Farm Bills 2020: Gains and Losses

Dr Debabrata Sutradhar, HoD, Dept of Economics

The government of India, under the prime ministership of Mr. Narendra Modi introduced three major farm reforms in the agricultural sector with the vision of creating ‘One India, one Agriculture Market’. The objective of this ambitious reform is to provide an opportunity for farmers to sell their produce anywhere in the country without any restriction. The prime minister of the country stated that  the new farm bills will liberate the farmers from the chain of government regulation, exploitative middleman and money lenders. The new farm bills passed by the both houses of Indian Parliament are: 1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, 2. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020, and, 3. The Essential Commodities (Amendment) Bill, 2020.

The first bill seeks to provide freedom to farmers to sell their produce anywhere in the country. It will break the monopoly of the state owned Agriculture Produce Market Committee (APMC). The APMCs were set up to protect farmers against middlemen and money lenders, but unfortunately over a period of time APMC itself became an institution of exploiting farmers. The new bill allows private mandis (agricultural market) to be set up anywhere in the country and farmers would be free to sell their produce in the private mandis. In India there are about 7300 APMC functioning in the entire country under the respective state government regulations. Until now, if the farmers wanted to sell their produce in the government determined price also known as Minimum Support Price, it is only possible through APMC mandis, where government licensed holder arthiyas (commission agent) help the farmers to sell their produce in return for government determined commission. In India only 6 percent of farmers can sell their produce at MSP, that’s only a handful of farmers’ benefits from MSP, while the majority of farmers consisting of small and small medium farmers remain outside the MSP system. Only 36 percent of the medium and large farmers sell their produce in the APMC mandis.  Also, it is difficult for the farmers to sell the produce at a price higher than MSP, due to the cartelization of price by the middleman in the APMC market. These middlemen force the farmers to sell at the MSP price set by the government. A vast majority of the small farmers sell their produce in the local market at price determined by the buyers. The new bill sought to bypass APMC and set up mandis(agricultural market) to be operated by private individuals without any government regulated price. 

The second bill relates to contract farming, providing framework on trade agreements between farmers and the corporate. The written farming agreement should be done prior to the sowing of seeds and should include mutually agreed price, quality and grade of farm produce. This bill will enable farmers to enter into an agreement with buyers for a minimum period of one crop, or one production cycle of livestock to a maximum period of five years. In case there is a dispute between farmers and the corporate firms, the matter may be initially reported to the sub-divisional officer for resolution and later the parties may approach the District Magistrate for the final dispute settlement. The District Magistrate has to settle the dispute within 30 days and may impose stringent penalties on the private corporation while no penalty for the farmers.

Third bill seeks to deregulate commodities such as cereals, pulses, oilseeds, edible oils, onions and potatoes. These commodities will be regulated by the central government under extraordinary circumstances such as war, famine, extraordinary price rise, natural calamity of severe nature. The move is expected to attract private investment in the value chain of these commodities. This will allow agri-business to stock food articles and remove the government’s ability to impose restrictions arbitrarily.  

Cause of concern for the farmers:
Firstly, farmers are of the opinion that overtime MSP and APMC will be removed. Though the central government assured the farmers that MSP and APMC will continue to exist along with private mandis. Farmers are demanding inclusion of MSP for the private mandis. Secondly, there is apprehension that farmers will be exploited by the big corporate. Small farmers would be at the mercy of corporations without any bargaining power. Moreover in case of dispute, bureaucrats are supposed to settle the matters. Farmers do not have the right to approach the judiciary.

Most of the Indian farmers being poor and illiterate, lack the means to fight against corporate houses. Thirdly, APMC being a state government regulated is a source and the government gets commission on every quantity of commodities traded, the state government will lose a large chunk of earning revenue. After the implementation of the new bill, less source of revenue will dry down. Hence some state governments are against the new bill.  Fourthly, changes in the Essential Commodities Act will help the hoarder and black-marketers in the country.  Fifthly, a number of people are employed in the APMCs as clerks, labourers, accountants, arthiyas and series of middlemen. The new bill will affect employment of these people.

Opportunities for the farmers:
The farm reform which claimed to have ‘one nation one market’ is a step towards a free market in the farm sector. This bill will introduce competition between existing APMC and the upcoming private mandis. The farmers will have a choice between the two different markets. Also, corporate will have the opportunity to buy directly from the farmers. Also the present system of trading major agricultural produce via APMC involves a series of middlemen which tends to raise the price of agricultural produce. In absence of such middle men and a stiff competition among corporates, it might lead to a decrease in the prices of agricultural commodities which ultimately will benefit the farmers and consumers. The contract farming gives assurance to the farmers of good return. This will motivate the farmers to produce more. The Essential Commodities Act will encourage private investment in creating infrastructure such as cold storage, warehouse etc. It will help to store excess produce during bumper harvest and supply it during lean season.

New farm is needed for the hour as the present system of regulated market and MSP is benefitting only the rich, large and medium farmers. But the new farm bill does not address the needs of the small and medium farmers who are vulnerable under APMC and MSP structure.

With passage of new farm bills, farmers are left free without any protection from the government. Bihar abolished APMC market in 2006. In absence of a regulated market no significant change took place in terms of agricultural infrastructure and development of the farmers. Farmers are selling their produce at a price determined by the buyer which is below MSP. The new farm bill does not guarantee that after setting up private mandis, the condition of small farmers will improve.   

Degree of Thought is a weekly community column initiated by Tetso College in partnership with The Morung Express. Degree of Thought will delve into the social, cultural, political and educational issues around us. The views expressed here do not reflect the opinion of the institution. Tetso College is a NAAC Accredited UGC recognised Commerce and Arts College. The editors are Dr Hewasa Lorin, Dr Aniruddha Babar, Nisha Dahiya and Meren. For feedback or comments please email: