In September 2020, the Indian government passed 3 agricultural reform laws that have sparked massive protests, dominated political discussion and divided opinion. More than 200,000 farmers brave the biting Delhi cold to continue an agitation demanding that the Farm bills be revoked.
The laws seek to create a more open agricultural sector, eliminating regulations that have been blamed for suffocating growth in the agricultural sector for decades. With an emphasis on increasing farmers’ market options and fostering a contract trading system, some academics have welcomed the attempt at cutting through a notoriously complicated web of agricultural laws. Why then do farmers resent these laws so deeply that they are willing to protest for days in the face of water cannons and looming pandemic worries?
What do the farm laws change?
The Farmer’s Produce Trade and Commerce Act allows farmers to trade outside of state-run Agricultural Produce Marketing Committees (APMCs) or mandis, overturning all state-level restrictions on buying and selling produce outside physical markets set up by the government, and allowing farmers to sell directly to private buyers.
The Essential Commodities (Amendment) Act removes barriers to holding and distributing produce such as stock limits which regulate the amount of produce a distributor can store. The act hopes to promote private sector investment in the agriculture sector, where investment has been worryingly stagnant in the recent past.
The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act focuses on facilitating contract trading, where farmers can enter into a direct agreement with a buyer prior to sowing crops, and sell the crop at predetermined prices. For decades the government. The buyer is not required to offer the farmer a minimum support price (MSP), a price floor for essential crops that the government has guaranteed for decades.
Farmers’ worries of dwindling incomes are not unfounded. With 82 percent of Indian farmers classified as small and marginal and continued land fragmentation not helping matters, the balance of power when negotiating terms of trade is likely to tip in favour of private enterprises. Farmers fear they will have to sell their produce at throwaway prices and will lose bargaining power.
Past evidence from similar experiments is not reassuring. In 2006, Bihar, one of India’s poorest states, repealed the Agricultural Produce Marketing Committees, essentially abolishing the mandi system. Although agricultural productivity and private investment was expected to improve, the results were disappointing, with both measures remaining mostly stagnant over the years. In an NCAER study evaluating the policy, farmers mentioned the non-availability of a fair selling price as the main constraint to increasing production.
While the Indian agricultural sector is undoubtedly in need of reform, the implementation of these reforms on the ground level will determine whether they truly improve farmer livelihoods. After pushing the reforms through despite opposition party protests and with a worrying lack of consultation with stakeholders, the government will need to convince farmers that their interests will be safeguarded for reforms to truly bear fruit.
For a more detailed set of resources on the new farm laws, this is a good article: