Repeal of Three Farm Laws: Its Impact on Farmers and the Economy

By Rohitkumar Raut

Introduction

19 November 2021, on the auspicious occasion of Guru Purab, the Hon’ble Prime Minister of India, Mr. Narendra Modi, announced that the government has decided to repeal the three farm laws. The move for repealing these laws comes more than a year after farmers from various parts of the country including Punjab, Haryana, Rajasthan, western Uttar Pradesh and Madhya Pradesh have been protesting against the same.

The initial reactions of protesting farmers from Punjab and Haryana to this news has been that of jubilation but they have stated that the fight is not over yet. Many farmers are of the view that a verbal promise won’t be enough and that the protest would not be called off unless and until the laws will be repealed in the winter session of the parliament. On the contrary, economists and farmers who acknowledged the merit in the legislation saw the decision for repealing the legislation as a setback.

Through the means of this article, the author aims to delve deeper into the issue, explaining what the farm laws were all about and what is the possible impact of their abrogation on the farmers and the economy.

The Three Farm Laws: A Basic Understanding

The three farm laws that are to be repealed by the Central Government are the following:

1. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020;
2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020;
3. The Essential Commodities (Amendment) Act, 2020.

In September of 2020, the Hon’ble President of India, Mr. Ram Nath Kovind ratified the three ‘Agriculture Bills’ that were earlier passed by the Indian Parliament. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 were proposed in the Lok Sabha on 14 September 2020 and subsequently passed on 17 September 2020. Further, the Acts were passed in the Rajya Sabha on 20 September 2020 and both the acts finally received Presidential Assent on 24 September 2020. The Essential Commodities (Amendment) Act, 2020 was proposed in the Lok Sabha on 1 September 2020 and subsequently passed on 15 September 2020. Further, on 22 September 2020, the amendment was passed in the Rajya Sabha, finally receiving Presidential Assent on 26 September 2020. 

The primary objective of The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was to permit trade of agricultural produce outside the existing Agricultural Produce Market Committee (APMC) mandis, and thereby allowing more flexibility and freedom of trade to the farmers by not restricting their sale of produce to the APMC mandis. In addition to this, the act also allowed e-trading of scheduled farmers’ produce (agricultural produce regulated under any state APMC Act) in the specified trade area. The act also aimed at enabling direct online trade of agricultural produce via internet.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 aimed at creating a sustainable structure for contract farming by establishing the minimum and maximum periods of the agreement of farming and further spelling out the pricing of farm produce and the resolution of disputes arising during the contract.

The Essential Commodities (Amendment) Act, 2020 was an amendment to the existing Essential Commodities Act, 1955 and its objective was to deregulate certain commodities like cereals, pulses, oilseeds, edible oils, onion and potato from the list of essential commodities and further guidelines were laid down regarding stock limit and its calculation.

Reason for the Ongoing Protest

The Indian farmers have been protesting against the three farm laws as they fear that they could face losses due to the new laws instead of incurring profits and hence the protests. Some farmers have instead called for the enactment of an act on the enforcement of Minimum Support Price (MSP).

Further, some farmers also believe that the new laws favour private companies instead of the farmers and therefore, that has become an additional concern for the farmers. The Central Government had conducted several rounds of talks with groups of farmers but that didn’t lead to any viable option.

The Repeal: Impact on Farmers

The repeal of these farm laws has garnered mixed reactions from farmers across the country. While some are jubilant and celebrate this as a victory of the farmers, others view it as a lost opportunity at leveling up the framework of the agricultural sector of India. 

There may be some deficiencies in the exact design and mechanism of the reforms proposed in the three farm laws, but most advocates of agricultural reform would agree that they were in the right direction. However, what left many people disappointed was the lack of a wider consultation regarding the provisions and the enactment of the farm laws. 

The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was an important step towards minimizing the restrictions that farmers face while trading their agricultural produce as it sought to permit intra and inter-state trade of farmers’ produce beyond the physical premises of Agricultural Produce Market Committee (APMC) markets and other markets notified under the state APMC Acts. This would have enabled the farmers to fetch better money for their produce and also reach a larger consumer base which would’ve benefitted both the farmers as well as the consumers. Further, the act also aimed at digitalizing the agricultural market space in India which is an entirely new step in the agricultural sector. The integration of digital payment services with technology and agriculture would have transformed the agricultural business scenario in India by leaps and bounds. The Act, also prohibited State Governments from imposing market fees or cess of any kind on farmers, traders, and electronic trading platforms, thus ensuring that it didn’t create unnecessary hindrances in the progress of farmers.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 aimed at creating a structure with respect to contract farming while also looking to it that the interests of farmers are safeguarded and protected at all times. The Act provides for a farming agreement between a farmer and a buyer prior to the production or rearing of any farm produce. Further, the Act also lays down the minimum and maximum period of the agreement for the ease of the farmers as well as the other party to the contract. Furthermore, in terms of pricing, the act lays down that the pricing of farm produce and the process involved in the evaluation of the price should be mentioned in the contract. For prices, that are subject to variation, there should be a guaranteed price for the product that has to be clearly specified in the contract; any extra revenue generated on top of the guaranteed price should also be specified in the contract. This ensures that the farmers or not cheated or defrauded and they get an equal say in the contract in addition to a guaranteed price and any further profits for their hard work. Further, the process of dispute resolution is divided into three tiers for the ease of both parties.

The Essential Commodities (Amendment) Act, 2020 aimed at ensuring that certain specific commodities are granted the status of essential and hence, their supply and costs are regulated only during emergency situations like cases of war, famine, extraordinary price rises, or natural calamities. Further, the Act also sought to deregulate certain commodities from the list of essential commodities in addition to changes to the imposition of the stock limit and calculation of the same. 

From the above analyses, one can observe that the farm laws were reforms in the right direction that set out to promote the interests of farmers and also to bring about a positive transition in the agricultural sector of the country. Therefore, the repeal of these Acts will have a negative impact on the farmers as these benefits assured by the Acts will be withheld from them.

The Repeal: Impact on Economy

The repealing of the farm laws will not have any immediate impact as such on the farm’s laws, however, in the long term, it will surely hamper the prospects of growth in the agricultural sector of the country as many potential benefits and perks of the farm laws that could have widened the horizons of the agricultural sector as well generated revenue have now been withheld due to the repealing of these laws. Having taken the decision of repealing these farm laws, which has been the bone of contention between the Central Government and the protesting farmers, there is a high probability that various sectors of the economy, particularly the anti-government sections, who have been in the backseat for all these years, will try to shake the government’s stance in every aspect with the support of the masses through the mediums of strike or threat of a strike, without actually considering the growth or betterment of the economic state of the nation. 

Conclusion

To conclude this article, the author would like to state that even though the farm laws were enacted for the betterment of the farmers, many farmers were skeptical of them and further mass protests led to the repealing of these laws. This highlights the importance of creating and increasing awareness among the common man and the farmers regarding the merits and benefits of a policy. Further, a wider group of professionals and people from the agricultural sectors in addition to farmer union representatives should’ve been consulted which could have led to the three farm laws not being repealed. With respect to the repeal of farm laws, Swaminathan Anklesaria Aiyar said, “It is a defeat for economic sense and a victory for undeserving vote banks.”