Why the three potentially groundbreaking farm laws were eventually repealed

While the reactions to the laws represent two extremities, the actual impact on farmers may lie somewhere in between

So, the Prime Minister has finally announced the repeal of the three controversial agricultural laws days before the first anniversary of the farmers' agitation. There have been extreme reactions to, and divided opinion about the three acts and their content over the past one year.

Some say these agriculture market reforms are similar to the 1991 moment (when liberalistion was introduced), others condemn the new laws in very strong terms. In my view, the agricultural reforms are important and are designed to address the long-standing problems of the farmers.

However, the truth in terms of the impact on farmers may lie somewhere in between the extreme views.

There is a wrong impression that farmers had to sell the entire agricultural produce to APMCs earlier. Even before the laws, majority of the agricultural trade was done outside these mandis with regulation and licencing.

The new laws are meant to give a greater choice to the farmer and fetch him better prices, apart from stiumulating an  increase in private investment in supply chains like storage, warehousing, and processing.

The two main concerns of the farmers are: (a) likely weakening of the existing MSP system; (b) dismantling of regulatory protection by allowing corporatisation of markets and leaving small and marginal farmers at a disadvantage. (b) Farmers and critics also question the process of bringing these farm laws without wide consultations although the government says there were a lot of consultations with farmers and several state governments.

It may be noted that agriculture and marketing are state subjects, though the Centre has control over interstate trade. The new laws have two categories of markets within each state under the banner of One-Nation-One-Market.

The issue is whether dual control of marketing, that is, control of APMC by the state government and control of the trade area by the Central government will work within the states. In fact, the laws give unlimited powers to the Centre in trade areas. This may lead to conflicts.

It is true that there are flaws in the APMC system and that it needs reforms. Farmers fear that the APMC mandis will be weakened and that small and marginal farmers would end up in the hands of corporations, leading to unequal bargaining power.

APMC has to be strengthened with higher investments as private traders generally use its prices as a reference. Regulatory infrastructure is needed in the trade area (outside APMCs) to foster free competition. The Centre, of course, has now clarified that there can be regulations in the trade area also.

One view is that as a precondition of reform, local markets, infrastructure and institutions have to be developed. This entails (a) strengthening APMC infrastructure and institutional structure; (b) developing market infrastructure including local mandis at the farm gate; (c) developing collectives and cooperatives like Amul Milk for small holders for collective bargaining, including women collectives; (d) getting more Farmer Producer Organisations (FPOs) to help the small holders in both, input and output markets, and dealing with the private sector; (e) information access and connectivity for obtaining higher prices for farmers. Spending agri infrastructure funds should be fast-tracked.

The farmers’ demand of legalising MSP may not be needed. I think the government is assuring that the MSP system will continue. I think future governments are also likely to continue with this system. Of course, incentives need to be given for other crops like millets, pulses and oilseeds for diversification of cropping patterns.

This will also increase equity in water use as rice, wheat and sugarcane consume 80 per cent of water. To reduce soil degradation and ground water depletion, diversification of cropping patterns is needed in Punjab and Haryana. However, diversification has to be gradual. Crops other than rice and wheat should get them higher returns without risks.

Is it necessary to have a one-size-fits all policy for farm laws? Why can’t we leave it to the states?

Farm laws should reflect regional and crop diversity. In cooperative federalism, states have a major role. Way forward is to leave it to states on farm laws and a larger role to states on agriculture and marketing issues. At the same time, there is a need for farm reforms including marketing, more investment in the sector for transformation of agriculture.

Of course, ultimately, the solution for agriculture in the medium to long term depends on development of non-agriculture.

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The author is Vice Chancellor, IGIDR, Mumbai. Views are personal