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. After having been approved by the Lok Sabha and the Rajya Sabha, the President of India gave his
assent to the bills on 27 September 2020. According to the ruling government, these acts are reforms to accelerate
growth in agriculture through private investment.
It intends to support small farmers in attracting better deals and investment in technology to improve productivity.
Since 26 November, farmers from Punjab and Haryana have laid siege to the national capital. They are protesting against
recently passed Farm BillsThese bills lay the framework for allowing farmers to sell produce directly to corporates,
argues the CentreFarmers fear that this may be an excuse to pull off the MSP safety net from under their feet .
Since the passing of the law, there has been a massive protest by farmers which led to the staying of the law by the
Supreme Court in January 2021 for redressal of farmers’ grievances.

Minimum Support Price (MSP) system

It is a system of agriculture in India, in which government declares the purchase price of certain crops and
guarantees them in case the farmer is unable to garner such prices in the open market.

Objectives of introducing the MSP system are:

o To provide price support to the farmers
o To procure the food grains for the public distribution system (PDS)
o To build a buffer of the food grains for ensuring the stability of prices in cases of scarcity induced due
to a natural or man-made calamity.

Certain shortcomings which have resulted out of the MSP system:

o Over-production of the supported crops like wheat and rice
o Destruction of biodiversity as the farmers are induced to grow the same high-yielding crops
o Under-production of the other non-supported crops like pulses
o Land degradation due to the lack of crop rotation practices and the over-use of fertilisers and
pesticides
o Artificial inflation caused due to the price support, which ultimately affects the people with low
purchasing power
o Over-exploitation of groundwater, induced by the electricity subsidy

 The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, allows farmers to
sell their harvest outside notified APMC mandis without taxes.
 The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill,
2020, facilitates contract farming and direct marketing.
 The Essential Commodities (Amendment) Bill, 2020, deregulates the production, storage, movement and
sale of cereals, pulses, edible oils and onion.

Farm Bill allows farmers to sell their produce outside the APMC regulated markets. The APMCs and MSP were created
during the Green Revolution in an era of food grain scarcity. However, APMC has become a state cartel that is
deliberately fixing low prices for agri-products and forcing distress sale by farmers. India is now a surplus producer of
food grains. The Farm Bills will defeat the monopoly cartel at the APMC mandi and farmers can sell the produce
anywhere to anyone.
Farmers are free to make contracts and transfer risk to businessmen in deals made over a crop even before yield is
made or met.

The three laws aim to change the way agricultural produce is marketed, sold and stored across the country. They are
mostly focussed on the forward linkages to the agricultural sector.

Government’s stated intentions behind the introduction of bills:

• Doubling Farmers’ Income: The government has stated that the acts would strengthen the agriculture and are in
the direction of its stated policy objective of doubling farmers’ income. The government says that the acts
would decrease the farmers’ dependence on the state controlled APMC mandis and would lead to better price
discovery of food grains.
• Encouraging competition: The act attempts to improve productivity and efficiency and to provide better
products to the consumers by allowing for the entry of the private businesses in Agriculture. The aim of the bills,
in general, is to introduce competition in trade and marketing. This is manifest in the proposal to increase stock
limits and freedom to sell the produce directly to the consumer, instead of going through the APMC route.
• Reduced wastage of resources: There have been media reports in the past showing food grains being wasted in
FCI warehouses and godowns. It is expected that private warehouses would be more proactive in elimination of
such wastages as this will enhance the return on investment.
• Expansion of farming: The bills attempt to introduce innovation and ease the entry of corporates which can be
expected to take initiatives related to the development of new markets and encouragement of the adoption of
the exotic species of crops in the Indian agriculture.
• Encouragement to innovation: The bills are expected to bring in an element of innovation in agriculture by
providing a base for the youth to reinvent their entrepreneurship skills in agriculture and make it more
remunerative. There are myriad opportunities in agriculture, which need to be exploited. For e.g., there is a
growing realisation in urban areas of the benefits of consuming organic foods. This can be exploited to produce
high value, chemical-free food to be supplied to such areas.
• Investment opportunity: Agriculturists have always complained about the lack of funds and the inability
to access capital for investment and making agriculture more remunerative. Advent of corporates will fulfil the
need for the required expansion of the capital base in agriculture.
• Assured demand: The private sector will also create an assured demand for the farmers. This is because the
private sector banks upon the economies of scale, which would require regular procurement and assured
supplies.
• Promotion of Research: By its very nature, the private sector has more inclination to invest in the research to
augment productivity and increase the profits. This will lead to the demonstration of best practices to farmers
and would lead to the adoption of new technologies that are expected to enhance profits for the farmers.
• Formalisation of informal contracts: Contract farming is already in prevalence in the country between the
farmers and the agro-enterprises. The bill is only an attempt to formalise the system to prevent exploitation of
the farmers and provide them an avenue for dispute resolution.

A. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act,
2020:
The act aims at opening up agricultural sale and marketing outside the notified Agricultural Produce Market Committee
(APMC) mandis for farmers, removes barriers to inter-State trade and provides a framework for electronic trading of
agricultural produce. It expands the scope of trade areas of farmers’ produce from select areas to “any place of
production, collection, aggregation”.
It prohibits state governments from levying any market fee, cess, or levy on farmers, traders, and electronic trading
platforms for the trade of farmers’ produce conducted in an ‘outside trade area’.
The act seeks to break the monopoly of government-regulated mandis and allow farmers to sell directly to private
buyers.

ADVANTAGES

Addressing the gap of APMC acts:

The law related to the regulation of Indian agricultural markets like the Agricultural Produce Market Committees (APMC)
act had led to centralization and was thought to be reducing competition and participation, with undue commissions,
market fees, and monopoly of associations damaging the agricultural sector.
The act seeks to break the monopoly of government-regulated mandis and allow farmers to sell directly to private
buyers by circumventing the APMCs. The new laws provide full autonomy for farmers to sell their produce.

Higher price realization for farmers:

The act is expected to increase the freedom of choice of sale of agri-produce for the farmers and this could help the
farmers in getting a better price for their produce because of more choices of markets. This would allow small and
marginal farmers to sell their produce at market and competitive prices.
The act allows for private players to buy the farmers’ produce even at their farm gates. This will allow the farmers to get
better prices through competition and cost-cutting on transportation.
The farmers will be able to get a greater share of the price being paid by the customers, which currently stands at a
lowly 15%.
This would help raise rural incomes and subsequently provide an impetus to the economy at large due to the increased
demand from the rural areas.

One India, one agricultural market:

It is expected to pave the way for the creation of a ‘One India, One Agriculture Market’ by promoting barrier-free inter-
state and intra-state trade with provisions of electronic trading as well. This could help correct the regional disparities in
demand and supply of the agricultural produce. This could help farmers of regions with surplus produce to get better
prices and consumers of regions with shortages, lower prices.

B. Farmers (Empowerment and Protection) Agreement on Price

Assurance and Farm Services Act, 2020:
It creates a national framework for contract farming. It provides a legal framework for farmers to enter into written
contracts with companies and produce for them.
The written farming agreement, entered into prior to the production or rearing of any farm produce, lists the terms and
conditions for supply, quality, grade, standards and price of farm produce and services.
It defines a dispute resolution mechanism. The Act provides for a three-level dispute settlement mechanism–
Conciliation Board, Sub-Divisional Magistrate and Appellate Authority.

ADVANTAGES

Risk mitigation:
Contract farming will help small and marginal farmers transfer the risk of market unpredictability from the farmer to the
sponsor.
It reduces the risk of price and marketing costs on small and marginal farmers.

Better price discovery:

Contract farming will help farmers reduce the cost of marketing and improve their incomes.
Farmers will engage in direct marketing thereby eliminating intermediaries resulting in the better realization of price.
Scope for increasing farm productivity:
Contract farming will enable the farmer to access modern technology and better inputs. This would allow farmers to
increase farm productivity and also reduce input costs.
Contract farming agreements between companies and farmers are already operational in crops of particular processing
grades (the potatoes used by beverages and snacks giant PepsiCo for its Lay’s and Uncle Chips wafers) or dedicated for
exports (gherkins). The processors/exporters in these cases typically not only undertake assured buyback at pre-agreed
prices, but also provide farmers with seeds/planting material and extension support to ensure that only produce of the
desired standard is grown.

Impetus to private sector participation:

The act seeks to encourage private sector participation in procurement and reduce the government burden of procuring.
Contract farming can ensure uninterrupted sources for their production and also secure the purchaser from market
price fluctuations.

Legal framework protecting farmer interests:

The legal framework for contract farming will empower farmers to engage with the contract buyers on a level playing
field without any fear of exploitation. The mutually agreed remunerative price framework is envisaged under the act.
This provision is touted to protect and empower farmers.
Sale, lease or mortgage of farmers’ land is totally prohibited, and farmers’ land is also protected against any recovery.
Farmers have been provided with adequate protection.
An effective dispute resolution mechanism has been provided with clear timelines for redressal.

C. Essential Commodities (Amendment) Act, 2020:

It removes cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities. It will
deregulate the production, storage, movement and distribution of these food commodities.
It will also remove stockholding limits on such items except under “extraordinary circumstances”. The central
government is allowed regulation of supply during war, famine, extraordinary price rise and natural calamity of grave
nature and annual retail price rise exceeding 100% in horticultural produce (basically onions and potatoes) and 50% for
non-perishables (cereals, pulses and edible oils), while providing exemptions for exporters and processors at such times
as well.
It requires that imposition of any stock limit on agricultural produce be based on price rise.
It will allow agribusinesses to stock food articles and remove the government’s ability to impose restrictions arbitrarily.

ADVANTAGES

Addressing the loopholes in ECA, 1955:

The Economic Survey 2019-20, which has extensively analyzed the Essential Commodities Act, notes that the
government intervention under the ECA 1955 often distorted agricultural trade while being totally ineffective in curbing
inflation.
Since large stocks held by traders can be outlawed under the ECA 1955 anytime, they tend to buy far less than their
usual capacity and farmers often suffer huge losses during surplus harvests of perishables. The threat of restrictions also
acts as a disincentive for private investment into cold storage, warehouses, processing and export as entrepreneurs get
discouraged by the regulatory mechanisms in the Essential Commodities Act, 1955.
Such laws also restrict opportunities to export even when global crop prices go up.

Attracting private investment:

The deregulation through ECA amendment will help attract private sector/foreign direct investment into the agriculture
sector.

Improve the forward linkage infrastructure:

The incoming private sector investment would help build supply chain infrastructure for the agricultural sector. This
could help facilitate the supply of Indian farm produce to national and global markets.

The incoming private sector investment would help build supply chain infrastructure for the agricultural sector. This
could help facilitate the supply of Indian farm produce to national and global markets.

❖ The Farmers’ Produce Trade and Commerce (Promotion and Facilitation)

Act, 2020
Reason(s) for Protest
Against the spirit of federalism:
• Since agriculture and markets are State subjects – the acts are being seen as a direct encroachment upon the
functions of the States and against the spirit of cooperative federalism enshrined in the Constitution.
Fears with respect to MSP system:
• Farmers fear that the new proposed system will end the minimum support price regime. They fear that
encouraging tax-free private trade outside the APMC mandis will make these notified markets unviable, which
could lead to a reduction in government procurement itself.
• The creation of private mandis will drive agriculture business towards private mandis, ending government
markets, intermediary systems and APMCs. In a scenario where more and more trading moves out of the
APMCs, these regulated market yards will lose revenues.
• As a result, big corporate houses will overtake markets, thereby procuring farm produce at incidental rates.
Critics view the dismantling of the monopoly of the APMCs as a sign of ending the assured procurement of food
grains at minimum support prices (MSP). This could lead to the increasing clout of private buyers and could lead
to low bargaining powers of the farmers.
• Lack of statutory support in the acts for the MSP is a major point of concern, especially for farmers
from Punjab and Haryana, where 65% of wheat (2019) is procured at MSP by the Food Corporation of India and
state agencies.
Effect of middlemen:
• Middlemen working with APMC and traders will be affected.

Government Response/ Argument against the reason(s)

• The Centre, however, argued that trade and commerce in food items is part of the concurrent list, thus giving it
constitutional propriety.
• MSP is an incentive not a right: Even though the MSP might be beneficial for a section of the farmers only, the
cost of MSP itself is very high for the country as a whole. MSP was given to the farmers as an incentive to
prevent them from exploitation, it cannot be mandated as a right.
• It is an artificially high price which hurts the population who does not cultivate these crops but is poor; e.g.
landless labourers, small & marginal farmers in villages who are also the net buyers of the food grains.
• Currently, MSP is declared for 23 crops before the sowing season. However, government only purchases paddy,
wheat and select pulses in large quantities, and only 6% of farmers actually sell their crops at MSP. Government
was willing to give a written assurance but farmers are not for it.

❖Farmers (Empowerment and Protection) Agreement on

Price Assurance and Farm Services Act, 2020
Reason(s) for Protest
Challenges to farmers:
• The inability of the small and marginal farmers to understand the terms of the contract may lead to the
exploitation of such farmers.
• The lack of bargaining power of farmers with big companies is also a major concern.
• Critics are apprehensive about formal contractual obligations owing to the unorganised nature of the farm
sector and lack of resources for a legal battle with private corporate entities.
Lack of price fixation mechanism:
• The Price Assurance Act, while offering protection to farmers against price exploitation, does not prescribe the
mechanism for price fixation. There is apprehension that the free hand given to private corporate houses could
lead to farmer exploitation.

Government Response/ Argument(s) against the reason(s)

• Contract farming is already in prevalence in the country between the farmers and the agro-enterprises. The bill is
only an attempt to formalise the system to prevent exploitation of the farmers and provide them an avenue for
dispute resolution.
• The bill aspires to resolve the disputes at the local level itself to decrease the reliance upon the judiciary
• The act explicitly prohibits any sponsor firm from acquiring the land of farmers – whether through purchase,
lease or mortgage.
• The point to note is that contract cultivation is voluntary in nature and farmers cannot be forced into an
agreement.
• The legal framework for contract farming will empower farmers to engage with the contract buyers on a level
playing field without any fear of exploitation. The mutually agreed remunerative price framework is envisaged
under the act.

❖Essential Commodities (Amendment) Act, 2020

Reason(s) for Protest
Increased threat of food insecurity:
• Critics anticipate that the easing of regulation of food items would lead to exporters, processors and traders
hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when
prices increase. This could undermine food security.
Increased volatility of food items:
• Critics anticipate irrational volatility in the prices of essentials and increased black marketing.

Government Response/ Argument(s) against the reason(s)

Centre is within its rights to frame laws that promote barrier-free trade of farm produce (inter- as well as intra-state)
and do not allow stockholding or export restrictions. But these can be only after the farmer has sold. Regulation of the
first sale of agricultural produce is a “marketing” responsibility of the states, not the Centre.
The central government is allowed regulation of supply during war, famine, extraordinary price rise and natural calamity
of grave nature
The incoming private sector investment would help build supply chain infrastructure for the agricultural sector. This
could help facilitate the supply of Indian farm produce to national and global markets.

Other objections to the bills:

Decline in the states’ revenue: The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance
prohibits the states from collecting any kind of tax, levy or fee on the sale of agricultural produce, outside the mandis.
The states have pointed out that this provision would lead to a significant loss for them and dry up their revenues.
Mandis bring in revenue for state governments. The diversion of agricultural trade towards private mandis could lead to
the loss of states’ revenues. Some states are concerned about the loss of revenue from mandi taxes and fees, which
currently range from 8.5% in Punjab to less than 1% in some States.
Upper hand to the businesses: The farmers are apprehensive of the lack of negotiating power in front of the corporates.
They believe that the companies would be able to dictate prices of the commodities against the disorganised farmer
groups.

Lack of Consultation: First the ordinance route and now the hastily attempt to pass the Bills without proper consultation
adds to the mistrust among various stakeholders including farmers.
Also, by allowing ‘trade zones’ to come up outside the APMC area, farmers have become apprehensive that the new
system would lead to eventual exit from the minimum support price.

➢ The move to enlarge the market for agricultural produce is welcome but this should be supplemented by
measures that will help preserve the existing ‘safety net’ mechanisms like MSP and public procurement.
➢ Though a farmer will have the freedom to choose where he/she wants to sell, he/she may not have the
knowledge to negotiate the best terms with a private company. The state should work towards empowering the
farmers in this direction.
➢ The government must create enabling infrastructure to enable the farmers to do barrier-free trading of
agricultural commodities.
➢ The method of determining prices, including guaranteed price and additional amount, should be provided in the
agreement as annexures. The government must ensure suitable provisions to ensure that the prices are not
below the MSP.
➢ In case of prices subjected to variations, the contract agreement must include a guaranteed price to be paid for
such produce, and a clear reference linked to the prevailing prices or any other suitable benchmark prices for
any additional amount over and above the guaranteed price, including bonus or premium.
➢ There should be time-bound redressal of grievances.