Farm Bills 2020

The Indian Farm Reforms of 2020 refers to 3 agricultural bills passed by the Parliament of India on 27 September 2020. The bills jointly aim to provide several marketing outlets for farmers and provide a legal basis among other items for farmers to into pre-arranged contracts. The 3 laws are the Farmers produce trade and commerce act, the farmer's agreement on price assurance and farm services act, the essential commodities act, which came into effect following the approval of President Ram Nath Kovind.


What are these 3 bills?

The Farmers Produce Trade and Commerce Act is perhaps the most far-reaching and contentious. This bill aims to circumvent the APMC operates at the state level. This bill restricts the oversight and authority of APMC to the 'business yard' of APMC. Outside the business yard, individuals in what can be referred to as 'trade area' are free to trade in agricultural goods. Thus, this trade does not come under the APMC and there is no obligation to pay any fee to APMC and no license is required for the buyers. This bill also aims at a "facilitative framework for electronic trading", which permits an electronic trading platform, and no jurisdiction of state governments over them. 

The second is the Essential Commodities Bill, which aims to eradicate arbitrariness and unpredictability of the announcement of stocking limits by connecting it to transparent market triggers dependant on rules. Accordingly, only under extraordinary situations can a form of constraints be deployed. The bill proposes that stocking caps can only be invoked for horizontal goods where there are a 100% retail price rise and a 50% increase for non-perishable agricultural foodstuff using the base price. There is a view that removing the threat of stocking limits would be welcomed by large businesses that hitherto found this to be a constraint. 

In the third-order, The Price Assurance And Farm Services Bill Agreement, which is more conveniently referred to as the 'Contract Farming bill' seeks to provide a basis of the written agreement without mandating them between farmer and sponsors. It provides a medium of communication between farmers and sponsors by written agreements. 

How will these bills benefit the farmers?

  • Defect the APMC mandi monopoly cartel and market the commodity to anyone anywhere. The farmers will have the freedom to take their business to anyone. 
  • Have the freedom to store inventory which was limited by ESCA stocking restrictions. 
  • Free to make contracts and pass the risk to business even before yield is generated.  

Why are farmers protesting?

The farmers are upset with the bill because they feel that these bills are the solution by the government to bypass the prevailing system in their states for the purchase of their crops. Let's see what does MSP means, The minimum support price is set by the government to purchase directly from the farmers. This rate is to safeguard the farmers to minimum profit for the harvest. The farmers fear that this safety net has been snatched away on the pretext of giving farmers more playing ground. 

We are seeing most protestors from Punjab and Haryana because they are the biggest beneficiaries of this safety net. In these sectors, the state procurement infrastructure is very strong, before any farming season, an MSP is promised which encourages the farmers to concentrate on taking more yield. These bills will kill this procurement process as well.

The other half of the tale

These bills liberate the farmers from the clutches of the middlemen agents who earn lakhs of commission. Their respective state governments will lose the mandi tax which is big revenue for them. This is the very essence of why state governments are opposing these bills and the political parties are supporting them. The congress led government in Punjab is showing major resistance and is just confusing the farmers. 

In conclusion, this bill benefits the farmers greatly and allows them to earn more than MSP and earn whatever price they want. State government parties are opposing the bill because of their huge loss in revenue and looking after their own selfish gains. The BJP government has already finalized its decision to not revert the bill.

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