Unpopular Opinion: The New Farm laws Are Progressive And Much Needed For the Farmers of India

On 20th September, the Farmers’ and Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 was passed by the Parliament of India. Here’s our analysis of the three laws and their impact on the farmers.

Farmers’ and Produce Trade and Commerce (Promotion and Facilitation), Act

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, beaks the monopsony of Agriculture Produce Marketing Committees (APMC). An institution that earlier bounded farmers to sell their output to the APMCs (mandis) and nowhere else. The new law aims to end this monopsony in the interest of the farmers.

Quick Takeaways

• The law ensures economic freedom to the farmers of India to sell their produce anywhere both intra-state or inter-state.

• The farmers will be free to trade at farmgate, cold storage, warehouse, processing units etc and would not be restricted to the mandis like before. (Chapter II, Sections 3 and 4)

• Abolition of cess or levy for sale, which is to say farmers will not be charged any market fee, cess or levy for sale of their produce and will not have to bear transport costs.

• Additionally, the law proposes electronic trading in transaction platform for a smooth and hassle-free transaction. (Chapter II, Section 6)

• With a dispute resolution mechanism in place (Chapter III, Sections 8, 9 and 10), the law plugs potential exploitation of the farmer. 

These measures are in sharp contrast to the earlier (APMC) markets-based system, which has monopolised agricultural trade leading to the impoverishment of the farmers.

The Bill aims to break the monopoly of mandis and provide farmers and traders freedom of choice of sale and purchase of Agri-produce.

According to critics, the dismantling of the monopoly of the APMCs means bringing an end to the assured procurement of food grains at minimum support prices (MSP).  In the absence of APMC, there will be no alternative for a large market that can actually set price signals. This can result in buyer cartels fixing the market price. However, the Prime Minister of the country and the Government of India has assured that the previous system of mandis will remain, and the new laws will give the farmers freedom of choice to either trade through mandis or at various other units. This is a massive victory for the farmers who earlier had no other option than to trade through mandis.

The law is a step towards liberalising agricultural trade, eliminating an extractive set of middlemen, create leaner food supply and benefit farmers and consumers alike.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

This is a kind of forward contract, which will give farmers assured returns and reduce any price-related uncertainty.

Quick Takeaways

• The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 creates a legal framework of agreements within which farmers can engage with companies and wholesalers.

• This law covers all components of an agriculture transaction- pricing, transparency, payment mechanisms and manner of delivery. It defines a “farming agreement” (Chapter I, Section 2(g)), details it (Chapter II, Sections 3 to 12) and finally create a dispute settlement mechanism (Chapter III, Sections 13 to 15).

• It places compliances on quality and standards (Chapter II, Section 4), a power which was earlier held by the middlemen in APMCs because of which the small farmer had no questioning recourse in farm practices, pesticide residue, safety standards etc.

• The law prohibits sponsors (companies, processors, wholesalers) from acquiring ownership rights or making permanent modifications on farmer’s land or premises (Chapter II, Section 8), thereby protecting the farmer’s land.
• The law further enables the agreement with modern financial instruments like insurance and credit (Chapter II, Section 9).

The Law, therefore, ensures that Farmers will be protected when dealing with institutions

The Essential Commodities (Amendment) Act, 2020

The Essential Commodities (Amendment) Act, 2020 brings an ancient 20th-century law, the Essential Commodities Act, 1955, in tune with 21st century.

Quick Takeaways

• It aims to ease excessive controls over the production and distribution of agricultural commodities.

• It attempts to deregulate the prices of cereals, pulses, potato, onions, edible oilseeds and oils (Section 2); controls will come into effect “only under extraordinary circumstances which may include war, famine, extraordinary price rise and natural calamity of grave nature”.

• This amendment will pave way for cold chain infrastructure to come up, which will help curtail the food wastage in India. The cold storage will help in holding perishables and selling them even after the harvest period. This will help the storage of fruits and vegetables — and has no impact on rice and wheat.

So what’s the fuss about?

Why are the farmers protesting? To be honest, we don’t know either. The laws are clearly progressive and any person in their right mind can see a huge difference from the previously existing laws and the new ones. The earlier draconian laws left the farmers impoverished with little or no scope for growth. The new laws are in line with the demands of “Farmers’ Manifesto for Freedom” which was signed by 200 citizens from 12 states, including Punjab.

It is difficult to comment on the ongoing farmer protest purely on the economics of new law, there’s more political underpinning to the agitation than concerns for the real farmers.

_{Featured image: Danish Siddiqui/Reuters}

---