Kara Sears
The Indian agriculture acts of 2020, often referred to as the Farm Acts, are three acts initiated by the Parliament of India in September 2020. The Farm Acts were passed to transform the Indian agricultural sector by changing the way agricultural produce is marketed, sold, and stored. However, the acts faced protests from farmers in various parts of India, who alleged that the acts would hurt their earnings and were passed unconstitutionally. The Farm Acts were eventually repealed in December 2021.
| Characteristics | Values |
|---|---|
| Year | 2020 |
| Number of Acts | 3 |
| Acts | Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; Essential Commodities (Amendment) Act, 2020 |
| Objective | To change the way agricultural produce is marketed, sold and stored across the country |
| Supporters | Gita Gopinath, Salvatore Babones, 866 academics from educational institutes, US State Department |
| Opposition | Kerala, Punjab, Chhattisgarh, Rajasthan, Delhi, West Bengal |
| Opposition Reasons | Uncertainty regarding implementation, controversy surrounding minimum support prices (MSPs), low bargaining power of farmers |
| Impact | Increase opportunities for farmers to enter long-term sale contracts, increase availability of buyers, permit bulk purchases, attract private sector/foreign direct investment into the agriculture sector |
| Status | Repealed on 1 December 2021 |
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What You'll Learn
The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
The Act aimed to facilitate lucrative prices for farmers through competitive alternative trading channels and promote barrier-free interstate and intrastate trade of agricultural goods. It allowed for the electronic trading of farmers' produce, enabling direct and online buying and selling through electronic devices and the internet. The Act created a separate structure of trading by bypassing the Agricultural Produce Market Committee (APMC) and the need for licences provided by APMCs.
The Indian government argued that the new laws would modernise Indian agriculture and improve market efficiency and private investment. However, the Acts faced significant opposition from farmers across India, who argued that the laws would hurt their earnings and bargaining power, with concerns also raised about the potential dismantling of the Minimum Support Price (MSP) system. The MSP system guarantees farmers a minimum price for their produce, which is set each year. Farmer suicides and incomes are serious issues in India, and there are fears that the removal of the MSP could force farmers to sell their produce to large agribusiness corporations, with no legal recourse in the event of a contract violation.
The farm laws also faced legal challenges, with several states passing resolutions against them, and the Supreme Court staying their implementation in January 2021. The laws were eventually repealed in December 2021 by the Indian government, led by Prime Minister Narendra Modi.
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The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020
The bill also included provisions for pricing and dispute settlement. The price of the farming produce was to be mentioned in the agreement, along with a guaranteed price and a clear reference to any additional amount above the guaranteed price. A three-level dispute settlement mechanism was outlined, involving the conciliation board, the Sub-Divisional Magistrate, and the Appellate Authority.
The bill was met with widespread criticism from farmers across India, particularly in Punjab, Haryana, Western Uttar Pradesh, Uttarakhand, and Rajasthan. Farmers argued that without regulation, they would be pitted against large corporations with little bargaining power. They also expressed concerns about the lack of statutory support for Minimum Support Prices (MSPs) in the bills, which was a major point of concern for farmers from Punjab and Haryana, where a large proportion of wheat is procured at MSP.
Due to the opposition to the bills, on 12 January 2021, the Supreme Court stayed the implementation of the farm laws and appointed a committee to address farmer grievances. In November 2021, Prime Minister Narendra Modi announced that his government would repeal the laws, which formally occurred on 1 December 2021.
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The Essential Commodities (Amendment) Ordinance, 2020
The Essential Commodities Act (ECA) is an act of the Parliament of India that was established in 1955 to ensure the delivery of certain commodities or products. The supply of these products, if obstructed due to hoarding or black marketing, would affect the normal life of the people. This includes foodstuff, drugs, fuel (petroleum products), etc.
The imposition of any stock limit on specified items must be based on price rise. A stock limit may be imposed only if there is a 100% increase in the retail price of horticultural produce and a 50% increase in the retail price of non-perishable agricultural food items. These restrictions will not apply to stocks of food held for public distribution in India.
The Ordinance seeks to increase competition in the agriculture sector and enhance farmers' income. It aims to liberalize the regulatory system while protecting consumers' interests. The central government may regulate or prohibit the production, supply, distribution, trade, and commerce of essential commodities.
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Minimum Support Prices (MSPs)
The Minimum Support Price (MSP) is the minimum price for select crops raised in the Kharif and Rabi seasons that the Government of India considers remunerative for farmers and deserving of support. The Indian government sets the price for about two dozen commodities twice a year. The MSP is a crucial support mechanism for farmers, ensuring they receive a minimum profit for their harvest while also increasing food security in the country.
The MSP was initially introduced in the 1960s as an incentive for farmers to adopt technology to increase the productivity of agricultural land. The Agricultural Prices Commission (APC), set up in 1965, suggested MSPs for paddy. In 1985, the APC was reconstituted as the Commission for Agricultural Costs and Prices (CACP). The CACP is an apex advisory body for pricing policy under the Ministry of Agriculture, and it recommends pricing based on factors such as national requirements, available resources, farmer wages, cost of living, and product competitiveness.
The MSP system has faced criticism for its limited scope and market distortions. Larger farmers with better awareness and financial capacity dominate MSP benefits, exacerbating income inequality. The focus on water-intensive crops like wheat and paddy has also led to environmental concerns, such as groundwater depletion and soil degradation. Additionally, high fiscal costs, procurement expenses, storage shortages, and wastage reduce the cost-effectiveness of the MSP.
Despite these challenges, the MSP remains an essential tool for supporting farmers' incomes and ensuring food security in India. The effectiveness of the MSP has varied across states and commodities, and there have been concerns about low awareness among farmers regarding the MSP and its procurement agencies. The government has implemented the MSP at the state level through organisations like the Food Corporation of India (FCI) and the National Agricultural Co-operative Marketing Federation (NAFED).
The recent farm law protests in India highlighted the controversy surrounding MSPs, with farmers expressing fears about the potential dismantling of the MSP system and the lack of statutory support for MSPs in the bills. The protests led to the Supreme Court of India staying the implementation of the farm laws and appointing a committee to address farmer grievances.
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The impact on farmers' earnings
The Indian agriculture acts of 2020, often referred to as the Farm Bills, were three acts passed by the Parliament of India in September 2020. The laws would have deregulated the system of government-run wholesale markets, allowing farmers to sell directly to food processors and outside designated state-regulated areas called mandis. While the Indian government described the measures as a gift to farmers, providing them with more choice, the acts faced protests from farmers across India who alleged that the bills were passed "unconstitutionally" and would hurt their earnings.
One of the main concerns regarding the Farm Bills was the potential loss of the guaranteed minimum support price (MSP) for their produce. Indian farmers have the right to sell their products, mainly wheat and rice, to the government for a guaranteed MSP that is set periodically each year. The MSP system is based on trust, and there are fears that policymakers could effectively dismantle it by setting prices too low or not providing accessible product collection centers. If the government were to dismantle the MSP system, millions of farmers would be forced to sell their products to large agribusiness corporations, and if a corporation violates a contract with a farmer, the new laws prohibit the farmer from seeking redress in a regular court. This uncertainty regarding the implementation of reforms and the controversy surrounding the MSPs were major points of concern for farmers, especially in Punjab and Haryana, where a significant proportion of wheat is procured at MSP.
In addition to the concerns about the MSP system, farmers also protested the low bargaining power they would have when selling directly to large corporations. The Farm Bills were also criticized for being passed with little public or parliamentary debate and for being anti-farmer and corporate-friendly. The Bharatiya Kisan Sangh (BKS), a farmers' organization associated with the BJP, demanded that the government send the bills to the Parliamentary Standing Committee on Agriculture and questioned the haste with which the bills were passed.
The impact of the Farm Bills on farmers' earnings was a significant issue that led to widespread protests and opposition from various state legislative assemblies and opposition parties. The fear that the new laws would reduce prices for their crops and decrease their income prompted farmers to refuse to accept the measures and led to sustained and highly polarizing protests. As a result of the protests and opposition, the Supreme Court of India stayed the implementation of the farm laws in January 2021 and appointed a committee to look into farmer grievances. In November 2021, Prime Minister Narendra Modi announced that his government would repeal the laws, and they were formally repealed in December 2021.
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Frequently asked questions
The Indian Farm Laws, or Farm Acts, are three acts initiated by the Parliament of India in September 2020. The laws aim to change the way agricultural produce is marketed, sold and stored across the country.
The three acts are: 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, and 3) The Essential Commodities (Amendment) Act, 2020.
The main controversy surrounding the Indian Farm Laws is the uncertainty regarding the implementation of the reforms, particularly the potential dismantling of the Minimum Support Price (MSP) system, which guarantees farmers a minimum price for their produce. There are also concerns about the low bargaining power of farmers and the lack of statutory support in the bills for the MSP.
The Indian Farm Laws faced strong protests from farmers, particularly in Punjab, Haryana and other states, who argued that the laws were anti-farmer and corporate-friendly. In response to the protests, the Indian government announced in November 2021 that it would repeal the laws, and they were formally repealed on 1 December 2021.
The Indian Farm Laws were expected to benefit all stakeholders, including farmers, industry and consumers, by establishing a more integrated market, creating competition and enhancing efficiency in the agricultural sector. The laws would also attract private sector investment and help facilitate the supply of Indian farm produce to national and global markets.
