The recent Farm reform law 2020 sprung in by the Modi Government could turn out to be the most far-reaching. On Sunday, Prime Minister Narendra Modi said that the agricultural reforms have opened new avenues and opportunities for farmers and bestowed them more rights than earlier. In past times, the Modi Government has also taken multiple bold steps in favor of the Nation like demonetization, GST implementation, and now this bold step of farm reform law 2020. The new law termed the watershed movement in history is capable of transforming the farming sector.
Recent Farm reform Law 2020 have opened access to new possibilities for farmers. Decades-old requirements of farmers, which were promised by many political parties, can now be met. Parliament has recently passed farm reform laws after rigorous brainstorming. These reforms have not only crushed the shackles of farmers; they have also given new virtues and opportunities to them.
In a session of Parliament last month, three laws were passed that could pave the way for India to upend the global food trade, while others fear it will wreck millions of farmers’ livelihoods. Within days, rural groups and opposition leaders launched public protests. This Farm Reforms Law 2020 was protested heavily by many from the opposition party, arguing that they will be detrimental to farmers’ interests in the long run. Even though the intent of the law is bonafide, its benefit depends primarily on its implementation.
About Farm Reform Law 2020
The government recently passed three Bills, which will replace the existing laws governing the agriculture/farming sector. The Farm reform law 2020 got initiated to bring maximum benefit to the agricultural sector. The farm or farming sector plays a strategic role in the process of economic development of a Nation.
Already it has made a significant contribution to the economic prosperity of advanced countries, and its overall role in the economic development of less developed countries is of vital importance. The agriculture sector has been the backbone of our Nation’s economy.
Modi Government introduced three new bills to replace the existing laws. Farmers Produce Trade and Commerce (Promotion and Facilitation) Act 2020, The Farmer (empowerment and protection) agreement of the Price Assurance and Farm Services Act 2020, and The Essential Commodities Amendment Act of 2020.
We shall discuss the same in detail by throwing some light on its importance in the current scenario and how it will help our Nation:
Farmers Produce Trade and Commerce (Promotion and Facilitation) Act 2020
The previous farm laws restricted the Indian farmers and traders to sell their produce to mandis, governed by the Agriculture Produce Market Committee Act of the respective state. Mandi is the marketplaces that carry out the sales activity and temporary storage of the farm produce, thereby giving assurance of returns and an easy network of mediators for bulk sales. Mandi is regulated by the APMC, where the agricultural produce is sold at minimum support price as decided by the state. The farmer is acquainted with the buyer through a negotiator who organizes an auction in the mandi place. The trader with the highest bid gathers a lot of produce, whereas the farmer and the buyer have to give a commission to the respective agent. Leaving a win-win situation for the agents but the farmers who sweat themselves the entire year in farming get a very tiny amount of money for survival.
The new bill has ruled out the existing obstacles of the Indian farmers by lifting the restriction on the sale of agricultural produce to mandis. Now the farmers can sell their produce openly to anyone anywhere in the country.
The bill has also further introduced electronic trading of farmers’ produce. As per the reform, an electronic trading platform can be established & operated by companies, partnership firms, or any registered societies. The payment has to be made within three days while trading via mediators through this platform. In case of purchase directly from the farmer, the amount is to be made immediately or maximum within three days. Delay of the payment even after three days will be fined as high as Rs 50,000 to Rs 10 lakh. With this ordinance in effect, the state governments will not be able to levy any market fees, cess for any sales conducted outside the APMC regulated mandis.
The Farmer (Empowerment and Protection) Agreement of the Price Assurance and Farm Services Act 2020
This new farm reforms law 2020 allows the farmers to enter into an agreement for contract farming with the buyers to produce a crop for a pre-decided price before sowing. The ordinance requires the mentioning of the pre-decided price of the product in the agreement. For the product subject to the price variation, a guaranteed price & reference to an additional amount must be clearly stated.
Further, in case of breach of the contract’s terms and conditions, this regulation provides a three-level conflict settlement mechanism — the conciliation board, Sub-Divisional Magistrate, and Appellate Authority. Hence, in case of any dispute between the farmer/trader and the buyer, they first must appeal to the conciliation board and not put the same directly to the Appellate authority.
The Essential Commodities Amendment Act of 2020
The Essential Commodities Bill 2020 is a significant reform and an amendment brought to the existing law “Essential Commodities Act.” The Act governs the production, supply, price, distribution, etc., of a list of basic commodities essential for livings like food items, fertilizers, and petroleum products. The purpose of the Essential Commodities Act is to keep a check on hoarding the crucial goods so that the traders do not take any undue advantage of a change in demand and supply chain.
With the reformation in the Essential Commodities Act 2020, the agricultural produce, like cereals, pulses, potatoes, onions, edible oil, and oilseeds, will not be regulated by the Act other than in extreme circumstances like war or famine. The Act reserves to restrict stock limits of these listed items only if there is a steep price rise, i.e., 100% in the case of horticultural produce and 50% in non-perishable food items.
Post this scenario, the farmers and traders will now be free to stock the agricultural produce without government restrictions.
How Advantageous are the Farm Reforms law 2020?
- With the amendment of the Farmers Produce Trade and Commerce Act 2020 and the dismantling of the monopoly of APMC mandis, the entire market will be open to the farmer to sell their produce. The reformation tends to bring transparency and fair play in the trading of farm produce. Also, by bringing the private sector into the picture, there will be a rise in the competition. And a competitive economy is considered a healthy economy by creating a win-win situation for all.
- Trade within the mandi is presently taxable. Mandis charge multiple fees and the agent’s commission by the farmers. But with the reform of initiating sales to anyone, no taxes be levied on trade outside the regulated mandis. The reformation will enable farmers to retain higher margins and uplift even marginal farmers’ per capita income.
- Previously due to the mandi system and MSP mechanism, the price rise due to demand was controlled by the law, which discouraged private sector companies from investing in the agricultural sector. The government would sometimes ban some farm goods from holding local prices, which would limit the ability to store crops. Farmers suffered huge losses when the production of perishable commodities surged. As per statistics, India lost 40% of post-harvest produce annually due to an inefficient supply chain. The new reforms address these issues through private bodies and new Agri startups by improved infrastructure and take the agriculture sector upwards.
- Through Farm reforms law 2020, the government aims to bring privatization into the agriculture business and improve India’s infrastructure. It is believed that by bringing private companies close to the farming sector, they will have access to more extended credits, the latest technological advancement, a better quality of products, increased efficiency, etc.
- The farm reforms law 2020 will highly encourage agricultural startups. Anyone working on post-harvesting services or digital platforms for agri-business will have a stable entry into the sector, which will boost the overall Indian agriculture. They shall no longer be hindered by a state’s bureaucracy & the License Raj of local APMCs.
- Contract farming can protect farmers from any notable price fluctuations due to demand or unpredictable conditions. This reform provides security to farmers in terms of earnings. It binds the buyer and farmer in a mutually agreed contract even before they start rearing or sowing the produce. The farmers get the surety that the crop is purchased at a reasonable price. They can now focus more on the quality of the produce.
- With the Farm reforms law 2020, the exports of agricultural produce will rise if implemented successfully. The farmers will carry out profit farming with the freedom to sell anywhere to anyone and enter into a specific price contract with the traders. Hence India will be able to place itself globally as an agriculture giant with an increase in farmers’ bargaining powers.
Take Away
India’s agricultural sector needs reforms through high-end technologies, digital tools, entrepreneurs, and Agri startups to provide farmers with consistent services. However, the new framework of reform is capable of offering reasonable safeguards to the farmers and traders. Their concerns, doubts, and fear need to be addressed by the government through Farm Reforms law 2020.
Though the laws are a noble declaration of their intention, these reforms have raised specific questions that need to be answered. If implemented successfully, the Farm reforms law 2020 shall prove to be fruitful in the long run.
