Cecily Zamora
In 2020, three new farm laws were passed in India, which sparked protests by farmers who believed they would lose more than they would gain. The laws were intended to deregulate the system of government-run wholesale markets, allowing farmers to sell directly to food processors, but farmers feared this would result in the end of government-guaranteed price floors and reduce the prices they received for their crops. The laws also failed to address the issue of farmer suicides and incomes, which have remained unresolved for decades. The laws attracted global interest and were eventually repealed in December 2021.
| Characteristics | Values |
|---|---|
| Year of implementation | 2020 |
| Number of laws | 3 |
| Official name | Farm Bills |
| Objective | To deregulate a system of government-run wholesale markets and allow farmers to sell directly to food processors |
| Outcome | Protests by farmers who feared that the laws would result in the end of government-guaranteed price floors, thereby reducing the prices they would receive for their crops |
| Status | Repealed in December 2021 |
| Supporters | Narendra Modi, Gita Gopinath, Salvatore Babones |
| Opposition | Rakesh Tikait, Rashpinder Singh |
| Related issues | Farmer suicides, farmer incomes, nutrition and hunger |
| Impact | Increased choice for farmers, potential transformation of the agricultural sector, risk of corporatization |
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What You'll Learn
Farmer protests and repeal of the 2020 Farm Bills
Agriculture is a complex issue in India, as it is home to a large population of farmers and is self-sufficient in the production of various types of food. However, issues such as nutrition, hunger, farmer suicides, and low farmer incomes remain unresolved. In September 2020, the Parliament of India passed three acts, often referred to as the Farm Bills, which were intended to transform the agriculture sector and empower farmers. However, these acts sparked widespread protests among farmers who feared that they would be left at the mercy of corporates and lose the protection of government-guaranteed price floors.
The Farm Bills, or the Indian agriculture acts of 2020, were passed by the Lok Sabha on 17 September 2020 and the Rajya Sabha on 20 September 2020. The President of India, Ram Nath Kovind, gave his assent on 27 or 28 September 2020. The acts would have deregulated the system of government-run wholesale markets, allowing farmers to sell their produce directly to food processors and buyers outside designated state-regulated areas called mandis. While the government argued that this would make it effortless for farmers to sell their produce, farmers feared that it would result in the end of government-guaranteed minimum support prices (MSPs), reducing the prices they would receive for their crops.
The issue of MSPs was a major point of contention. 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. However, the Farm Bills did not include MSPs as a mandatory provision, and farmers feared that the government would dismantle the MSP system, forcing them to sell their products to a few large agribusiness corporations. Additionally, if a corporation violated a contract with a farmer, the new laws prohibited the farmer from seeking redress in a regular court.
Protests against the Farm Bills began in August 2020 in Punjab, with small-scale demonstrations, and intensified after the passage of the acts. On 25 September 2020, farm unions across India called for a Bharat Bandh, or a nationwide shutdown, to protest against the laws. The most widespread protests occurred in Punjab, Haryana, and Western Uttar Pradesh, but demonstrations took place in several other states as well. On 12 January 2021, the Supreme Court stayed the implementation of the farm laws and appointed a committee to look into farmer grievances.
On 19 November 2021, Prime Minister Narendra Modi announced that his government would repeal the Farm Bills, and both houses of Parliament passed the Farm Laws Repeal Bill on 29 November 2021. The laws were formally repealed on 1 December 2021. Despite the repeal, farmer unions continued to demand guaranteed MSPs and reminded the government of its aim to double farmers' incomes by 2022. The debate around India's farm laws highlighted the challenges of balancing the market and the state, as well as the need for antitrust enforcement to protect farmers from large corporations.
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Minimum Support Price (MSP)
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. The MSP is generally announced before the sowing/planting season and is approved by the government. It aims to safeguard farmers by guaranteeing a minimum profit for their harvest while increasing food security in the country.
The MSP was initially an incentive for farmers to adopt technology to increase the productivity of agricultural land in the 1960s. However, in the 2000s, it evolved into a market intervention and farmer income scheme. The effectiveness of such a price policy has varied widely between states and commodities. Awareness of the MSP among farmers is low, with only about 20-25% of wheat and paddy produce being sold at MSP.
Attempts to ensure MSP fulfilment have included the Price Support Scheme (PSS), the Decentralized Procurement Scheme (DCP), and the Farmer Income Protection Scheme (PM AASHA). Under PM AASHA, a price deficiency payment (PDP) system has been launched, where the government will partially compensate farmers who have sold their crops at market prices less than the MSP.
The MSP also supports the public distribution system, which provides subsidised food. In the 1960s, India experienced food shortages, such as the Bihar famine of 1966-1967, resulting from droughts and war. During this decade, the Agricultural Price Commission (APC) introduced various price policies, including procurement at pre-decided prices, minimum support prices, and a distribution system to supply food grains at subsidised rates.
The MSP is not legally enforceable, and farmers have demanded a legal guarantee for it. There are also procurement limitations, as government purchases are concentrated in select states. The implementation of MSP-related policies has been biased, resulting in a decreased focus on diversification and creating shortages in pulses and edible oils.
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Centralization of agricultural markets
The Indian agricultural sector has been characterised by a network of government-regulated wholesale markets, which were established to ensure fair trade and effective price discovery for farmers' produce. These markets are governed by Agricultural Produce Market Committees (APMCs), which have the authority to regulate trade, license buyers and commission agents, levy market fees, and provide the necessary infrastructure for trade.
However, in recent years, there has been a push for reform, with the central government promulgating three ordinances in June 2020: the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Ordinance, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, and the Essential Commodities (Amendment) Ordinance. These ordinances aimed to facilitate barrier-free trade outside APMC markets, create a framework for contract farming, and regulate the supply of certain food items in exceptional circumstances. The ordinances also sought to increase opportunities for farmers to enter long-term sale contracts and attract more buyers, including bulk purchasers.
The centralisation of agricultural markets in India has been a contentious issue. On the one hand, it has been argued that centralisation reduces competition and participation, with high commissions, market fees, and monopoly power of associations damaging the agricultural sector. This led to widespread protests by farmers, particularly smallholders, who feared the loss of government-guaranteed price floors and the potential reduction in crop prices. The protests gained momentum, with farmer leaders demanding the repeal of the laws rather than mere amendments.
On the other hand, supporters of centralisation argue that it is a necessary step towards modernising Indian agriculture and transforming it into a modern national industry. They contend that the previous system of state-regulated markets was restrictive and needed to be more open. The central government has also asserted that the new laws would empower farmers by providing a complete transformation of the agriculture sector.
In response to the protests, the Indian government announced the repeal of the three farm laws in November 2021, with the formal repeal taking place on 1 December 2021. The government acknowledged the need to address farmer grievances and work towards reforms that benefit both farmers and consumers.
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Farmer incomes and suicides
The Green Revolution of the 1960s and 1970s brought about a significant shift in Indian agricultural practices. While it helped rich peasants gain wealth and political power, it came at the expense of small and marginal farmers. The introduction of new technologies, backed by input subsidies, widened the gap between wealthy farmers and their less fortunate counterparts. This dynamic was further exacerbated by national economic reforms in the 1990s, which included reduced public investment in agriculture. The state withdrew funding from vital agricultural support services, leading to a decline in agricultural growth and negatively impacting the livelihoods of those dependent on the sector.
Economic policies have perpetuated the agrarian crisis, with agriculture being recognised as a "relatively unrewarding profession". The National Skill Development Policy, for instance, aimed to reduce the farming population, further contributing to the challenges faced by farmers. Structural changes in macroeconomic policies that favoured privatisation, liberalisation, and globalisation have also been suggested as root causes of farmer suicides. The high cost of expensive genetically modified crops, such as Bt cotton, has pushed farmers into a cycle of debt, taking out substantial loans from private moneylenders with exorbitant interest rates.
Farmer suicides in India gained international attention in the 2000s, with various government initiatives attempting to address the issue. Studies have identified several factors contributing to farmer suicides, including insufficient or risky credit systems, the challenges of farming in semi-arid regions, poor agricultural income, and the absence of alternative income opportunities. The government's lack of interest, the absence of a safety net for farmers, and limited access to information related to agriculture have also been cited as critical factors. Maharashtra has been the state worst affected by suicides in the farming sector, with over 60,000 deaths between 1995 and 2013.
In 2020, the Indian government introduced three agriculture acts aimed at transforming the agriculture sector. However, these bills were met with protests and concerns from farmers, who feared the loss of government-guaranteed price floors for their crops. The laws were eventually repealed in December 2021, but they highlighted the ongoing tensions between agricultural policies and the welfare of farmers in India.
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Antitrust enforcement
In 2020, the Indian government introduced three new farm laws that were met with widespread protests from farmers. The laws were intended to deregulate the system of government-run wholesale markets, allowing farmers to sell directly to food processors. However, farmers feared that this would result in the end of government-guaranteed price floors, reducing the prices they receive for their crops. This issue was exacerbated by the fact that, in many parts of India, farmers are promised a certain price for their grain but have no accessible collection centres nearby where they can sell it.
The laws also failed to address the need for antitrust enforcement to level the playing field for farmers who would be pitted against a few large corporations. Without such regulations, millions of farmers could be forced to sell their products to a small number of big agribusinesses. Furthermore, if a corporation violates a contract with a farmer, the new laws prohibit the farmer from seeking redress in a regular court. This dynamic is similar to monopsony situations, where big corporate buyers have an advantage over suppliers.
The Indian government should have repealed its new farm laws and crafted new legislation that could benefit poor farmers and consumers most of all. This could have been achieved through a careful deliberative process, creating a market that functions freely within the broad parameters set by well-crafted laws.
In response to the protests, the government agreed to repeal the laws in late 2021. However, farmers continued to protest until the laws were officially repealed on 1 December 2021.
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Frequently asked questions
India's farm laws refer to the three acts passed by Parliament in September 2020: the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act.
Prime Minister Narendra Modi described the measures as a "gift" to farmers, claiming they would empower tens of millions of farmers. The laws aimed to deregulate the system of government-run wholesale markets, allowing farmers to sell directly to food processors and outside designated state-regulated areas. They also sought to increase opportunities for farmers to enter long-term sale contracts and attract private investment in the sector.
Farmers feared that the deregulation of wholesale markets would result in the end of government-guaranteed minimum support prices (MSPs), reducing the prices they would receive for their crops. They also believed that the creation of private markets would drive agriculture business away from government markets. The laws were criticised for lacking sensitivity to the need for antitrust enforcement, which would be necessary to level the playing field for farmers who would be pitted against large corporations.
The farm laws inspired sustained and highly polarising protests. In January 2021, the Supreme Court stayed the implementation of the laws and appointed a committee to look into farmer grievances. In November 2021, Modi announced that his government would repeal the laws, and they were formally repealed on 1 December 2021.
