An analysis on Farm Bills – Why the chaos?

An analysis on Farm Bills – Why the chaos?

Author: Varnika Singh

The three Farm bills that are passed by both the houses and have also received President’s assent are drastic reforms that agricultural sector longed for. But why it has caught so many eyes, from various political parties and various states legislatures is the question needs to be answered and what it lays down for future is needed to be understood.

During the inception of the lockdown, ordinances were passed by the central government for the agricultural sector of the country. These ordinances were considered as against the state practices, and thus, many states called it an encroachment upon their agricultural markets by the centre. This move was definitely rushed by the present government as it was undertaken in times of pandemic. The government stated trade and commerce in food items are part of the concurrent list; by this, they got their way out on constitutional terms. And this was cleverly done by removing the restrictions with regard to stocking food products so that trade restrictions could be used. Thus they amended the Essentials commodities Act. Then in June, the ordinances were implemented which later on were presented as a bill in September.

So, calling it part of a relief package in such times would not be right, but instead, it was to introduce the big players into such small markets, i.e. one of the biggest economic sectors of India as well. APMCs would be targeted, and though agreed the existing laws need reform, but such unrestricted exposure will create problems for farmers in the distant future.

Now, these ordinances were passed in the form of bills. It was clear it would make many parties upset and especially the state legislatures as it targets directly one of their income sources that they thought to have up until now given to them by Entry 14 and Entry 28 of List II. Before understanding why such opposition came to let us first understand what these bills are,

The three bills –

– The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

– The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

– The Essential Commodities (Amendment) Bill, 2020

The farmers produce trade and commerce. Bill focuses mainly to open all agricultural markets and all the sales regarding those products, even to outsiders or other regions. They have brought in the Agricultural Produce Market Committee (APNC) Mandis for all farmers, i.e. all inter-state trade can be accessed and done by farmers to sell their crops to in other states without any restrictions.

Thus, this will totally do away with the governmental set-up of APMCs, and the state levied tax will terminate as I stated above the tax incurred by such mandis set-up by the state governments will stop and therefore the market fee or cess or levy which was collected for trade-in outside regions will stop as well. So, with these even the farmers will become vulnerable to outside market and companies or big investors will attract them by good prices but this will lead to creating of a black hole as once the farmers will get used to this system by that time the APMCs will be long gone and shut down thus leaving such farmers to the fancies of such investors eventually. The one main reason to support this is that there is no mention of MSP, i.e. the minimum selling price in the bill, which was ensured in the APMC by the government for selling various crops. Thus, this being a major concern about how will the farmers ensure that they will not be obtruded and affix that minimum price they will need for their crop. Also, an estimate of Indian farmers does not grow all crops which are enlisted in the list for MSP which is given by the government, so for one or two crops they grow, they already are at a loss. Introducing these bills without ‘one nation one MSP’ policy is what is dreaded by the farmers.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill is also in furtherance of the above bill and lays down the framework for the agreements of trade in order to sell or purchase those farms produce with other traders. Thus, this bill emphases on contract farming by making an agreement between farmer and buyer incorporating the mutually agreed remunerative price framework. Therefore, the legislations objective is to protect farmers right by putting the onus on the buyer. The terms and conditions are envisaged in such an agreement; thus, quality, grade, standards all are to be set. Large buyers, exporters and retailers will be in direct contact of the farmers. The aim is to eliminate the middleman concept. In APMCs the produce was delivered or sold to these large buyers by way of a middleman who bought in bulk or played the role of intermediary. But with these new bills, the government has tried to stop this practice, but will it? No, of course not these intermediaries helped such small farmers to sell their produce at a good price. Therefore, the small farmer who produces very small quantity could sell it to the middleman who would have given him a good price for it. Now the scenario will be that such farmers won’t be able to approach directly to these large investors with their small quantities so eventually the concept which government aimed to eliminate will somehow come back and now the middleman will work in between farmers and these investors instead of working at APMCs. Thus, this will also affect state governments, especially their source of revenue, and this is why they are calling this Act of the central government against cooperative federalism which is enshrined in the Constitution. 

Another change that has been very drastic and definitely very abrupt was the amendment made under the Essential Commodities Act. Even the ordinance which was passed for the same faced many questions but changing it into a bill will hamper with the whole economically fair competition we talk about. The amendment removed many items from the essential commodities which will also remove the regulation on production, storage, movement and distribution of these commodities. And such commodities included potatoes, onion, oil, pulses, cereals etc. which are main food products could be sold without any regulatory rules. Thus, the amendment was supported in this manner to also remove the stock price limit, which now could only be done if there is a 100% increase in the retail price of such horticulture produce. And 50% rise occurs in the retail price of non-perishable food items then their stock limit shall be applied. In all other circumstances now, hoarding can be done by the producers as well as any buyers disrupting the balance of the market. Law against hoarding was made to safeguard the interest of both sellers and buyers, but with no limit on this stocking, there will be great fluctuations seen in the market. Therefore, this bill also allows the central government to supply such items in extraordinary times like war, famine, natural calamity as the price is affected at these times of such products and thus give exemption to exporters and processors by way of this amendment bill.

After understanding what these three bills are and how they might affect the farmers, you must have got an idea of why it faced opposition in the houses. Once these bills were placed in the house, the opposition and the Shiromani Akali Dal straightaway termed theses as “anti-farmer reforms”. Eventually, in protest of the same, Minister of Food Processing Industries and the only SAD representative who was part of the BJP, i.e. Harsimrat Kaur Badal resigned from the Union Cabinet. This was mainly a strong opposition by Punjab’s agricultural sector. Thus, the oldest ally of BJP, i.e. SAD, quit the National Democratic Alliance (NDA). They are majorly concerned that the MSP system will end and farmers will be left vulnerable. But though the Agriculture Minister Narendra Singh Tomar said that the Minimum Selling Price would be ensured, there is still doubts as the bills nowhere mention of the same. But still, the government states that the reforms will help in the following manner –

– Boost growth by involving private sector investment to build infrastructure and supply chain in both national and global markets.

– Aims to help small farmers to provide them with good prices.

– By expanding markets, a better price can be achieved by more rigorous competition in such Agri markets.

– To remove middleman, therefore, will remove the concept of commission and also mandi fees which were taken.

– Contract farming will protect farmers interest and establish contract-based trading of these commodities, which will also be subjected to no regulation because of these bills.

The reasons for farmers agitation –

– Direct impact will be seen on mediators that are the connecting link between farmers and consumers up until now. Especially this is why the Punjab government is scared as their major occupation of the state is agriculture-based.

– MSPs do worry the farmers as they think they will be at a loss.

– State revenue will stop, as APMCs are very much politically handled; thus, now private sectors will have a share of it.

– Hoarding system will definitely lead to unfair profit-making or price fluctuations in the market.

Protest in Punjab & Haryana –

Since the introduction of the farm bills, the SAD has been opposing it and in a result of which Badal also tendered her resignation on the passing of these bills. This clearly shows that the Punjab government knew this would be unhealthy for their money-making market. The Punjab and Haryana government have a robust MSP Mechanism in their state which is not that strong in others. So, despite Prime Minister Modi’s assurance, they still are worried that the introduction of all investors and opening this market will affect the production and selling cost. Whereas in other states, many few farmers are even aware of these support prices; thus protest is weak or not to be seen there. Also, they are concerned that these bills will eventually decrease the bargaining possibilities once all the big investors get comfortable in the market. Thus, they are mainly concerned about there wheat and rice procurement at these prices. Therefore, the Akali Dal is worried about there cess levy on mandis, which will stop and one major revenue source will stop as well.

Now reading on all aspects, we get the idea of how these bills will affect India Agri-market. The government plans to shut down the whole mandi system, i.e. the APMCs slowly by implementing these bills and boosting private sector more into this. But one point they have ignored is about the accessibility as one of the major occupations of people of India is farming and is spread across the whole country. So, applying this big thinking of directly connecting farmers to all traders is definitely a drastic change as there are many small farmers who have very less produce or accessibility or even knowledge about all this. So, they for them the option of government established mandis were best because of three reasons,

– Easy to access

– Definitive price scheme was given

– They could approach a middleman to sell their produce

Even though reforms are needed in the agricultural laws but implementing such will be a substantial challenge. One such example by which this can be understood was when the government had its network system in the country by BSNL it was the only source of the connection at that time. Later, when private investors were introduced, the government stopped its services by BSNL in many places. But in the rural areas and remotest of areas, there is still no connection or network tower, i.e. the reach of these companies like Airtel, Vodafone etc. so there the government has still their service by BSNL available. Thus, this shows that even in 2020, the outreach of government in regard to implementation of various bills still lacks and needs refinement, which applies in farm bills as well.


The three farm bills are imperative to reforming agricultural laws. But the same could be more descriptive on various terms in order to ensure security to farmers right. The theory that a farmer has the right to recover production costs plus make any profit should be focused on both mandi and private buying. For both agricultural and horticultural crops (a long-standing requirement from farmers), there should be a base price at which the product cannot be sold. Such purchasing should evoke punitive action against the consumer and commission agent if done at a lower price. For small crops that they wish to purchase for food security and the public distribution system (PDS), the government should have a higher MSP for the same. But now we will have to see how the Act unfolds itself in the coming times.

(The views are personal)

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