The Farm Bills, 2020 : benefits and lacunae

October 19, 2020

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This article has been written by Varad Kanade and Nimish Joshi, from DES Navalmal Firodia Law College, Pune.


When the country is making such tremendous strides with digital connectivity and even school children have moved to online classes, now it’s time for the agriculture sector to go online. Farming is not an attractive occupation; Surveys show 42% of farmers want to move out of it. Today farmers are fighting not only for a better price but also for a better market. Farmers must be as free as non-farmers to buy and sell anywhere in India. Now farmers will get better prices through an increase in their marketing capacities and this will help in creating ‘one nation, one market’. Opposition parties and many farmers’ organisations have protested against the new laws, the protest arises from misstatements given by some politicians that the minimum support prices (MSP) will eventually become redundant. 

The commission agents have been the main link between the farmers and procurement agencies, these bills will adversely affect their business, these commission agents regard their opposition as a fight for their survival. The new laws will give farmers the freedom to sell their produce anywhere in India, it will give them access to corporate buyers. India in 1991 went through a major reform wherein Licence Raj was dismantled and the Indian market was open to multinational companies, in these reforms the most important sector was left out, that is the agriculture sector. Repealing the APMC act and essential commodities act was considered a key step towards giving farmers a liberated economic landscape to boost their income. The stronger the agriculture sector the strong will be the foundation of self-reliant India.

Why were the new reforms necessary? 

When the zamindar system was abolished to stop farmers exploitation, the land got divided into small parts. Farmers were owners of small plots. As a result, it couldn’t grow a huge number of crops.  When the green revolution happened the then government introduced APMC act. This Act introduced a Mandi system for farmers to sell their produce. In Mandi system, the traders were trading with farmers through licensed middlemen who worked for commission (from both farmer and trader).  An auction happens for farmer’s produce that was created for farmer’s development and growth. But its backfired middlemen started buying farmer’s produce at a very low price and would sell that same product for a higher price to traders to earn more commission. These middlemen used to decide that today they will only purchase for a particular for example 20rs per kilo this made  farmer a “Price taker”. 

To tackle this if a farmer sells his product to illegal trader outside mandi he’d have to sell his produce at the price that trader says, which lead to more exploitation. This system has been going on for the past 25 to 30 years. Thus, crores of urban consumers or traders had to pay a higher price for farming produce and millions of farmers went highly underpaid. 

Agriculture employs 58% of India’s total population and 15%of total GDP. In 2020, there was a 4% growth in the agricultural sector (GDP wise). Thus, India’s Agricultural sector has been liberalised and quasi-privatised by the new Farm Bill  2020 by eliminating dangerous middlemen, facilitating better prices for farmers, attracting new investments and social upliftment of farmers. 

Farm bill 

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance,2020. The  Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services  Ordinance,2020 was promulgated by the Union Cabinet on 5th June, 2020.  

These Bills were introduced by Mr. Narendra Singh Tomer, the Minister of Agriculture and Farmers  Welfare. First enacted by Lok Sabha on 17th Sept, 2020 and then by Rajya Sabha on 20th Sept,  2020 and Accent was given by President Ram Nath Kovind on 24th Sept,2020.  

The farm bill includes 3 acts: 

  1. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm  Services Act, 2020.
  2. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
  3. The Essential Commodities (Amendment) Act, 2020.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and  Farm Services Act, 2020 

First of all, let’s take a look at the act’s Preamble:

“An Act to provide for the creation of an ecosystem where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels; to promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce outside the physical premises of markets or deemed markets notified under various State agricultural produce market legislations; to provide a facilitative framework for electronic trading and for matters connected therewith or incidental thereto.“

This act allows Farmers to trade all over India without any restrictions. This act provides a nationwide framework for Agreement between Farmer and Sponsor i.e. the trader or the buyer. It also promotes barrier-free interstate and intra-state trade of agricultural produce and provides a framework for electronic trading. 

FARMING AGREEMENT: This is one of the main features of this act. According to to Sec3(1) of the act, the  farming agreement may provide information relating to terms and conditions for supply of farming produce including the time of supply, quality, grade, standards, price and other matters. This agreement includes quality standards of not only farming produce but also quality farming  practices, labour and social development standards.  

The act ensures the best value for farmers as the value is already decided in agreement and it can’t be changed even if the market prices rise or fall. The farming agreement may be linked with insurance service providers or credit schemes of the central and state government. 

DISPUTE RESOLUTION: The dispute resolution under this act is concerned with a conciliation board consisting representatives of both parties considering the selection is fair and balanced.  Both parties shall include this provision at the time of forming a farming agreement. If this provision is not included then the matter goes to the Sub-Divisional Magistrate of the concerned area. According to this Act, the sub-divisional magistrate is a sub-divisional authority. The Sub-Divisional Authority forms a conciliation board; if the matter is not resolved then this authority entertains the dispute. 

The provides a “force majeure” provision which means a Farmer in the case doesn’t deliver pre-decided amount of produce to the trader because of natural calamities or epidemic diseases or drought then order of recovery amount shall not be passed against the farmer. 

In other cases, if payment default is done by the trader then that trader is liable to pay ½ times the amount due to the farmer from him. In the case of Farmer, recovery should be paid by the farmer but the amount shall not exceed the actual amount incurred by a trader/sponsor.  

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act,  2020 

The Act provides the freedom to trade in trade areas and interstate or intrastate trade. According to the Act, the trader shall pay on the same day as delivery of farming produce if not the payment shall be done within three working days and a receipt should be given on the same as of delivery. 

According to this Act, “Any Person” with a PAN card is able to enter in direct trade with farmers. Whether through e-commerce platforms or physical trade. No market fee is levied on trade outside Mandis.  

Benefits of the Farm Bill 2020

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

The said Act in section 3(3) gives farmers the freedom to enter into an agreement with corporate companies. The act states that the minimum period for agreement shall be for one crop season or one production cycle of livestock, as the case may be and the maximum period shall be five years. 

Section 5 gives farmers the right to gain more profit in accordance with the fluctuating market conditions, as there are chances of earning high profits. When the farmer is entering into a  contract, the delivery of farming produce needs to be collected by the sponsor within an agreed time frame. The act does not permit to enter into an agreement with considering the farmland as a mortgage, lease, sale or raising any permanent structure or making any modification on the land. 

This very act also gives freedom to both the parties to terminate such agreement for any reasonable cause with mutual consent. 

If the sponsor fails to make payment of the amount due then he is imposed with one half times of the total penalty. So, it gives payment security to farmers as well. 

The farmers produce trade and commerce promotion and felicitation act 2020. 

Firstly, farmers used to sell their crops in Mandis and other local markets. This particular act allows the farmers to carry on the intra-state trade and commerce. The said act gives payment security to farmers as well. It basically directs the trader to make the payment on the same day or within the maximum three working days after the delivery. Earlier when farmers were selling their produce in local mandis, they were supposed to pay the mandi tax. The said act restricts such mandis and APMC markets to collect tax from farmers. 

Lacunae of Farm Bill 2020


The 3 acts are revolutionary if the government addresses the loopholes of these acts. The loopholes of these acts are quite concerning and the government should discuss the same with farmers to be more efficient and effective. The government should form a proper mechanism for contract farming  so no farmer is exploited by big greedy corporates. To solve disputes between farmers and traders. The government should establish a different regulatory body rather than Sub-Divisional Magistrate. The MSP  system is flawed and even though the government recently said that they are not repealing MSP but still they need to address the fact that only 6% of Farmers are getting benefits. The government should Implement this scheme more effectively by spreading awareness with the help of Gram panchayat so that the smallest of farmers will know about this and will get the benefit. Farmers in our country are not united. Just like AMUL or National Egg Coordination Committee Farmers should form a nationwide group or local groups to deal with big traders. 

Effective implementation is necessary. Right now, India is going through a food surplus still people are going to sleep hungry. Why is that? Because of the mismanagement of the government. 


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