Repeal of farm laws

Penned by Sakshi Sharma

INTRODUCTION

Prime Minister Narendra Modi startled the entire nation last Friday by announcing the repeal of the 3 farm laws. The laws introduced in September 2020 were withdrawn, in a shocking turn of events, after almost a year long struggle with the farming bodies. Why did this move come about so suddenly? Does it have anything to do with the upcoming elections in U.P., Punjab? Is it to keep the rising popularity of Rakesh Tikait in check? Is it a move to win support and forge an alliance with the Akali Dal? Is it simply a tactical retreat? Well, the intent behind the move remains largely unclear. The decision, however, is sure to have enormous implications for the Indian economy.

ECONOMIC IMPLICATIONS

To understand what the repeal means w.r.t each bill, it is worthwhile to look at how the laws could have revolutionized the agricultural sector as well as the Indian economy.

1. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

This bill aimed to liberate the farmers by providing them the opportunity to sell their produce beyond the physical premises of the APMC markets. Additionally, the provision of alternative trading channels, electronic trading and abolition of market fee (like cess) gave greater autonomy and (possibly) ensured an increased income for the farmers. Moreover, the reform would have reduced the monopoly of the traders and ensured movement of produce from surplus to deficit regions, thereby ensuring greater food availability.

The repeal inhibits the growth of the agricultural sector as the status quo remains unchanged. Farmers would still be restricted to the APMC mandis, subject to the mercy of the middlemen. The paltry rural income of Rs 13000 (roughly) would remain constant unless some other reform which propels high-value agriculture is put in place. More so, it would become increasingly difficult to implement such a high-value scheme as these schemes typically require huge investments in logistics, storage, processing etc. Under the bill, these investments could have been made with relative ease by the private sector. 

2. The Farmers (Empowerment and Protection) Agreement on Price Assurance & Farm Services Bill, 2020

This bill facilitated the creation of a farming agreement between a farmer and a buyer prior to the production or rearing of a farm produce. The bill specified the pricing mechanism, minimum and maximum period of contract, and a dispute resolution mechanism. This would have helped reshape the farming sector by transferring the risk from farmers to sponsors, providing farmers access to high quality seeds, pesticides etc., and linking the farms to global markets (through contractual agreements between farmers and MNCs, increased investment from the private sector). The bill also had the potential of turning simple farm produce into potential billion dollar brands. Rajgira, amaranth, and other high-protein Indian grains, for instance, could have been introduced on the global forum. Given the world’s current obsession with keto-diet/ protein- rich foods, the grains could have been a tremendous hit. Just like Peru marketed quinoa on the global forum, the bill would have provided an avenue to the Indian producers to do the same with these grains.

The main cause of worry, though, was that the govt. would lose control over the prices and MSP (Minimum Support Price) would become obsolete. This in turn would lead to greater exploitation as their bargaining power would reduce and they would be exposed to inequitable contracts.

So, what essentially does the repeal do? The effect seems to be obscure. While it hinders the opportunities available, on one hand; it also protects the farmers by not exposing them to increased competition, unfair contracts etc. Moreover, all the positives listed above were mere anticipations; things could have taken a turn for the worse as well. The ambiguous dispute resolution mechanism, for instance, could have fueled greater private sector exploitation; thereby worsening income inequality and poverty. Furthermore, with the demand for a remunerative MSP still looming, the net effect seems to be dubitable.

3. The Essential Commodities (Amendment) Bill, 2020

This amendment deregulated the production, storage, movement, and sale of several commodities, like cereals, pulses, edible oils etc. except in the case of unusual circumstances like war, famine etc. The imposition of stocking limits was also removed under this bill. This would have helped improve the cold storage, warehouses, processing facilities, which consequently would have facilitated wastage reduction during storage. Additionally, the issue of harassment of businessmen and traders on account of produce spoilage, quality problems would be reduced with this bill in place.

The bill also had a few ramifications associated with it. The removal of stocking limits, for example, could have led to increased hoarding, which would have led to artificial price fluctuations and lower prices for farmers after the process. This would have defeated one of the core purposes of the reforms, which was to improve the income of the farmers. 

CONCLUSION

Did the government do the right thing by repealing the laws? The consensus appears to be mixed. On one hand, there are people who feel that the agricultural reforms were long overdue and detrimental to the economic growth of the country. Repealing of the laws, they argue, has derailed the government from its reformist path. On the other hand, there are people who feel that the laws were vague and wouldn’t have led to a substantial change for the farmers as well as the economy. This group is, though, insistent on getting the MSP legislated. Will the government accede to the demands? The future of the legislation seems to be indefinite but the repeal has surely provided a boost to the farming bodies, which would now vouch even strongly for the MSP issue.

While opinion seems to be divided over the repeal, there is an unopposed belief that the agricultural sector does need a structural transformation (since it employs 44% of the workforce but only contributes to 16% of the GDP). How the government plans to drive change in the farming sector, in the face of increasing protests, unrelenting bodies is something we would have to wait and see.

REFERENCES

• https://indianexpress.com/article/opinion/columns/farm-laws-repeal-farmers-agitation-7631937/
• https://timesofindia.indiatimes.com/blogs/The-underage-optimist/power-of-the-status-quo-on-the-new-farming-laws-why-change-is-scary-but-we-must-still-do-it/
• https://www.firstpost.com/india/five-reasons-why-pm-modis-rollback-of-farms-is-politcally-noxious-and-logically-unjustifiable-10151161.html
• https://timesofindia.indiatimes.com/blogs/The-underage-optimist/global-brands-indian-farms-listen-to-those-who-actually-work-on-farm-reforms-not-just-twerk/
• https://www.jagranjosh.com/general-knowledge/farm-bills-indian-farm-reforms-2020-1606901455-1
• https://economictimes.indiatimes.com/news/economy/agriculture/agricultural-reforms-heres-a-look-at-key-measures-in-the-legislation-passed-in-lok-sabha/the-essential-commodities-amendment-bill-2020/

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