongly entrenched in England, Parliament, and not judges make law[98]. From the principle of parliamentary supremacy flows the corollary that the judges cannot make law, for if they do it would be infringing the supremacy of Parliament. Similarly, in France, Montesquieu[99]  proclaimed that the judge is subordinate to the law and is bound by law.

            However, it can be demonstrated that even in England this view was really a fiction[100].   For instance, the entire British Common Law was in fact judge made law (though most of it was made before Parliament became supreme). The British judges from time to time gave law making decisions of historical importance. For example, Rylands v. Fletcher (1866), created the law of strict liability which is coming more and more into prominence in recent times (see my judgment in Union of India vs. Prabhakaran Vijay Kumar,2008 ). Similarly Donoghue v. Stevenson, 1942 AC 562, created the law of liability for negligence, which has had a powerful impact all over the modern world.[101] A large number of other law making decisions by British Courts can be quoted.

            Judicial legislation is to some extent unavoidable in the modern era for two reasons: (1) Since modern society is dynamic, the legislature cannot possibly conceive  of, and cater to, all the developments which may take place in the future. Hence there will be gaps in the statutory law which have to be filled in by judges (2) The Legislature may often be unwilling or incapable of making a modern law which is of pressing need, and then this job has sometimes to be done by the court.

            The Indian Supreme Court in Sarojini Ramaswami v. Union of India, AIR 1992 SC 2219, (Paragraph 2), observed:

            "It used to be disputed that judges make law. Today, it is no longer a matter of doubt that a substantial volume of the law governing the lives of citizens and regulating the functions of the State flows from the decisions of the superior courts. ‘There was a time’ observed Lord Reid, ‘when it was thought almost indecent to suggest that judges make law – they only declare it……….But we do not believe in fairy tales any more’.”

            Keshavanand Bharti’s case, AIR 1973 SC 1461, Maneka Gandhi’s case AIR 1978 SC 597, cases in which new dimensions have been given to Articles 14 and 21 of the Indian Constitution are all law-making judgments. Similarly, Marbury v. Madison, 1803 (5 US 137), Brown v. Board of Education, 1954 (347 US 383),  Miranda, Griswold, etc are law-making decisions of the U.S. Supreme Court.

            The view that the legal system is gapless was challenged by the German jurist Heck[102] and the French jurist Geny[103] who demonstrated that the positive legal order was necessarily fragmentary and full of lacunae. They noted that there is always a certain sphere of discretion where the judiciary could create law within these gaps. According to Geny, this discretion should not be exercised arbitrarily but had to be based on objective principles. According to Geny the method of doing this was “to recognize the interests involved evaluate their relative force, weigh them on the scales of justice so as to assure the preponderance of the most important ones according to a social criterion, and finally to establish the most desirable balance”. To produce a just equilibrium of interests, Geny says, the judge must carefully scrutinize the prevailing moral sentiments and inquire into the social and economic conditions.

            In Germany the free law movement pioneered by Fuchs[104] and Kantorowicz[105] required the judges to create law in accordance with justice and equity whenever the positive law was unclear or ambiguous. According to them, the judge should decide the case according to the dominant conceptions of justice, or if such were absent, according to subjective legal conscience.

            In the U.S.A. Roscoe Pound, who is the most outstanding figure in sociological jurisprudence in America, propounded his “instrumentalist” approach, which would allow the judge a greater flexibility. In his book ‘Jurisprudence’ Pound states that the engineer is judged by what he does. His work is judged by its adequacy to the purpose for which it is done, and not by its conformity to some ideal form of a traditional plan. We are beginning, in contrast with the last century, to think of jurist and judge and law-maker in the same way. Law is, above all, “social engineering”.

            Pound does not deny that the dispensing of justice in keeping with the established norms has certain advantages, such as predictability and stability in the legal system. However, according to him, it is also possible to sometimes dispense “justice without law”, which according to Pound, has its advantages such as greater adaptability to the social dynamic, etc.

            In line with Ehrlich, Geny, Kantorowicz, Sinzheimer and other European jurists, Pound regards the normative material as the least important part of the legal order. The purpose of law, according to Pound, is to reconcile and harmonise the conflicting and overlapping demands and interests of the society, and he has laid down his “table of interests” for this purpose. Pound believes that his concept of law, and especially his notion of the possibility of “justice without law”, is more capable than any other of resolving a problem which he regards as basic and which he formulates as follows:

            “Law must be stable and yet it cannot stand still”.

            In this way Pound seeks to bring law into harmony with the dynamism of social life.

            The French jurist Cruet in his book ‘The Life of Law and the Importance of its Acts’ observes: “Every legislative act brings the law to a halt.” This is explained by the ‘lagging’ of the legal order behind the dynamic forward movement of society. As Burdeau says, legislation was an excellent thing so long as its chief function was of consolidation of established relationship. But when major changes kept occurring in modern society legislation was found inadequate.

            Justice Cardozo of the U.S. Supreme Court in his book ‘Growth of Law’ tried to reconcile the contradiction between a stable legal order and the social dynamic by propounding his “principle of growth” as a means of arriving at a compromise between “stability” and “change”. According to Cardozo, “sooner or later if the demands of social utility are sufficiently urgent and if the functioning of an existing rule is sufficiently productive of hardship or inconvenience, utility will tend to triumph”. This is also the view of Pound who in his book ‘Interpretation of Legal History’ says:

            “The social interest in the general security has led men to seek some fixed basis for an absolute ordering of human action whereby a firm and stable social order might be assured. But continual changes in the circumstances of social life demand continual new adjustments to the pressure of other social interests as well as to new modes of engendering security. Thus, the legal order must be flexible as well as stable. It must be overhauled continually and refitted continually to the changes in the actual life which it is to govern. If we seek principles, we must seek principles of change no less than principles of stability”.

            According to Pound and Cardozo, it is often a court hearing that first brings to the forefront those new factors, trends, and conditions which necessitate changes in the law, and they can be most helpful in forestalling possible tensions between a stable legal order and changes in society.

            The realist school took the matter to extremes in America. According to Gray,[106] one of the founding fathers of the realist school, all law is judge made law. Gray regards statute, custom, etc., as merely the material which the judge uses in making law. This is regarded by some as a development of the thesis of Justice Holmes, who observed that law is nothing more than the prediction of how the court will act. According to the realist school, law is made by the judge in his professional capacity and it is in constant flux. Frank, another leader of the realist school of America, regards statute as ‘probable law’ while the judge made law is ‘actual law’.

            The realist school went to extremes and it was subsequently rejected in the U.S.A., but judicial law-making is still often accepted in America. Thus Prof. Friendmann of Columbia University in his article ‘Limits of Judicial Law Making’ (29 MLR No.6 1996) writes:

            “The Blackstonian doctrine as the ‘declaratory’ function of the courts, holding that the duty of the court is not to pronounce a new law but to maintain and expound the old one, has long been little more than a ghost. From Holmes and Geny to Pound and Cardozo, contemporary jurists have increasingly recognised and articulated the law-making functions of the courts…….It is therefore time to turn from the stale controversy over whether judges make law to the much more complex and controversial question of the limits of judicial law-making.”

            It appears that while earlier judges used to make a law while pretending not to, this no longer is the practice now. The Austinian view that the judges do not make law was based on the principle of parliamentary supremacy in England, and hence the judges in England had to maintain the fiction that they were not legislating otherwise there would be violation of parliamentary supremacy. However, now even the judges in countries following the common law system openly proclaim that judges do make law.

            Thus, Justice Holmes of the U.S. Supreme Court stated “I recognize without hesitation that judges do legislate, but they do so only interstitially, they are confined from molar to molecular dimensions”. (See ‘The Mind and Faith of Justice Holmes’).

            A similar view was taken by Lord Denning in England. In Seaford Court Estates v. Asher,[107] he observed:

            “It would certainly save the judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a judge cannot simply fold his hands and blame the draftsman. A judge must not alter the material of which it (the law) is woven, but he can and should iron out the creases”.

            This view was no doubt overruled by the House of Lords in Magor and St. Mellons District Council v. Newport Corporation,[108] which declared it a ‘naked usurpation of the legislative function’, but the Indian Supreme Court has preferred the view of Lord Denning to that of the House of Lords (See Directorate of Enforcement v. Deepak Mahajan,[109]  State of Karnataka v. Hansa Corporation[110] and Bangalore Water Supply and Sewerage Board v. Rajappa.[111] )

            In his book ‘The Nature of the judicial process’ Mr. Justice Cardozo of the U.S. Supreme Court said “He (the judge) legislates only between gaps. He fills the open spaces in the law”.

            Since it is now accepted by almost all jurists in the countries following the Common Law System that judges do legislate we can proceed further with the enquiry regarding the manner of this judicial legislation, the circumstances in which it can be done, and its limits.

            Bodenheimer in his ‘Jurisprudence’ states “There may be times or historical contingencies where bold and unconventional action on the part of a judge becomes wholesome and beneficial for society. There may be situations where stagnation or decay can be overcome only by a judicial decision-maker who, being convinced that the preponderant values of the community are wholly obsolete or unreasonable, is willing to take risk and is determined to chart a new course into the future. Progress often depends on the courageous, decisive and anti-traditional action of great men. And although we should insist that the major tasks of law reform should be reserved to the action of men or bodies entrusted with the business if we did not, at times, concede to the judiciary the right to lead the moral sentiment of society and inaugurate,   in a judicial decision, a new conception of justice in accordance with the highest knowledge and truest insight perceptible to the human mind.”  

Limits of Judicial Legislation

1.                  Where there is a clear casus omissus i.e. gap in the statute the court can fill it in.  This was done by the Indian Supreme Court in D. Velusamy v. D. Patchummal (2010). In that case the Protection of Women from Domestic Violence Act, 2005 was considered. Section 2 (f) of that Act defines ‘domestic relationship. That definition uses the expression ‘relationship in the nature of marriage’ but does not explain what it means. Hence the court had to fill in the gap in the law. 

2.                  But what if there is no law, and hence there is no question of filling in the gap? In Vishaka vs. State of Rajasthan, AIR 1997 S.C. 3011 there was no law for protection of women from sexual harassment at work places, and hence no gap in an existing law. Yet the Supreme Court laid down guidelines in this connection, and said that this will be the law until Parliament makes a law on the subject. Here the court practically acted as an interim Parliament. Is this a valid approach?

In University of Kerala vs. Councils of Principals of Colleges (2010) 1S.C.C. 353 a 2 Judge bench of the Supreme Court of which I was a member referred to a Constitution Bench the question whether this approach is valid, but the Constitution Bench is yet to be constituted.

In the University of Kerala case (supra) the facts were that in many educational institutions in the country the students union had been captured by anti-social elements who created a lot of trouble for the institution. Hence the court constituted a committee headed by Mr. Lyngoh (former Chief Election Commissioner) to make recommendations for ameliorating the situation. The committee made its recommendations, and court by an interview order directed these to be enforced in all educational institutions.

The matter came up before a bench of which I was a member. I was of the view that the court’s order amounted to judicial legislation and was invalid. The court could have directed the concerned authority to consider these recommendations, but could not have directed that they be implemented.

In in re Networking of Rivers (2012) 4 S.C.C. 51 the Supreme Court directed interlinking of the rivers of India. Such an order raises a host of problems, e.g. finance, planning, land acquisition, civil construction, environmental issues, etc. Should such an order have been passed? Is it implementable? I have grave reservations about this.

In L.K. Pandey v. Union of India, AIR 1986 S.C. 272 detailed guidelines have been issued by the Supreme Court for inter country adoption, though there is no legislation on the subject. 

In Kumari Mathuri Patil v. Addl. Commissioner, (1994) 6 S.C.C. 241, in order to check issuance of false and fabricated scheduled caste certificates, the Supreme Court issued a set of 15 guidelines about how such certificates should be issued, which authority can issue them, etc. It also created a vigilance cell headed by a senior police officer to check the malpractice. In Dayasram v. Suhi Balham (2012) 1 S.C.C. 333 the Supreme Court doubted the correctness of this judgment, and referred the matter to a larger bench, but the larger bench upheld the directives, saying that they were meant to fill in a legal vacuum.

3.         Can the court itself perform functions which have been given to a statutory authority?    In several decisions the Supreme Court held that it cannot. Thus in Supreme Court Bar Association vs. Union of India, AIR 1998 S.C. 1895, a Constitution Bench of the Court held that under the Advocates Act, 1961 only the Bar Council can debar a lawyer, and hence it reversed the earlier decision of a 3 Judge bench debarring a lawyer.

            In M.C. Mehta vs. Union of India (1997) 8 S.C.C. 770 the Supreme Court directed that the maximum speed limit of heavy vehicles in Delhi can be 40 km.p.h But fixing speed limits is the task of the State Government or its nominee vide Section 112 Motor Vehicles Act, 1988. Was the direction therefore valid?

            In G. Veerappa Pillai vs Raman and Raman, AIR 1952 S.C. 192 the  High Court had in a decision directed the Regional Transport Authority (R.T.A) to issue a bus permit to the petitioner. On appeal, the Supreme Court set order this order, holding that under the Motor Vehicles Act only the R.T.A. could issue the permit, and the High Court by its order in effect granted the permit itself (see also State of U.P. vs. Jeet S. Bisht, 2007 vide paragraphs 45 and 46 of judgment of M. Katju, J.).

4.         Can the Court ignore a statutory or Constitutional provision, and substitute it by its own order.   It is evident  that this cannot validly be done, but in fact it was done by the Supreme Court in the second Judges case (Supreme Court Advocate o Record Association v. Union of India) in which the court in effect ignored the provisions of Article 124 for appointing Judges to the Supreme Court, and substituted its own procedure (The Collegium System).

5.         Can the Court direct the legislature to make a law or amend an Act of the legislature? In a  catena of decisions, some of which have been referred to in Divisional Manager, Aravali Golf Course  v. Chander Haas (supra) the Supreme Court held that the court has no such power. Yet in Vineet Narain v. Union of India AIR 1998 S.C. 889 the Supreme Court directed amendment to the Delhi Special Establishment Act 1946  (under which the C.B.I. is constituted) by setting up a Central Vigilance Commission to which the C.B.I. will be accountable for its efficient functioning.

  Trends in Judicial Restraint

There is broad (though not absolute) separation of powers in the Indian Constitution vide Divisional Manager, Aravali Golf Course vs. Chander Haas, 2008.  The Constitution of India did not provide for the judiciary to be a super legislature or a substitute for the failure of the other two organs. Thus, the need arises for the judiciary to lay down its own limitations.

Some people say that the judiciary can enter into the domain of the executive or legislature because these organs are not functioning properly. But then it can also be said that the judiciary, too, is not functioning properly, there is great delay in deciding cases, corruption in a section of the judiciary, etc. Should then the legislature or executive take over the judiciary’s function?

 One of the examples of judicial restraint is the case of State of Rajasthan Vs. Union of India,[112] in which the court rejected the petition on the ground that it involved a political question and therefore the court would not go into the matter. In S.R. Bommai Vs. Union of India.[113] the judges said that there are certain situations where the political element dominates and no judicial review is possible. The exercise of power under Art.356 was a political question and therefore the judiciary should not interfere.  Ahmadi J. said that it was difficult to evolve judicially manageable norms to scrutinize the political decisions and if the courts do it then it would be entering the political thicket and questioning the political wisdom, which the court must avoid.[114]

In Almitra H. Patel Vs. Union of India,[115] where the issue was whether directions should be issued to the Municipal Corporation regarding how to make Delhi clean, the Court held that it was not for the Supreme Court to direct them as to how to carry out their most basic functions and resolve their difficulties, and that the Court could only direct the authorities to carry out their duties in accordance with what has been assigned to them by law.  Also, in Union of India Vs. Kishan K. Sharma,[116] when the High Court issued a Mandamus to the Government to pay a particular scale to its officers, the Supreme Court laying down the boundaries of judicial activism in general held that such Mandamus would not be permissible as fixation of salaries was an administrative decision. Similarly, creation of a post is an administrative or legislative functions, and cannot be done by the court vide Divisional Manager, Aravali Golf Course (supra)

Conclusion about Judicial Activism

My own view is that while judicial activism may be a good thing on certain special occasions, there should not be too frequent use of it. Where to draw the line is, of course, sometimes a difficult question to answer.

            In Divisional Manager vs. Aravali Golf Course a bench of which I was a member advocated judicial restraint by court.

           

            However, in certain cases I (along with a brother/sister Judge) resorted to activism. Some examples are (1) In Budhadev Karmaskar vs. State of West Bengal, Crime Appeal 135/2010 a bench of which I was the senior member directed the government to try to rehabilitate sex workers. In India there are hundreds of thousands of them. These women enter the flesh trade not because they enjoy it but because of abject poverty. Hence we directed the Central and  State Governments to prepare schemes for giving some technical training to these sex workers so that they can earn their bread not by selling their bodies but  by some technical skills, and we formed a committee headed by a senior Supreme Court lawyer for overseeing this. This case is still being heard from time to time even after my retirement in 2011 by another bench.

(2) In Aruna Shanbang vs. Union of India we declared passive euthanasia valid, but subject to some restrictions. We did this because often when a person goes into come and is on life support in hospital the relatives cannot go on paying for the hospital expenses, although the doctors have declared that the patient will not come out of the coma.

(3)       In M.K. Balakrishnan v. Union of India we directed formation of a Water Committee to do scientific research for finding out ways of solving the grave and widespread water shortage problem in India.

            These orders were passed because of pressing needs.

            However, pressing need should not be a ground for ignoring the statutory or constitutional provisions, and hence I have grave reservations about several decisions e.g. the Supreme Court Advocates on Record case, 1994 (The Second Judges case).

            The law should have some stability and predictability. The burst of judicial activism by some Indian judgments in recent decades is often mind boggling, and is a negation of this requirement. The time has come when a vigorous debate should be held by jurists on this subject.