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Pro-Farmer Reforms and their Aftermath Show Government’s Good Intentions

The issue of making agriculture profitable for farmers has been discussed and debated for decades now.

Multiple committees, consultations and stakeholder reviews were held. But what was missing was decisive action based on these consultations.

While farmers have made India extremely productive with their sweat and toil, the issue of profitability was always being sidelined because reforms in agriculture and agricultural markets never got priority.

Lack of enough markets to sell, regulatory restrictions hampering development of modern supply chains, inadequate infrastructure and information asymmetry often led to post-harvest losses or sub-optimal prices for farmers.

This is why the pro-farmer reforms were brought in, after due debate, discussions and consensus building that gone on for two decades.

In fact, even before the Modi government came in, the UPA government’s agriculture minister Mr. Sharad Pawar had pushed for these reforms and written to various chief ministers about it. These reforms were also part of the promises in the Congress party’s earlier manifesto.

To go over them briefly, the three laws that were brought in by the Modi government were:

  • The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Act, 2020
  • The Farmers (Empowerment And Protection) Agreement On Price Assurance And Farm Services Act, 2020
  • The Essential Commodities (Amendment) Act, 2020

The first law freed the farmers to sell at any place of choice, whether within the APMC markets or outside. If farmers want to sell within the APMC markets, that will continue. MSPs also continue. So, the MSP acts as a safety net for farmers.

The Modi government’s commitment to the MSP regime has been demonstrated time and again. Not only has the Modi government raised the MSP multiple times but it also raised the MSP immediately after passing the farm laws.

Subsequently, this year, record procurement has happened in Punjab and for the first time ever, MSP payments have been made to the farmers of Punjab directly into their bank accounts. About Rs 22,215 crore was already transferred as of mid-May 2021. Further, in complete contradiction to the falsehood that the MSP regime would be stopped, this year also saw the highest ever procurement of wheat in Punjab’s history!

Speaking of recent pro-farmer developments, the government decided to hike the subsidy on DAP fertiliser by 140%. The government has increased the subsidy for DAP fertiliser from Rs. 500 per bag to Rs. 1200 per bag. The government will spend an additional Rs 14,775 crore for this subsidy in the Kharif season.

The second law enables farmers to enter contracts with a complete legal framework to protect them and their lands. This way, contract farming acts as a form of price assurance, because, typically, in contract farming, the agreement is made between the farmer and buyer even before the crop is sown. The law has been made in such a way that the contract is for the produce and not the land. So, the land of the farmers is safe and cannot be taken away under any pretext. Further, farmers can end agreements if they choose to do so but contractors cannot do so.

Contract farming is not new in India. However, what is new in this law is, it provides a framework for legal protection for farmers, their lands and the price for their produce.

There were some questions some farmers had about these laws. The government has always been open for discussions, willing to clear misgivings about any clause in any law.

The government has already given the below assurances.

  • The government is ready to give written assurances about MSP
  • States could be allowed to levy tax on private markets outside APMC
  • Farmers will also be given the option of going to court to resolve any type of dispute
  • States shall have the right to register the Agricultural Agreement
  • No one can take away the land of farmers under any pretext. These laws do not allow any kind of transfer of land, sale, leases or mortgages
  • Contractors cannot make any permanent changes to the land of farmers
  • Contractors cannot take loans for any temporary construction on the lands of farmers
  • No matter what the situation is, the law does not allow any confiscation of lands from farmers

It is very clear that these pro-farmer reforms are crucial for the country to achieve the aim of doubling farmer income.

Because, the impact of these reforms will see India’s agriculture and food processing industries transformed. Private sector investments will pour in across the entire cold chain, reducing losses and ensuring better prices for farmers.

Better backward linkages will ensure better quality of produce, leading India to capture a bigger share of global export markets. So, even the global markets will open up for Indian farmers.

Employment in the food processing sector will rise among rural youth, and this will put India on the path towards becoming the leading food exporter in the world, while maintaining our food security.

Due to all of this, farming can become profitable even for small and marginal farmers.


May 29, 2021