Repeal of the three Farm Laws – a brief overview

Mihir Kumar Chowdhury

(mihirkumarchowdhury@gmail.com)

On November 30th, Hon'ble President of India Shri Ram Nath Kovind gave his assent to the Bill that completed the process of repealing the three contentious farm laws. The Law Ministry, on 1st December, notified the Farm Laws Repeal Bill (2021) which negates all the farm laws passed by the Parliament last year.

The three laws were the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers' (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act. The laws had come into effect after receiving the presidential assent on 27th September 2020. Soon after, the laws started facing massive opposition in the form of unprecedented protests from farmers which extended for more than a year. So, let us understand all three farm laws in detail to be able to visualize the complete picture better.

1. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:

Features: The Act seeks to give freedom to farmers to sell their produce outside the notified APMC market yards (mandis). It is aimed at facilitating remunerative prices through competitive alternative trading channels. Farmers will not be charged any cess or levy for the sale of their products under this Act.

Government's views in support of this Act: Government authorities argued that this Act will open more choices for farmers, reduce marketing costs, and help them get better prices. It will also help farmers of regions with surplus produce to get better prices and consumers in areas with shortages at lower prices.

Reasons for opposition towards this Act: Farmers were of the view that the provisions of this Act would lead to inadequate demand for their produce in local markets. They opined that transporting the produce outside the mandis would not be possible, especially for the small and marginal farmers, because of a lack of resources. It is precisely why they sometimes sell their produce at lesser than MSP rates in local markets. Secondly, farmers were also unhappy with the Act's provision which specified that a farmer and a trader could approach the Sub-Divisional Magistrate (SDM) to arrive at a solution through conciliation proceedings. They objected to this provision claiming that they are not powerful enough to directly approach the SDM offices for dispute redressals. Moreover, some states also opposed this Act citing that they will lose revenue as they would not be able to collect 'mandi fees' if farmers sell their produce outside the registered APMC markets. Besides, commission agents also stand to lose if the entire farm trade moves out of mandis.

2. The Farmers' (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020:

Features: The Act seeks to grant farmers the right to enter into a contract with agribusiness firms, processors, wholesalers, exporters, or large retailers for the sale of future farming produce at pre-agreed prices.

Government's views in support of this Act: The Centre argued that the law offered freedom of choice to farmers to sell their farm produce anywhere. They said that this Act seeks to transfer the risk of market unpredictability from farmers to sponsors. They also argued that besides giving the farmers access to modern tech and better inputs, the Act also seeks to boost farmer income by reducing the cost of marketing.

Reasons for opposition towards this Act: The Act did not mention the MSP that buyers need to offer to farmers, because of which the farmers feared that this would lead to the corporatization of agriculture which eventually would result in the removal of the MSP. Some also objected to the contract system, claiming that it would make small and marginal farmers susceptible to exploitation from big companies unless the sale prices continue to be regulated as was done before.

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

Features: The Act seeks to remove commodities like cereals, pulses, onions, oilseeds and potatoes from the list of essential commodities and will do away with the imposition of stock holding limits on such items except under "extraordinary circumstances" like war, famine, extraordinary price rise and natural calamity.

Government's views in support of this Act: The government said that this Act aimed at attracting private investments/FDI into the farm sector as well as bringing price stability.

Reasons for opposition towards this Act: Farmers argued that big companies will have the freedom to stock commodities, thereby helping them dictate terms to farmers. Some also opined that it would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase, thereby resulting in irrational volatility in the prices of essentials and increased black marketing.

The MSP assurance became the focal point of this massive protest. In this context, it is worth noting here that over the years, the working of the MSP system has been such that it benefits only a handful of farmers at the all-India level. The Shanta Kumar Committee appointed by the Central government in 2015 reported that across the nation, only around 6% of farmers are benefitting from the existing MSP regime. But the interesting thing to note here is that for farmers of some states like Punjab and Haryana, the existing MSP system has worked quite well. In fact, in these two states, the procurement of paddy and wheat at MSP rates ranges from around 75 to 80 per cent, which is quite remarkable. That is why, the farmers of these two states were quite vocal about their demands for repeal of these farm laws, fearing that the implementation of the same may result in the dismantling of the existing MSP system, thereby eliminating their assured source of income. In addition, some states were also unhappy with the farm laws as it would deny them the right to collect fees from outside-mandi trade of farm produces, which would eventually cut down on their state's revenue collection.

The government had proposed these laws as reforms similar to those of 1991 which liberalized the Indian economy by linking it with the global market. The new laws were aimed at strengthening basic farm sector infrastructure through greater private investments. However, owing to the mounting pressure due to the unprecedented protests that extended for more than a year, the three laws had to be ultimately repealed. This event clearly stands out as a unique teaching example of Indian policymaking in the field of agriculture and has etched its position permanently in the pages of Indian political history.