The Government of India enacted three new farm laws for agriculture in September 2020:
- The Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020;
- The Farmer’s (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020;
- The Essential Commodities (Amendment) Act, 2020
The new Acts have been acclaimed as path-breaking, and a “1991 moment” for agriculture by some and criticized by others who include the key stakeholders, namely farmers who want the laws repealed. Recall that in 1991, then Finance Minister and Prime Minister made it their responsibility to educate parliamentarians and the public about and the need for economic reforms, the difficulties ahead in implementation, and how the country and the general public will cope with them. No such effort has been made in the case of farm laws.
The first first farm law is the most fundamental and critical of the three, as it affects each one of the millions of individual farmers in the country. The second law deals with contract farming and will only affect those who voluntarily choose to enter into a contract with agribusiness. FPOs and resourceful farmers will be the more likely participants. The third law is not even a Farm Law, but essentially an amendment of the existing Essential Commodities Act Act (available on Ministry of Consumer Affairs website and not Ministry Ministry of Agriculture web site). The Third Law removes limits on storage of farm products by traders, which can potentially impact consumer prices and access to food grains by the poor, and therefore has implications for national and household food security. This blog addresses only the first law dealing with marketing of agricultural produce by individual small farmers in a regulation free trade ecosystem.
The general public, and many in the professions, are not fully aware of the nuances of trade in farm produce. So, there is general appreciation of liberalization of agricultural trade promised under the laws, based on impressions of how the 1991 liberalization of industry played out in the national economy. This has led to a biased view of the farmer agitations against the laws and any criticism by concerned professionals. Comparing the farm laws to industry’s ‘1991 moment’ for agriculture is unfair. Agriculture employs over 60 crores people compared to a few million in industry. Industrial employees are also highly skilled workers who could be absorbed immediately in private sector when the government demitted ownership of public sector and liberalized domestic and and foreign investment in industry to encourage competition. Public sector employees were allowed negotiated settlements giving time to acclimatize to new technologies and automation, and also given a generous retirement package which provided a buffer till they found gainful employment. Many of them actually set up their own industry.
In contrast, by the First Farm Act, millions of individual small farmers will be thrown into the open and free trade market with their hands tied, as there is no regulatory oversight over the trade processes and players, nor a social safety net buffer to protect them from price losses. For every other trading platform (eg SEBI/NIFTY for stocks, property, public auctions of art, even the most modest consumer products like a five rupee pack of glucose biscuits sold in small kirana shops, etc.) ), designated public regulators and institutions provide oversightand protection for minimum floor prices (or MRP consumer roducts) , authentication of traders in play, the trading process, and payments transfers, and grievance redress to ensure fair and just trade. All of these are bypassed in the present form of the ACT, or heavily loaded in favour of the trader .