Farm Bill 2020 - An agricultural reform or a disaster?

All three controversial Farm bill 2020 on Sunday became law with the signature of President Ram Nath Kovind. Farm Bills 2020, with the aim to bring agricultural reforms in the country were initially issued as an ordinance in June 2020, which are then passed by voice vote in both the houses during the delayed monsoon sessions this month.

What is Farm Bill 2020? Why are farmers protesting?

Farm Bill 2020 consists of three ordinances :

  1. "The Farmers Produce Trade and Commerce ( Promotion and Facilitation ) Ordinance, 2020" -- allows farmers to sell harvest outside of Agricultural Produce Market Committee (APMCs)

  2. "The Farmers Empowerment and Protection Agreement on Price Assurance and Farm Services Ordinance, 2020" -- facilitates contract farming and direct marketing.

  3. "The Essential Commodities ( Amendment ) Ordinance, 2020" -- except in extraordinary circumstances deregulates production, storage, and sale of several foodstuffs including cereals, pulses, edible oils, and onions.

While the farmers are protesting against all the three bills, the major concern is around the first one, which allows the setting up of trade area, and the other ones allow bureaucrat-led dispute resolution mechanisms to remove farmer-buyer contracts out of the ambit of civil courts. What is the trade area? Trade area is the area where any trader ( who holds a PAN account under the Income Tax Act, 1961 ) is allowed to trade with the farmers.

While State governments are concerned that this will diminish the relevance of Mandis which bring revenue to them, farmers fear the end the Minimum Support Price regime, lack of bargaining power with the big corporates/ companies, and eradication of middlemen/Arhtiyas with which they have a long-lasting relationship for selling the harvest and often act as money lenders as well.

While on the other hand, where Central Government is emphasizing that this will encourage private markets, past events don't support this claim. Bihar Government abolished it's Agricultural Produce Market Committee ( APMC ) Act in 2006, Maharashtra changed the APMC law in 2018 in lines with the first ordinance of Farm Bill 2020 and Kerela never had the law, still, these states lack private markets and investments and the major purchase is from the APMC markets and not directly from the farmers.

Our country has access to cereals rather than a shortage and this entails the cost of interest on financing the stock, the cost of storage, the cost of pilferage, and spoilage. While government stocks held up more than the buffer stock, even during a pandemic rather than spending, they saved the expenditure. Minimum support prices prevent farmers from diversifying harvest impacting government spending and benefits they can receive by shifting from grains to fruits, vegetables, etc.

While many speculations are there around this agricultural reform, the Farm Law 2020 is not just a function of deregulation but of major drivers like the involvement of the private players, implementation of macroeconomic policy, and realistic investments in agricultural infrastructure which will the decide the steepness of the slope of the economic curve.

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