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Agricultural Reforms 2020 - An overview

Agricultural Reforms 2020

[This article is authored by Advocate Rabiya Mateen]


The concerned article talks about the three agricultural bills passed on 27 September 2020 by the Parliament of India. The three controversial agricultural bills aim to liberalize the agricultural sector in the country.

What are those three controversial bills?

The three laws are the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, and the Essential Commodities (Amendment) Bill, which came into force following President Ram Nath Kovind's approval.

History of the above-mentioned bills

On 5 June 2020, amid the increasing concern over the seismic collapse of the economy and the spread of the COVID-19 pandemic, three agricultural marketing ordinances were enacted by the Government of India which constituted a fundamental reorientation of the current regulatory structure. In doing so without the clear participation of the state governments, the central government showed its ability to use the COVID-19 crisis and the ordinance route to drive through reforms unilaterally.

These ordinances were brought to Parliament as statutory bills for discussion and were approved by September 14, 2020, and have since been passed. Unfortunately, Parliament's hearings were vastly insufficient to illustrate the possible repercussions of the bills and to fix their several weaknesses. The government also did not use the parliamentary debate as an opportunity to expose and explain its broader vision for Indian agriculture that these bills highlighted. The bills received presidential assent on 27 September 2020 and were notified in the gazette.

Bills in a more explained manner

Outside the Agricultural Produce Industry Commission or the APMCs, the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 aims to entirely free up sales of goods. It provides not only an e-highway for trade and purchases but also a framework for the e-trading of agricultural products. Farmers are permitted to market their goods outside the APMCs and this provides a chance for farmers to be more competitive and priced higher. In other words, for private companies to enter into the agricultural sector and negotiate directly with farmers, the market is thrown wide open.

The Market Assurance and Farm Services Arrangement for Farmers (Empowerment and Protection) Bill 2020 provide a basis for contract farming. It offers a template for agricultural negotiations at the national level concerning agribusiness, manufacturing, and the entire spectrum of facilities, including wholesalers, exporters, and major retailers, for the selling of agricultural produce at a price that is mutually agreed upon.

Cereals, pulses, oilseeds, edible oils, onions, and potatoes are excluded from the list of essential goods by the Essential Commodities (Amendment) Act. These goods are thus, now free from the constraints of the Critical Commodities Act and are deregulated. However in exceptional conditions, such as in the event of war, drought, natural disasters, and the imposition of stock caps if prices increase sharply, the central government has maintained the power to control them.

Why the bills have become controversial?

The shortcomings with the current scheme were that in the late 1800s, farmers had encountered many problems. Overproduction, low crop prices, high shipping costs, high-interest rates, and rising debt were among these concerns. To alleviate these issues, the farmers worked. The working reliance of the APMC (Agriculture Produce Marketing Committee) officials on intermediaries, commission officers, and red-tapism is another major problem with the new MSP-based procurement method. It is difficult for an average farmer to get access to these mandis and rely on the demand for selling farm produce.

More than 90 percent of farmers were beyond the control of the procurement method based on the MSP. Even MSP has remained a highly emotional topic for politics focused on farmers. The latest figures indicate that only 6% of farmers have access to the procurement system based on MSP. The MSP-based procurement scheme is very balanced.

Farm Bills 2020: Farmers' Appeal

The farmers' requests require the abolition of all three ordinances turned into bills:

  • The Bills were not repealed and the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and the Farmers' (Empowerment and Protection) Agreement on Price Guarantee and Farm Services Bill, 2020 were approved by Lok Sabha in the middle of the protests.

  • The mandi scheme is intact and their loans are being cleared.

  • The farmers believe that the bills will not only abolish the mandi hegemony but will also introduce an additional trading platform that will run parallel to the current mechanism to ensure free trade. This new law has nothing to do with the MSPs, as suggested by Agriculture Minister Narendra Singh Tomar; it merely allows freedom of choice for the selling and purchasing of goods beyond the mandate.

  • For MSP to be at least 50 percent higher than the weighted average cost of production and if the MSP is not charged, it must be penalized, in compliance with the 2006 Swaminathan study by the National Commission on Farmers' Rule.

  • Legislation should be placed in a place that would ensure compensation by intermediaries from the sellers. By marketing the commodity for more than its purchase price, middlemen still make profits.


The easiest response to farmers' demonstrations against farm bills could be to provide legislative subsidies for minimum market prices and procurement in the current bill to eradicate farmers' fears. Only if there are roads that connect villages to markets, climate-controlled storage facilities, the supply of energy is made stable and available to power those facilities, and food processing companies competing to purchase their goods, would it be of great use to give farmers the option to sell without the aid of intermediaries.

There is no legislative body formed by Parliament under the CACP (Commission for Agricultural Costs and Prices) which proposes the MSP along with the Central Ministries and State Governments themselves. It is just a strategy of the government that forms part of institutional decision-making. MSPs for crops are declared by the authorities, but there are no legal consequences. If it wants to stay in the MSP scheme and government procurement can proceed, the government should procure at the MSPs, this fear had to be explained even more and farmers should be well directed in this regard.



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