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for agriculture by some and criticized by others who include the key stakeholders, namely farmers who want the laws repealed. The first law is the most fundamental and critical of the three, as it affects all farmers. The second law on contract farming will only involve those who voluntarily choose to enter into a contract with agribusiness. The third law is essentially an amendment of the existing Act to remove limits on storage of farm products by traders, which can potentially impact consumer prices and access to food grains with implications for national and household food security. This blog addresses the first law dealing with marketing of agricultural produce 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 public sector industry. Public sector Industrial employees are also highly skilled workers who could be absorbed immediately in private sector when the government demitted ownership. They were also given a generous retirement package which provided a buffer till they found gainful employment. Many of them actually set up their own industry.
By this Act, individual 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 losses. For every other public trading platform (eg SEBI/NIFTY for stocks, public auctions of art or property, etc. ), designated public regulators provide oversight for minimum floor prices, authentication of traders, the trading process, and payments transfers, to ensure fair and just trade.