Can Three New Farm Laws Solve the Problems of Agricultural Sector?

The central Government got approved the three laws pertaining to Agriculture sector. This package combines three laws, all introduced through the ordinance route. First, the government has amended the Essential Commodities Act, 1955 to remove the existing restrictions on stocking food produce. Second, it has introduced a new law — The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) — to end the monopoly of the Agricultural Produce Market Committees (APMC) and allow anyone to purchase and sell agricultural produce. Third, another law — The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services - to legalise contract farming so that big businesses and companies can cultivate vast swaths of land on contract.  

These laws are hailed as landmark decisions that would benefit Indian farmers and transform the agricultural sector. The government stated that these laws will help move towards a freer and more flexible system for both parties involved (farmers and sponsors that can be individuals, partnership firms, companies, limited liability groups and societies). Taken together, these laws intend to liberalise the regulatory system in the agriculture sector, provide freedom to farmers and traders to trade in farm produce at a site of their choice such as farm gates, warehouses, etc., and to usher in legal contract farming in a uniform manner throughout the country.   

The effectiveness of these laws needs to be critically analysed in the light of the problems faced by agriculture sector and the farmers.


Experts and economists have listed the following issues as the major reasons for agrarian crisis of India.

Small and fragmented land holdings -- Uneconomic holdings.  

Heavy dependency on Agriculture 

Subsistence farming 

Seeds. Manures, Fertilizers and Biocides  - Under the control of MNCs – 

Irrigation –only 45.7% cultivated area is irrigated.  

Lack of Mechanisation                                    

Lack of adequate technical knowhow               


Storage, Transport                                        

Absence of Land Use planning        

Crop selection                                      

Disguised Unemployment                          

Insecurity for Agricultural Labourers.      

Scarcity of Capital    

Apart from the above problems, Farmers are facing present day complicated situations, deepening of Agrarian crisis  with the cropping up of new problems due to change in social equations, misuse and abuse of scientific inventions, climate change, expanding economic arena, policies of globalization, liberalization etc.  Pro establishment Experts hesitate/refuse to recognise these issues as problems. 

It is pertinent to see whether these new laws are capable of solving the above problems.

Small and fragmented land holdings:  

More than 67% of farmers own less than 1 Ha, and 1% of the farmers own more than 4 Ha. This is one of the major reasons of agrarian crisis. The solution is formation of economic holdings.

Economic Landholding: 

According to PROUT, to facilitate increased production economic holdings must first be reorganized. An economic holding means a holding where output exceeds input. It is not possible to predetermine the size of this economic unit. While considering input, output, productivity, etc., to determine the optimum size of an economic unit, factors like the fertility of the soil, climatic conditions, etc., will have to be considered.

Economic holdings will generally comprise land of the same topography having adequate irrigation and other agricultural facilities. The size of economic holdings must be progressively increased keeping all these factors in mind. In the first stage, individual small farmers should be encouraged to pool their land together to make it economically viable holding and start cultivation on co-operative principles. 

The ownership of the land is inconsequential; what counts is the production from the land. Merely delegating the management of land to someone will not yield the desired production. Formation of economic holdings through cooperation in farming and phase wise cooperative farming is the way out.  

Success of Cooperatives: 

Many people raise questions regarding cooperatives because in most countries the cooperative system has failed. On the basis of the examples to date, it is not appropriate to criticize the cooperative system. This is because most countries could not evolve the indispensable conditions necessary for the success of the cooperative system. Cooperatives depend upon three main factors for their success – morality, strong supervision and the wholehearted acceptance of the masses. Wherever these three factors have been evident in whatever measure, cooperatives have achieved proportionate success.

As this kind of mentality was never created in India, India is a classic example of the failure of the cooperative system. Indian cooperatives were not created for economic development but for the fulfilment of political interests. Under such circumstances it was impossible for the cooperative system to succeed.  

The new laws fail to address the above issue, hence the problem will continue.  

Heavy dependency on Agriculture:

More than 60% of the population is depending on this sector. Adapting the principles of balanced economy and starting of Agrico (pre harvest) and Agro (post-harvest) industries in villages, which create employment opportunities, is the sure way to reduce the dependence on agriculture sector. 

The new laws do not address this major issue. The central government does not have the concept of balanced economy.

Perspectives on Water / Irrigation Development: 

Post-1980s, the groundwater-based irrigation took over with expansion of electricity and tube-well or bore well technologies. Meanwhile, groundwater extraction has surpassed the limits of its replenishment in several parts of the country, making private investments more and more insecure. 

Solution lies in the principle that subterranean water should not be disturbed; otherwise the level of the water-table will drop, leading to an acute shortage of water. The best system is to collect surface water. The rainwater, even from light showers, should be collected where it falls. It is always better to conserve surface water”. 

Because these laws give free hand to corporate sector, there is every possibility of over exploitation of underground water since the companies plan to maximise the profits in short time and they have no interest in the long run; whereas for a farmer or a cooperative of farmers will have long range interest and hence they take up water conservation projects which yield results over long periods.  

Impact of Globalization and Liberalization: 

Production and marketing of agriculture produce are no more protected activities. The Indian farmers unprepared and unsupported have to face tough competition from corporate farmers within the country and imports from other countries.  

- Free Trade Agreements (FTAs)

- Genetically Modified Crops:  

The farming community is facing threat of losing their independence of seed and farm technology because of pressure and allurement from MNCs to grow Genetically Modified crops. Farmer’s demand that no patents to be allowed on any seed/planting material-related technologies is justified.

New laws aggravate this problem by giving more scope to the greed of corporates and FDI in agriculture.   

Climate Change: 

Studies show that there has been a significant increase in the area, duration and intensity of monsoon droughts in India since the mid-1950s. Droughts are not just about reduced rainfall; higher temperatures also increase the incidence of droughts, and their intensity and impact.  

Agriculture, as practised now, also contributes to climate change due to massive emissions of greenhouse gases. Shifting rainfall patterns, increased temperatures and extreme climate events are changing some critical factors that have influence on farming, such as carbon dioxide levels and ozone concentration. These are in turn causing increased incidence of climate change at a large scale and localised sporadic disasters such as intensive rains, floods, drought, cloud bursts etc. All these are also causing unexpected changes in soil quality, crop growth, pest and disease, and even nutritional quality of the produce, making farm management a huge challenge and farming a highly risky affair for farmers.

This problem can be overcome by adopting a farming system that is sensitive to the specific agro-ecology of the region and adopting methods that are best suited to that particular zone. This actually means applying ecological concepts and principles to optimize interactions between plants, animals, humans and the environment while taking into consideration the social aspects that need to be addressed for a sustainable and fair food system.  

The three laws under reference or the existing laws do not address the issue of climate change.

 Scarcity of capital and Mounting Debts:  

Famers argue that the causes for the poverty and indebtedness are not farmers themselves, but due to the Government policies towards agriculture like levy policy, price policy, credit policy, revenue policies etc., and the misery inflicted on farmers should be removed by the state itself. For this they demand all debt of farmers’ has to be written-off. In future the farmers should be ensured with scientific price so that they can never be in debt.  

The farmers' suicides in India, also known as the agrarian crisis, are the phenomenon of suicides among Indian farmers from 1990 to the present. During the duration from 1998 to 2018, it has resulted in the suicides of more than 300,000 farmers in the country.  

Many farmers do not have access to institutional finance. Many a time the apathetic attitude of the Bankers towards the village folks and the complexity of the formalities to be fulfilled, turns them to private lenders. The scale of finance followed while lending to agriculture sector is unscientific, irrational and inadequate forcing the farmers to approach private money lenders. To avoid the ignominy and insults they may have to face while availing loans many farmers, that too the small and marginal farmers use their hard earned savings for cultivation. All these category of farmers never get the benefit of loan waivers. 

The new law may prompt corporate farming to introduce capital in agriculture sector to get higher profits, but it is not going to benefit the crores of agriculturists who are in dire need of timely finance at reasonable rate of interest.

Marketing - Storage -Transport

Central government says that agricultural markets are over-strained by a web of outdated laws that were codified with a food scarcity mind set. The restrictions on ‘hoarding’ were a legacy of the food crisis of the 1950s. These are irrelevant now, barring a national food emergency. Removal of these would help traders and stockists, and may sometimes help crop prices from falling. The government claims that dropping out agriculture commodities from the purview of the Essential Commodities Act will help achieve price stability and benefit consumers; it is expected to primarily help traders.  

The Essential Commodities (Amendment) Ordinance, 2020, amends the existing act to remove all agricultural commodities from the list of essential commodities. The government assumes that “the freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector. It will help drive up investment in cold storages and modernisation of food supply chain.”      

This law helps to legalise the hoarding activity which will force the consumers – all citizens of this country –to face increased prices because of the greed of few.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, does not do away with the APMC (Agricultural Produce Market Committee) system, but restricts it to physical space of the market, with transactions made outside of this area exempted from any taxes or fees associated with the APMC.  

Through a barrier-free trade of farmers’ produce outside the markets notified under the various states agricultural produce market laws (state APMC Acts)”, this ordinance is “another milestone in the path of freeing up Indian farmers from the licence-permit raj”.  

It basically aims to create trading opportunities outside state-run Agricultural Produce Marketing Committee yards. The government said that “this is a historic-step [in] unlocking the vastly regulated agriculture markets in the country”. Farmers did not benefit from the Act earlier – now it is supposed to help them.  

Doing away with APMCs -  

There is no doubt that APMC markets have been marred by several problems in different states such as lack of enough market yards, lack of facilities/amenities in the existing markets, the bureaucratic monopoly in existing APMC markets and aperiodic elections to the market committees, malpractices by traders such as non-issue of receipts, unwarranted deductions in the payments given to the farmers, etc. But the changes proposed in the law, especially the prospect of zero-tax trade outside the APMCs, could lead to the withering away of the eco-system of the APMC. It is like jumping from frying pan into fire.  

The presence of all these inefficiencies and issues, however, does not mean that APMC markets are inherently problematic. APMC markets have been an important medium for price discovery at the local level for the farmers. APMC markets are the last resort for millions of marginal and small farmers who would never be attractive to corporate buyers, individually or perhaps even collectively, through FPOs.   

This leads to a situation where local farmers do not find adequate demand for their produce at MSP in the local market. Since most farmers are small or marginal landowners, they do not have capacity to transport their produce to large distances, and hence, are forced to sell them at a lower price than the MSP in the local market itself.           

Situations in Bihar which did away with APMCs in 2006 and other states that never had APMCs point out that it has not stopped the exploitation of farmers; rather they are at the mercy of a private trader in a fragmented market.  

This law would help big business do direct deals with the farmers, but it will not help the farmers who have little bargaining power.  This is evidenced by the experience of ‘on-line trading’ introduced during last decade. New law could end up demolishing the existing faulty structure without replacing it with anything better.   

Production, collection, procurement, processing, marketing and distribution of   agricultural produce and essential goods done exclusively through cooperatives (producers and consumer cooperatives) are the solution to overcome this problem.   The central government has not shown interest in this direction. 

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act 2020- Contract Farming:

It unlikely, that individual farmers might find themselves equipped or powerful enough to negotiate with corporates or big-pocket sponsors to ensure a fair price for their produce. The act says that the quality parameters can be mutually decided by the two parties in the agreement. But the quality aspect will become crucial when a few corporates will try to usher in uniformity which might end up adversely impacting the already skewed agro-ecological diversity in the country. Experience of the farmers who entered into contract farming reveals that they are the losers in long run, when the company starts applying impractical quality standards and reject major share of the produce.

 Legal sanction to contract farming would help corporates enter the agriculture sector and   could lead to disruption in this ongoing practice of oral contract farming. Though there is an elaborate dispute resolution mechanism, how would the small farmer with little bargaining power, access it when pitted against big companies?    

With a view to get higher yields, the contractors use high doses of fertilizers and plenty of water, which in the long run will cause water logging and salinity making the land unfit for cultivation. Excess use of fungicides, pesticides and chemicals will not only pollute the environment but also build resistance in the insects and the like. Principles of organic and sustainable farming will find no place in contract farming.

Given the timing, the context and the overall balance of power in which these three ordinances have been enacted, these are likely to work for the traders, big agri-businesses and corporates and not for farmers, least of all small farmers.  

Reasons for Opposition of these laws: 

These laws are opposed not only by farmers, but also by those concerned with the wellbeing of the masses; main reasons are:

Laws Without Scrutiny:

If the Central Government really wanted to bring about historic changes to agricultural laws for the benefit of the farmers, why did it need to evade public and parliamentary scrutiny? Though, there is nothing so urgent in any of these three laws that call for bypassing Parliament through an ordinance, why this unnecessary hurry?  Why bring these changes through the back door, in dark hours of a national medical emergency, displacing the constitutionally mandated state governments?  Do these laws have anything to do with the coronavirus or the lockdown?    

These reforms will not help farmers’ to realise higher incomes; at best, this may be another example in the long history of policies that work for agriculture but not for agriculturists, which is seen in the agricultural research activities.  Agri-imports are likely to increase in a liberalised atmosphere. If that happens, farmers will be short-changed due to competition from imports and an information asymmetry in the market.   

Along with the above laws some of the states at the instance of the Central Government, have removed the existing restrictions on non-agriculturists to buy agriculture land. Now, anyone can buy agriculture land, which the states claim as a big step in increasing food production and better utilization of arable land. But, the farmers fear that the situation will turn worse; because, it is an opportunity for the moneyed people to buy land for construction of farm houses for enjoyment and for the real estate lobby to expand its tentacles. These sections have hardly any interest in farming or increasing the productivity of the land.

Who benefits?

Despite the government’s claims, not one of these acts benefits farmers in any way. However, as the text in the ordinances note, they will help traders, especially big corporations. 

Infringement of State Powers: 

While agriculture is a state subject, the Central government is involved in many aspects – from planning, fund allocation and implementations. These three acts on agricultural commerce cut through state government incomes; the power of states over agriculture will get diluted. Together, these acts are viewed as Centre’s plan targeted at usurping state powers, overriding state laws and market committees and weaken the Sates.

Political Game:

Similar bills were presented by UPA government during 2012 and BJP vehemently opposed the same on the ground that small farmers cannot face the free market system. BJP leaders quoted the situation prevailing in Europe, USA and other western countries, where billions of dollars are spared by those Governments towards rescuing the loss suffering farmers; since such steps are not possible in India, they opposed the bill. The same party does not hesitate now, to get the bills passed in parliament with the brute majority. Congress and other members of UPA, who supported the same idea in 2012, now oppose it. None of these political parties offer concrete solution to mitigate the problems of farming sector and the farmers. Innocent farmers fail to recognise this political game.

Solution  for Agrarian Crisis:                                 

Numerous attempts and ways suggested so far to solve the agrarian crisis has revolved round the acceptance of individual ownership of the land which they consider as natural right and that land should be owned by individual cultivators because they are deeply attached to their land. Actually in this matter we should give more importance to collective welfare than to the sentiments of the individual.

Peasants agitations throughout history have mainly focussed on the issues connected with cultivators, i.e. the land owners, share croppers, tenants etc. There are hardly any movement to address the problems of landless agricultural labourers except the movements demanding grant of land to them which is neither technically sound nor practically possible.   

The modus operandi of exploiters has changed. It is no more a physical and economic exploitation of the farming community; there are other aspects like cultural subjugation, language suppression etc., and newer methods of psycho-economic exploitation are forced upon the people including farmers.  

Three Phases of Farmer Agitations:  

Based on the situations and background of revolt by farmers, they can be classified into three broad categories or phases. 

First phase consists of agitations and revolts against the oppression of the rulers or their representatives like Jagirdars, Zamindars land lords etc., and the money lenders who snatched farm produce from the hands of growers in the name of taxes, levies, share, interest and the like.

Second phase is dominated by agitations to demand ownership of land by tenants, share croppers, regularization of encroachment in revenue and forest lands and clashes between the landless and the land holders.  

Third phase agitations are centring round farmers struggle for survival and fight against the government policies which are enemies in the guise of saviours.  On the one hand farmers have to face the vagaries of environment and on the other side tough competition from corporate farmers.  

Loan Waiver is not the Solution: 

Farmers are demanding loan waiver, political parties are vying with each other in announcing farm loan waiver. Some state governments have announced waiver of crop loans up to some limit per individual at different times and the beneficiaries were mostly the borrowers from cooperative sector. When the Central government announced waiver of agriculture loans in 2008, it was the borrowers of the Nationalised Banks who got the benefit. 

It is not correct to think that all the defaulting farmers are under loss and all those who have repaid the loans regularly are in profit and are well to do people. Prestige issue, moral conscience, cordial relationship with the Banker, necessity to avail additional loan and many other factors are responsible for prompt repayment. Loan waiver on a mass scale will benefit the defaulters only, irrespective of whether one is a wilful defaulter or could not repay because of crop failure, low prices etc.  

Peasants avail short term crop loans, medium or long term loans for development of land, creating irrigation and other facilities, purchase of machinery, equipment etc. Waiver of crop loan alone will not benefit those who have availed term loans. 

Loan waiver is sure to demoralise those who repay promptly and force them to become dishonest in future. As a short term measure it is better to reschedule the repayment of default loans and advance interest free fresh loans to the needy as well as the prompt borrowers. There is a trend to avail agriculture loan when it is available at a cheaper rate of interest and invest it in business or deposit it for a higher rate of interest which needs to be checked. Waiver of loans to such people and to wilful defaulters cannot be justified.   

Faults of MSP:

Cost of cultivation and yield vary according to agro-climatic conditions, availability of irrigation facility or dependence on rain, cost of labour, size of holding etc. Arriving at a common figure of cost of cultivation for the entire country is not rational. The government declares M S P for few crops only that too in an unscientific, irrational way and trying to implement in a half-hearted way and through corrupt non-committal Government machinery will only aggravate the problem rather than solving it.   

Balanced Economy:  

Shri P.R. Sarkar opines that the agricultural potentiality of the country must be developed by reducing the percentage of the population working in agriculture. Secondly, the excessively high percentage of the population dependent on agriculture must be reduced by developing industries. 

PROUT suggests that for a perfectly balanced economic environment, it is required that some thirty to forty percent of the people should depend directly on agriculture, and about ten to twenty percent on agro-industries (post-harvest), ten to twenty percent on agrico-industries (pre harvest), about twenty percent on general industries, ten percent on general trade and commerce, and ten percent on intellectual or white collar jobs.  

Block Level Planning:

Planning should function on various levels such as the block, district, state, national and global levels, but block-level planning should be the basic level of planning. Block-level planning is essential for economic decentralization, so it should be adopted in all blocks. There should be provision in the constitution for block-level planning for socio-economic development.

The amount of natural and human resources varies from block to block; hence separate economic plans will have to be made for each and every block. There should be a block-level planning board in every block for this purpose. The block-level planning body will prepare a plan for the development of the block and accordingly implement the local developmental programmes. Above the block level there will be a district-level planning board. Thus, from the block level upwards, there will be planning boards to prepare and implement the local plans and programmes. It must be remembered that planning should be of ascending order, starting at the block level, and including all the levels of a socio-economic zone and the state.

Most blocks are currently demarcated on the basis of political considerations. PROUT does not support such divisions. Block divisions should be reorganized according to such factors as the physical features of the area (including river valleys, varying climatic conditions, topography, the nature of the soil, the type of flora and fauna, etc.), the socio-economic requirements and problems of the people, and their physico-psychic aspirations. Thus, blocks should be scientifically and systematically demarcated as the basis for efficient decentralized economic planning.  

Industrial Status to Agriculture:

Price of any industrial product is decided by the manufacturer, whereas the price of agriculture produce is decided by the middlemen or the traders. Neither the growers nor the consumers have opportunity to decide the price of an agriculture produce. Though the regulated markets and online trading are supposed to give better prices and opportunity for the growers, the system remains the same, that is the middlemen or the traders decide the price of agriculture commodity.  This situation is not going to change with the entry of corporates and the opportunity to sell at farm gate. The grower, at best can only refuse to sell the produce at the quoted price, but due to the limited keeping period of agricultural produce or pressing economic needs he is forced to sell it on some other day, for the price quoted by traders, even if it is uneconomical. At no point of time the farmer gets an opportunity to quote the price based on the cost of production.

According to PROUT, agriculture should be given the status of industry. This means, adopting the methods, standards and factors in deciding the price of an industrial product, while deciding the price of an agriculture produce. Industrial status to Agriculture does not means tolerating inefficiency or giving doles to that sector. It means making agriculture sector more strong and competitive and put an end to exploitation and suffering of farming community including agriculture labourers. It also means improving the efficiency, reducing the cost of production, addressing disguised unemployment, introducing scientific cultivation methods, mechanization, healthy competition, Co-operation, creating economic holdings, etc. in agriculture sector. In addition following steps are necessary:

Land Use Planning:

There should be land use planning from Aqua Culture to Silviculture in every watershed area. 

Crop Planning:

In the present setup each farmer guesses the demand for a particular crop and takes up cultivation. Many a time the supply exceeds demand and the prices crash, making farmers to suffer. To overcome this problem, it is necessary to assess the demand at micro and macro level and plan the cropping pattern in advance. 

Co-operation in cultivation:

Implementing a land use plan requires co-operation among the farmers in that area. Phase wise cooperative farming needs to be adopted. In the cooperative agricultural system, modern equipment must be utilized because such modernization will facilitate increased production. If modern equipment is used in agriculture, agriculture will not remain labour intensive and people can be utilized in other activities to enhance the development of the country. If fewer people work in agricultural cooperatives, there will be substantial savings. Simultaneously, women and children will be freed from related work so they will get scope to develop themselves. In addition, increased mechanization will link the villages to the cities and towns, and as a result the standard of living in the villagers will be increased.  

Solving Unemployment:

For the development of agriculture there is also a need for agricultural specialists and technicians. So cooperatives will have to train unskilled rural people so that they can acquire the necessary skills to develop the agricultural sector.  Producer’s cooperatives should employ such skilled labour. Thus, educated people will not remain unemployed, and they will not leave the villages for the cities. This will ensure rapid agricultural development. In addition, all types of agro-industries and agrico-industries will have to be developed according to the needs and resources the local area, and these industries should be managed as cooperatives.    

Mitigating disguised unemployment:

In villages the farmer and his/her family people are entirely dependent on agriculture. At times, the farmer will have to work for a few hours only and has to remain idle for rest of the day. They remain unemployed during intermittent periods and also after harvest of one crop till the sowing season of another crop. In the absence of alternate employment opportunities in villages and because of small holdings and inevitable circumstances the farming community faces disguised unemployment.  

When cultivation is taken up with proper land use planning on a co-operative basis, it is possible to generate full employment potentiality to the dependent land holders and landless labourers. Further, starting of Agro (post-harvest) and Agrico (pre-harvest) industries in rural areas is the solution not only to mitigate the problem of disguised unemployment but also to increase the income of villagers.  

Security for land less labourers:

PROUT system recognises land less agriculture labourers on par with land holders. They will also be members of cultivator’s co-operatives, which enables them full employment and also for dividends on their share.  

If agricultural labourers only raise slogans of agricultural reform they will not change the agricultural system. It is only possible to consolidate the economy through a system-based constructive approach. This is for the first time that a viable, permanent solution is given to address the problems of landless agricultural labourers by PROUT.

Solution for the Agrarian Crisis – A New Approach:    

Agrarian crisis cannot be addressed in isolation, overlooking other aspects of economy. A comprehensive and holistic approach is necessary. There is an urgent need to think beyond Capitalism in a different pragmatic way. 

Shrii Prabhat Ranjan Sarkar, profounder of a new socio-economic theory, PROUT - (acronym of Progressive Utilization Theory), opines that until now the structural locus standii of agriculture has not been properly developed. In fact, all aspects of the structural side of agriculture have been neglected. To solve India’s agricultural problems, there must be a radical change in the entire agricultural system.

PROUT suggests revolutionary ideas of agrarian reforms. Decentralized Economic System of PROUT includes the concept of balanced economy, block level planning, industrial status to agriculture, cooperative management of agriculture, phase wise socialization of land etc.,       --------------------------------------------------------

Post a Comment