Repeal of agricultural laws: a setback for the agricultural reform process

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The intention of the first law was to provide an alternative market and to create more competition in product markets so that farmers could get better prices.

By PK Joshi
The three agricultural laws aimed at reforming the agricultural sector were approved by the President in September 2020 after being passed by the Lok Sabha and the Rajya Sabha. Some groups of farmers have challenged these laws, sparked unrest and blocked the roads leading to Delhi. The government and the farmers have had 11 rounds of talks without any solution.

Farmers were adamant in favor of the repeal as they believed that these laws would negatively affect the prices of agricultural products and that they would be exploited by the corporate sector. A group of farmers also welcomed the laws and believed they would pave the way for competitive markets. At present, agricultural markets are restricted due to the Agricultural Commodity Market Committee (APMC) Act.

These laws were (1) the Agricultural Trade and Commerce (Protection and Facilitation) Act of 2020; (2) 2020 Agreement on Farmers’ Accord (Empowerment and Protection) on Price Insurance and Agricultural Services; and (3) Essential Products (Amendment) Act 2020 The intention of the first law was to provide an alternative market and create more competition in product markets so that farmers can get better prices.

The second law aimed to promote contract farming for high-value agricultural products for agricultural processing and export. These laws were to have higher prices for farmers and better access to improved agricultural technologies. The third law was to develop a transparent system for the storage of essential products.

The intention to introduce these reforms was to attract investment in agriculture and agribusiness, modernize Indian agriculture and increase farmers’ incomes. Unfortunately, the poor communication about the potential benefits of these laws for farmers and the general public has led to apprehensions about these laws.

The repeal of these laws is a setback for the reform process. This is exactly how India missed the first and second industrialization in the 19th and 20th centuries. We also missed the third technological revolution because the policies and regulatory frameworks were not conducive and India is far behind. Industry and agriculture are two important pillars of the Indian economy and together contribute around 45% of the GDP. With a business as usual approach, we will miss emerging opportunities in the agricultural sector. Globally, the demand for high-value and processed products is increasing rapidly.

The demand for agricultural raw materials and their by-products is also increasing for alternative uses, including green energy. We must learn from our achievements in the digital revolution, which has been made possible by creating an enabling environment for the private sector through needs-based reforms.

There will be a decline in investment in agriculture. The sector needs huge investments to create agro-infrastructure both at the farm level and upstream for the development of agro-markets, agro-industry, warehouses, cold stores, food processing. logistics, etc. The government announced the Agricultural Infrastructure Fund of Rs 1 lakh crore for the establishment of post-harvest facilities, such as setting up storage and processing facilities, to ensure higher prices for farmers for their products. The repeal of these laws will have a lukewarm response from the private sector for investment in agro-infrastructure development.

The repeal of these laws will also have implications for attracting FDI to the sector. At present, 100% FDI is automatically authorized for (1) floriculture, horticulture, beekeeping and growing vegetables and mushrooms under controlled conditions; (2) development and production of seeds and plant material; (3) breeding, fish farming and aquaculture under controlled conditions; and (4) services related to agriculture and its related sectors. FDI was expected to encourage contract farming and develop alternative markets. The flow of FDI will slow down due to the removal of these laws.

The way forward for the government is to engage with all agricultural leaders (both against and in favor of farm laws) on every point for the benefit of farmers and agriculture. The Center can also develop model farm laws, and states may have flexibility to modify them to suit their circumstances, but without violating the “one nation, one market” concept. The government and farmers can review suggestions made by the Supreme Court committee on the three farm laws after a farmers’ section challenges the legality of the laws.

The author is the former Director, South Asia, International Food Policy Research Institute, and Secretary, National Academy of Agricultural Sciences, New Delhi

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