by Nazneen Rahaman
Historically, India has been a leading producer and exporter of agricultural products such as spices, pulses and grains. In the 21st century, India boasts of having a population of over a billion and continues to employ approximately 42% of the population in the agrarian sector in some form or the other. However, suicides and strikes by farmers cast a gloomy shadow on this sector, in turn revealing widespread inequality and lack of substantial government support.
The Indian government officially re-introduced the three now-infamous agricultural reform bills in June of 2020, following the recommendations of the Agricultural Standing Committee of 2018-19. These bills were subsequently passed by the Lok Sabha (Lower House of Parliament) and the Rajya Sabha (Upper House of Parliament) in the latter part of September 2020.
The three farm laws that were passed by Parliament were the following.
i. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020
This law allowed farmers to trade their harvest outside physical marketplaces that extended to online platforms as well. It also allowed farmers to sell their produce directly to consumers which was earlier not permitted. In a major step towards privatisation in the agricultural sector, goods were no longer required to be sold in state-controlled markets. Also, the number of middlemen would reduce significantly which is very beneficial as in the past, they are usually the ones who end up extorting the most amount of money.
ii. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
This law gave farmers the right to form contacts directly with the buyers/consumers, thereby avoiding middlemen (like a mandi which is a marketplace wherein farmers sell their produce through an auction). The law also stated that such agreements could be made even before the sowing season began by mutual agreement on the price being set. A concept known as ‘Contact Farming’ already existed in India which was quite similar in nature, only it had to be approved by the government’s Agricultural Produce Marketing Committees (APMC).
iii. Essential Commodities (Amendment) Act, 2020
This law removed produce like pulses, cereals, oilseeds, oils, onions and potatoes from the list of essential commodities so that buyers could purchase (in bulk), store, and redistribute the goods without any restriction in the future, except during extraordinary circumstances or emergencies like war or famine. This provision came as an amendment to the already existing- Essential Commodities Act, 1955. The only change between the original and amended law was that the aforementioned items were added to the essential commodities list. It also stated that impositions could only be added to the stock limit if there was a steep price rise of either a 100% rise in the retail price of horticulture produce or a 50% increase in the retail price of non-perishable agricultural food items. The increase was to be calculated over the price prevailing during the preceding twelve months, or the average retail price over the last five years, whichever is lower.
Despite the protests of several farmer unions against these laws, the government defended the same by talking about the benefits it would bring to the economy as a whole. Leading national media outlets like India Today stated that the government had presented these laws as reforms akin to the 1991 liberalisation of the Indian economy. The government led by Prime Minister Modi argued that the three laws opened up new opportunities for the farmers as well as increased their earning potential. Defenders of these laws maintained that the new laws will help strengthen the basic farm infrastructure through greater private investments. These laws were also seen to solve the challenge of financial constraints and lack of investment in rural farm infrastructure that was noted by successive governments. It was argued that with food markets growing exponentially in India, private players could make agriculture more profitable for the farmers.
Even though analysts and economists were supporting the government’s intentions and motives, the primary reason why the farmers were not in favour of the acts was due to concerns over the Minimum Support Price (MSP). MSP is the minimum price safety net provided by the government to farmers. It is through this that the government procures farmer produce to give them a guaranteed price, along with an assured procurement market. MSPs were introduced during the Green Revolution in the 1960s and are set such that they offer 50% returns over cost. This mainly benefits paddy and wheat farmers as the government procures only these two commodities in significantly large quantities. This system of MSP has been the central plank that led to India achieving its national goal of food self-sufficiency. The farmers feared the new laws would lead to the abolishment of the MSP (as it was now irrelevant) guaranteed by the government on crops which would leave them at the mercy of multinational corporations. This would in turn imply that there would be no assured income on their produce. However, the MSP system is a politically sensitive subject and financially unviable for the government. Some economists have called the MSP system of India one of the costliest government food procurement programmes in the world.
Like most things, these laws also proved to be a double-edged sword. Although it can’t be proven now, the Indian government had predicted that the passing of the bills could potentially lead to the average monthly income of farmers to double. This perhaps could have been possible as the laws would have empowered farmers through greater market access and expanded opportunities for commercial outcomes. For instance, by eliminating the APMC monopoly, the laws would’ve done away with the long-standing challenge of middlemen. These bills could’ve also led to an open market, enabling improved price discovery, supply chain efficiencies and dynamic market linkages.
On the other hand, by loosening the grip of APMCs, the government risked the possibility of farmers receiving prices below the MSP which has been the primary concern of the farmers which sparked the protests against the laws. Another downside would’ve been the lack of transportation facilities as the farmers are barely compensated for their produce which is why a considerable proportion of them aren’t able to transport their crops to vendors, wholesale markets and middlemen.
In support of the government’s proposition to privatise agriculture, there was plenty of theoretical evidence that showed that the farm laws would boost the country’s economy and provide support to the farming industry. There were even independent parties like Gita Gopinath, Deputy Managing Director of the International Monetary Fund who in support said, “The farm bills and labour bills are very important steps in the right direction”. Numerous academics from various Indian educational institutes like Delhi University and Jawaharlal Nehru University too openly favoured the laws.
Nonetheless, the farmers strongly opposed these laws. On 24th September 2020, protests started with farmers in Punjab announcing a three-day “rail roko” (railways strike). After seeing this initiative, farmers across the nation joined the streets under the leadership of the All India Kisan Sangharsh Coordination Committee (AIKSCC). Protests all over India started becoming frequent and unwilling participants were being dragged into this issue due to road blockades (especially in Northern India).
Some of these protests like in Delhi became increasingly violent and dangerous. The protests continued even with the catastrophic second wave of coronavirus in India, prompting the government to take strict action and measures. On the 26th of November, the police started retaliating by using water cannons and tear gas.
Upon realising the gravity of the situation, the Home Minister, Amit Shah suggested having talks regarding the laws with the leaders of the farmer unions, provided they back down from the nation’s capital and restrict their protests to designated areas. This offer was rejected by farmer unions. From the 3rd of December, negotiations finally began between the government and farmers, however, both the parties reached an impasse. All amendments being offered by the government were constantly being rejected and the farmers called for a Bharat Bandh or an all-nation strike. They also appealed to the Supreme Court to use its power of judicial review and strike down the three laws. While the court arranged for a panel of representatives to study these “controversial” laws, they finally ruled in favour of the implementation of the laws on 12th January 2021.
On India’s Republic Day, the country witnessed a surge of violent clashes of thousands of protesters with law enforcement agencies in multiple states. The government attempted to blame all this on inaccurate and unverified news being shared across social media. Social media accounts of popular activists and celebrities who were in opposition to these laws got banned or were called into the cyber-crime division in a bid by the government to stop these widespread protests. After these protests continued for over a hundred days, the Deputy Chief Minister of Haryana wrote to the Prime Minister, urging him to resume talks with the farmers to finally put an end to all this.
Finally, on the 19th November 2021, the Prime Minister repealed the farm laws in an address to the nation after several months of protests, strikes and unrest especially at the borders of Delhi. All protests were called off by farmer unions at the beginning of December 2021, with the police cases against the protesters being withdrawn. The farmers were able to return home and resume their lives after months of anguish.
I don’t think there has ever been a fool-proof law, there are always some loopholes. While the farm laws had the potential to greatly aid farmers, the ones whom the law concerned did not approve of it, so they were repealed. Even though we may never know if the laws would have been beneficial to the agricultural industry or not, at least the government did act democratically and heard the people’s concerns, and acted on them.
“The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.”