What are India’s new ‘Farm Laws’?

(हिन्दी में पढ़ने के लिए यहाँ क्लिक करें)

First Farm laws in British Raj

After Britain’s Industrial Revolution, when a large number of factories were built and rapid industrial production was started, the most important factor to run those factories was to ensure uninterrupted supply of raw material.

India was the biggest source of raw material for the British factories during the British Raj (British colonial period in India). The British colonial policy at that time was to force Indian farmers to forcibly cultivate only the crops that were required as raw materials for British industries. Then the farmer had to sell the crop only at the price that was also set by the government and usually it was very low.

India’s raw materials for British Industries

For example, the textile mills of Manchester in England needed cotton as raw material, so the farmers of regions like today’s Madhya Pradesh, Maharashtra, & Andhra Pradesh in India were forced to cultivate only cotton in their farms.

Similarly, the farmers in Bihar were forced to cultivate indigo because by the 1900s, indigo from China was banned in the United States. Therefore, the British began to force the farmers of India to increase the production of Indigo. Cultivation of indigo requires large amount of water and gradually the land becomes barren, so the farmers were unwilling to cultivate indigo and instead they preferred to cultivate paddy and pulses etc. 

Gandhi’s Satyagraha

To pressurize the farmers, the British created a situation through the local rules (Nawabs, Zamindars etc.) that the farmers would not receive any loans or any kind of assistance for agricultural work until they agreed to cultivate indigo. In the history books in our school curriculum in India, all of us have read that Gandhi ji had organized a Satyagraha (mass movement for truth) in Champaran (Bihar) in 1917. That satyagraha was against the forced cultivation of this indigo in that region.

But what if the farmer refuses to grow that crop or does not want to sell the crop to the government? How will British government get enough raw material for the factories in England?

Therefore, it was necessary to ensure that the farmer would have to sell the goods only to the government agents. For this, the British enacted laws like Hyderabad Residency Order in 1886 and then the Berar Cotton and Grain Market Act in 1887.

Under these laws, the British Collector of the district would designate a place and the farmers would have to sell their goods only at that particular place and only to the agents appointed by the government.

What Changed After Indepence?

The British left India in 1947, and some of their policies were also abandoned after that. After independence, the peasants in India were no more compelled to cultivate only a particular crop and they could grow whatever they wanted to. But what will happen if the traders who buy these crops from the farmers start hoarding it in mass volumes to increase the demand and prices?

Essential Commodities Act

To prevent this large-scale hoarding of agricultural goods, the government of India enacted a law called Essential Commodities Act in 1955.

Through this law, the government gave itself the right to declare certain food grains, medicines etc. as ‘essential commodities’ and also set the maximum price for them so that no one can hoard nor sell those commodities at an arbitrary price.

This measure helped in controlling the price of essential goods in the market. It was on the government to decide which items will be considered as essential items. The government would decide that by considering all circumstances of that time.

For example, after the COVID outbreak in 2020, you might have heard that the Indian government had declared items like masks or hand sanitizers as ‘essential commodities’ to prevent bulk hoarding and keep the prices under control.

The Essential Commodities Act was introduced in 1955, but agricultural production was still not sufficient to meet the demands of the growing Indian population. Every year, India had to import grains from abroad. That was the time when slogans like ‘Jai JawanJai Kisan’ (‘Victory to the soldier and Victory to the farmer’) were introduced to highlight the importance of farming and acknowledge the contribution of the farmer. 

Many of us who are from India have also read that the then Prime Minister Shastri ji had appealed that people should fast once a week to help reduce the food grains consumption.

The Green Revolution

In order to cope with this huge shortage of grains and to become self-sufficient, a program called Green Revolution was launched in the years 1965-66 and special attention was paid to rapidly increase wheat production with the help of new techniques of that time. States like Punjab, Haryana and Uttar Pradesh were the leaders in this.

The Green Revolution brought techniques to increase agricultural production, but one problem was that the farmers did not want to grow crops that take a lot of hard work and a long time for cultivation because of the potential risk for the farmer in case no one agreed to purchase that crop?

Minimum Support Price (MSP)

To address this concern, the farmers wanted a guarantee that they would get the right price for their crop. For this, the government assured the farmers that it would buy their grain at a fixed price. This is known as the Minimum Support Price (MSP) in English. This means that the farmer will get at least that minimum price for the crop.

But how will this price be decided? 

An Agricultural Price Commission was created in 1965 to fix this. In 1985, it was renamed as the Commission for Agricultural Costs and Prices. Gradually more items were added to its list and now there are 23 such items including cereals, pulses, etc. for which the support price is fixed by this commission. Twice a year, before the kharif and rabi farming seasons, this commission sends its suggestions to the government as to what the support price of these 23 items should be.

The government created this commission in 1965, but it is not a statutory body.

It is only a department under the Ministry of Agriculture. Therefore, it is not necessary for the government to accept the opinion of this Commission. The Commission can only send its recommendations,but it’s on the government to decide whether or not to accept it. This system was created by Indira Gandhi, and the Modi government has not changed it.

But still the MSP could not solve one other challenge that the farmers had to face.

That challenge is the problem of storage after harvesting the large quantities of grain. Most small farmers do not have the facility to safely store their grains for a long time. Hence, they are forced to sell their crop as soon as possible. Taking advantage of this, the traders and brokers would pressurize them and force them to sell the grains at the lowest possible price.

Mandi aka APMC

To address this, a new law called Mandi (i.e. Market Yard) Act was introduced. Under this law, the state governments created agricultural markets (mandis) and made arrangements to buy and store the grains there. These markets are operated and controlled by the Agricultural Produce Market Committees (APMC). In India, you might have seen the warehouses of Food Corporation of India (FCI), where the state governments store this grain.

Through the Mandi Act, governments made the law that traders cannot buy crops directly from farmers. 

Instead, all the buying and selling will take place only through these designated agricultural markets. For this purpose, licenses are issued to the people and only those who have a license can buy grain. The farmer can sell the grain directly to any of the license holders, or the goods can also be sold through the bidding process. Then the small traders buy grain from these mandis to sell in the open market.

These mandis are formed by the state governments, so the governments also charge taxes and other fees for buying and selling food grains at these mandis. It is a major source of revenue for the state governments.

Due to this Mandi act, the farmers were compelled to sell their grains only at these mandis.

The traders and brokers often collude with each other to keep the price low and then they later sell it at a higher price. Some state governments have given some leeway to this, but in most states, farmers are compelled not to sell their grain anywhere other than the mandi and often have to sell the grain only at the minimum support price. After this, the applicable taxes, commissions etc. also have to be paid, which means the minimum support price is not their real income.

But what are the new laws?

For the last few months, a section of people mostly from the Indian states of Punjab, Haryana and UP have been protesting in Delhi against the three new laws that the government has introduced.

The protestors claim that these are anti-farmer laws and should be revoked immediately.

The government believes that these laws will actually help improve the system and bring more benefits to the farmers.

Who is right in this?

What exactly are these 3 laws about and what has the government changed through these laws? Let’s take a look.

The First Law

The first of these 3 laws is called the “The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020“.

Through this, the farmers have been empowered to sell their crops anywhere in the country as per their own free will. This basically means that it is no longer necessary to sell your crop only to the government mandi (agricultural produce market) of your local area.

However, it doesn’t mean that the mandi system has been abolished. Mandis will still be operational and if any of the farmers prefer to sell their crops only to the Mandi, they can still do so.

This new law also specifies that the state governments cannot arbitrarily increase any kind of tax or duties.

The Second Law

The second law is the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020.

This law provides a legal framework for the farmers who want to enter into agreements with private companies or buyers to grow any particular crop and sell it at a mutually agree predetermined price. 

In case of any disputes, this law guarantees that the farmers will get legal protection and arrangement for settlement that was not available earlier.

The Third Law

These two laws ensure the convenience and safety of the farmers, but what will happen if the merchant or the company buying the goods from the farmer starts selling it in the market at an arbitrarily high price?

Suppose tomorrow the whole wheat produce of India is purchased by a big corporate buyer and it starts hoarding and selling it at a very expensive price, how will people afford it?

On the other hand, if the government starts interfering in everything and arbitrarily starts forcing the sellers to sell only at a certain price, how will the traders survive?

What would happen if a businessman bought a crop at a high price from the farmer and then the government forced it to sell that grain at a lower price?

To address this concern, a third law has been enacted to take care of the common consumers and to prevent any such arbitrariness by the government.

For this, few minor changes have been made to the Essential Commodities Act of 1955. 

Now, under the new law, the government will be able to declare a commodity as ‘essential’ only during situations like a war, famine, a natural calamity or in case of excessive and steep increase in the price of goods.

But, what exactly would be termed as a ‘steep increase’? Can the government arbitrarily declare any increase in the prices as ‘steep and excessive’? 

No.

If the price of a foodgrain suddenly rises by one and a half times or more than its average price during the last five years, only then it will be considered an unexpected price rise. In case of fruits or vegetables if the prices suddenly increase at least twice, only then it will be considered an unexpected increase.

Only in such situations, the government will be able to declare it a necessary commodity.

Questions for you

If the farmers are no longer bound to sell their grains only at the mandis designated by state governments, doesn’t it actually provide more freedom to them?

Are the state governments worried less about the farmers and more about the loss of current revenue from taxes and other duties levied on the farmers who sell in the mandis?

If farmers start selling their farm produce directly to anyone in the open market, how will the cartel of license holder traders and agents be able to set a minimum price and force farmers to accept it?

Is that the real reason behind the protest? Have these traders and agents misinformed or misguided the farmers and provoked them to protest against the new laws that are actually beneficial to farmers as the government claims? Are the opposition political parties fueling these protests because they see another political opportunity in this?

Now that you have read the facts, I will leave it for you to make your own judgement.

I want to make it clear that I did not write this article to support or oppose these laws. When I heard about these laws and the protests, I wanted to try and find the facts. Through this article, I have only shared the information that I could find through various sources including the text of these laws. If you notice any factual errors, or if I have missed any crucial piece of information, I would be happy to consider correcting it. Thanks!

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