Last year, the Indian Government enacted three major farm law reforms, namely, the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 which allows farmers to sell their produce to anyone outside of the Agriculture Produce Marketing Committee (APMC) approved mandis, both at the intra-state and inter-state level and the state governments are prohibited from levying any market fee, cess or levy on such a sale; the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 which allows farmers to enter into a contract farming agreement with a buyer prior to sowing or harvesting of any farm produce which must guaranty farmers a minimum price and to buyers an assured supply, and sets up a three-level dispute resolution mechanism comprising of a Conciliation Board, Sub-Divisional Magistrate and an Appellate Authority; and the Essential Commodities (Amendment) Act, 2020 which de-classifies some commodities like onions, pulses, potatoes, edible oilseeds and oil as essential items in normal circumstances but at the same time empowers the government to impose stock limits on them in case of a war or famine.

Since the enactment of new farm laws last September, a major section of the farmer community from the northern states of Punjab and Haryana has been demanding a total ban and repeal of these laws. Thousands of farmers are agitating relentlessly, day and night protesting at the Singhu border of the national capital, New Delhi. Although the new farm laws have nothing to do with setting up of a Minimum Support Price (MSP) but they have garnered strong opposition from the farmers mainly residing in these states in this regard. MSP is a minimum price which is fixed by the government for procuring selective crops’ produce from the farmers in the APMC approved mandis. Although it acts as a catalyst to bolster the farmers’ income in times of uneven market prices of essential crops like wheat, paddy etc. but it does not have a legal basis in India. In other words, there is no statutory framework in India that empowers the government to mandatorily set up MSP.

Then why are the farmers, particularly from the states of Punjab & Haryana protesting against the new laws? To answer this, first we need to trace the origin of the concept of MSP. MSP’s origin can be traced back to the 1960’s when our country was facing acute food shortage, at that time MSP was conceived as a policy incentive under the aegis of the Green Revolution drive to boost the growth of agricultural produce in India wherein the then government decided to procure food grains, mainly wheat, from the farmers in the government approved mandis at a pre-determined rate or MSP. As a result, farmers started investing heavily in irrigation machinery, fertilizers and pesticides because of the assurance that the government would buy their produce once it was harvested, at a rate which is not less than the MSP from anyone. The major states to benefit from this scheme were Punjab and Haryana.

However, since then it became a customary practice to set up MSP every year by the successive governments which came into power due to their vested interests of vote bank politics and gradually the scope of crops also expanded on which the MSP would apply. At

present, MSP is fixed for 24 crops by the government twice a year on the recommendations of the Commission for Agricultural Costs and Prices (CACP), which is a statutory body.

According to the Shanta Kumar Committee Report, 2015 – while farmers in India do enjoy some sort of a safety net under the MSP regime but in reality only 6 per cent of farmers actually succeed in selling their crops at MSP. Hence, a majority of Indian farmers have never really benefitted from the MSP system. The MSP regime is also plagued by intermediaries and middlemen who block access to the APMC mandis for small and marginal farmers as well as new traders. According to a report submitted by the Standing Committee on Agriculture to the Lok Sabha in 2019, it was found that most APMCs in India have a limited number of traders operating, which has resulted in cartelization and reduction of competition (in terms of buyers in these mandis) and that undue commissions and market fees were being charged therein¹.

In order to overcome the failures of the APMC regime, the government has enacted the new farm laws. While the Government claims that the new laws aim towards bringing farmers more close to buyers outside the APMC approved mandis, leading them to practically sell their produce freely to anyone in the market, however, the new laws are silent upon setting up of MSP by the government in the areas outside of the APMC approved mandis. And this is the reason why farmers majorly from the states of Punjab and Haryana are protesting today, because they fear that having no MSP fixed for their produce outside such mandis can jeopardise their livelihood and also put them in an uneven bargaining position with the big private entities who may enter the market as proposed buyers under the new contract farming regime.

Due to the perishable nature of crops, every year tonnes of farm produce goes to waste as it is kept lying to rot in warehouses that are ill-equipped to handle such vast measure of produce. The usher of new farm laws is indeed a stepping stone to welcome private players or big entities which are equipped with advanced infrastructure and storage facilities to aid in the protection and safety of the farm produce from going to absolute waste. However, the plight of farmers’ and their right to freely access the market must not be neglected. Especially, leaving small and marginal farmers in an unequal bargaining position with the big conglomerates, in the absence of a minimum support price outside of the government approved mandis under the new contract farming regime will put them at a greater risk and on the mercy of bigger private enterprises.

While hearing several petitions filed before the Apex Court challenging the constitutional validity of the new farm laws, the honourable Supreme Court of India has recently directed the Central Government to put a stay on the implementation of all the three farming laws and has also ordered to set up a four member committee to hear the plight of agitating farmers and all the stakeholders involved, and to amicably reach at a settlement.² However, the government must step up and act in a proactive way to strike a balance between the farmers’ interests as well as the privatization of the Indian agricultural sector which is the need of the hour.

¹ See Report No. 8, Standing Committee on Agriculture (2019-20): Action taken by the government on the report ‘Agriculture Marketing and Role of Weekly Gramin Haats’, Lok Sabha, (2019), available at: https://www.prsindia.org/billtrack/farmers-empowerment-and-protection-agreement-price-assurance-and-farm-services- bill-2020#_edn2

² Read the Court Order here: https://images.assettype.com/barandbench/2021-01/1df8a71d-e777-426e-ba24- f21525fe987b/farm_laws.pdf