Repealing Farm Laws

• 22 Nov 2021

Why in News

Recently, the Prime Minister announced the repeal of the three contentious farm laws.

• The Parliament ( Lok Sabha + Rajya Sabha + President) has the authority to enact, amend, and repeal any law.
• The farm laws had witnessed protests from farmers, mainly from Punjab and Haryana, on the borders of Delhi for more than a year.

Key Points

• Three Farm Laws:
  
  • Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020: It is aimed at allowing trade in agricultural produce outside the existing APMC (Agricultural Produce Market Committee) mandis.
  • Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020: It seeks to provide a framework for contract farming.
  • Essential Commodities (Amendment) Act, 2020: It is aimed at removing commodities such as cereals, pulses, oilseeds, edible oils, onion and potato from the list of essential commodities.
• Reason for Enacting the Laws:
  
  • There has been a long-pending demand for reforms in agricultural marketing, a subject that comes under the purview of state governments.
  • The Centre took the issue up in the early 2000s by pushing for reforms in the APMC Acts of the states.
  • The Agriculture Ministry under the then government designed a model APMC Act in 2003 and circulated it among the states.
    
    • The subsequent government, too, pushed for these reforms. But given that it is a state subject, the Centre has had little success in getting the states to adopt the model APMC Act.
  • It was in this backdrop that the government went for reforms in the sector by passing these laws.
• Reasons Behind Farmers Protest:
  
  • Repealing the farm laws: The first and foremost demand of the protesting farmers’ organisations is the repeal of three new agricultural laws.
    
    • As per the farmers the law is framed to suit big corporations who seek to dominate the Indian food and agriculture business and will weaken the negotiating power of farmers. Also, big private companies, exporters, wholesalers, and processors may get an edge.
  • Minimum support price: The second demand of farmers is the guarantee of Minimum Support Price (MSP) to ensure procurement of crops at a suitable price.
    
    • The Farmers are also demanding to get a written assurance in the form of a Bill for the continuation of the MSP and conventional food grain procurement system.
    • The Farmers’ organisations want the APMC or the Mandi System to be protected.
  • Electricity (Amendment) Bill: The third demand of farmers is the withdrawal of the Electricity (Amendment) Bill, as they feel that they won’t get free electricity due to this.
  • Swaminathan Commission: The Farmers are demanding MSP as recommended by the Swaminathan Commission.
    
    • The Swaminathan Commission Report states that the government should raise the MSP to at least 50% more than the weighted average cost of production. It is also known as the C2+ 50% formula.
    • It includes the imputed cost of capital and the rent on the land (called ‘C2’ ) to give farmers 50% returns.
• Staying the Implementation:
  
  • The Supreme Court stayed the implementation of the three laws in January 2021.
    
    • The farm laws were in force for only 221 days — June 5^th 2020, when the ordinances were promulgated to January 12^th 2021, when the Supreme Court stayed their implementation.
  • Since the stay, the laws have been suspended. The government has used old provisions of the Essential Commodities Act, 1955 to impose stock limits, having amended the Act through one of the three farm laws.
• Impacts of Repealing the Law:
  
  • Need of Consultation:
    
    • The repeal underlines that any future attempts to reform the rural agricultural economy would require a much wider consultation, not only for better design of reforms, but for wider acceptance.
    • The repeal would leave the government hesitant about pursuing these reforms in stealth mode again.
      
      • The government will doubtless have to walk the path of reform very cautiously.
  • Low Farmers Income:
    
    • Given that the average holding size stands at just 0.9 ha (2018-19). Unless one goes for high-value agriculture — and, that’s where one needs efficient functioning value chains from farm to fork by the infusion of private investments in logistics, storage, processing, e-commerce, and digital technologies — the incomes of farmers cannot be increased significantly.
    • There is no doubt that this sector is crying for reforms, both in the marketing of outputs as well as inputs, including land lease markets and direct benefit transfer of all input subsidies — fertilisers, power, credit and farm machinery.
  • Negative Impact on Industries:
    
    • Industries including logistics, cold chain, agri-related, and farm equipment would be impacted the most because they were supposed to be the direct beneficiaries of these laws.
  • Constant Agri-GDP:
    
    • The agri-Gross Domestic Product (GDP) growth has been 3.5% per annum in the last 14 years. One expects this trend to continue — there might be minor changes in the agri-GDP depending on rainfall patterns.
    • Cropping patterns will remain skewed in favour of rice and wheat, with the granaries of the Food Corporation of India bulging with stocks of grain. The food subsidy will keep bloating and there will be large leakages.

Way Forward

• On a positive note, the tryst with the farm laws could provide important lessons to the government. The most important lesson being that the process of economic reforms has to be more consultative, more transparent and better communicated to the potential beneficiaries.
• It is this inclusiveness that lies at the heart of democratic functioning of India. It takes time and humility to implement reforms, given the argumentative nature of our society. But doing so ensures that everyone wins.

Source: IE