Agricultural Reform and the Three Farm Laws — What Next?

Is 2021 the end of the road for farm reforms?


By now, there wouldn’t be anyone who hasn’t heard of the three (infamous?) farm reform laws that had sparked off a huge furore over the last year. For the record, these laws were the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020; Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020; and the Essential Commodities (Amendment) Act, 2020. Passed in September 2020, they were formally repealed in November 2021. After the repeal, the hubbub seems to have died down.

Where do we go from here? Is there still a case for farm law reforms, or has the issue been finally laid to rest?

Let’s leave aside the politics and look at the facts. There’s no doubt that farmers deserve a better deal, and for that agricultural incomes need to grow faster than they have been growing. While the overall economy has grown rapidly at rates of 6–8% post-liberalization, the trend rate of growth of the agriculture sector has been a sluggish 2–3% for decades. Successive Plans have aimed to bring it up to at least 4%, but the long-term trend remains more or less the same.

From 2000 onwards, governments have sought and received advice from eminent experts on steps to increase farm incomes and improve the lot of the farmers. A Committee of State Ministers has considered the matter, as also the Parliamentary Standing Committee on Agriculture. The general consensus over the years and across governments has been that to bring about change and step up growth we need to end the monopoly of mandis, allow contract farming, relax the restrictions on stocking of produce, focus on rainfed farming, pulses and oilseeds and agro processing. The repealed Acts sought to do more or less just these things. Yet they were strongly opposed.

The opposition was not without cause. Most significantly, it was perceived that the passage of the Bills was rushed through Parliament, without adequate consultation, creating doubts on the motives.

There were also concerns on the likely impact of the proposed reform legislation. Amongst these concerns was the worry that the Minimum Support Price (MSP) regime would be undermined, and farmers with marketable surplus would not be able to get a remunerative price for their produce. The provisions on contract farming, freedom to open markets other than the presently authorized mandis, and removal of controls under the Essential Commodities Act could have led to the dominance by big corporates of agricultural markets, leaving farmers at their mercy. The dispute resolution mechanism was also questioned. In short, a worst-case scenario was taken as a given.

With all these concerns, and the fact that the laws were repealed under the pressure of a sustained agitation for the purpose, is there still any future for these laws? Will it ever be possible to find a way ahead?

The answer lies perhaps in the composition of the agitating groups. There was strong and determined opposition, no doubt, but it was mostly from farmers with marketable surplus from a defined geographical region. In this region, procurement at MSP is very important. The existing mandi system is functional. Mandis are prosperous, and control of mandis is often the source of local political clout. These groups feared the worst-case scenario, and saw themselves as the likely losers from the reform laws.

On the other hand, farmers other than these were the likely gainers from the reforms. This would include farmers in other parts of the country, in rainfed areas, as also small and marginal farmers who make up about 85% of the farmers. These groups have little surpluses to sell, and have fewer stakes in the mandi system. Possibly that is why there was little impact of the agitation in the rest of the country, and that’s why there could still be a future for reform.

It is also notable that some States, including those run by the ruling party at the Centre (e.g. Karnataka, Uttarakhand) have through State specific legislation already implemented major parts of the reforms sought to be brought about by the three repealed Acts. There is clearly a constituency in favour of change.

So, what next?

The agitation has been withdrawn. A Committee is being set up to examine the remaining issues. The Committee may submit a report in the near future, or it may take its time. Either way, it is not of immediate consequence. After having defused with difficulty an issue on which the Government has been politically burnt, it is most likely that the farm reform law proposals would be consigned to cold storage for the time being.

Recent statements of Agriculture Minister Narendra Singh Tomar also suggest the same. He expressed the intention a couple of days back to “move forward again.” Fierce reactions from the Kisan Ekta Morcha led to a clarification the next day that the government “will not reintroduce the farm laws in an amended form.”

Though very likely, that would not be an ideal outcome for the country. Agriculture would then continue to languish as it has in the past. Though less likely, there is a best-case scenario whereby we can actually “move forward again” in the interests of farmers.

What is this scenario? Essential reforms are proposed afresh, after a prudent interval. Concerns are suitably addressed, and the process made more consultative, never mind if it takes time. Further, the trigger for implementation is left to the States. This is a key step.

The new laws could require a State Government order or even an Assembly resolution to give effect to them within the State. This would take the heat off the Centre. Where there are strong lobbies against the reforms, it would be for the State to take a call. Presumably, the reforms will be good for farmers and the agricultural economy. If so, the successfully implementing States would over time create pressures in favour of reform in the opposing States. If not, then status quo would prevail, as it then should.

Can this happen? Yes. Will it? Well, time will tell.

It’s all up in the air for now — so watch this space!

(First published in Rising Kashmir, 30 December 2021)

Musings on the economy, governance, and the system