As polls loom, PM Modi announces withdrawal of 3 farm laws

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November 20, 2021 4:30 AM

PM Modi says three reform-oriented laws will be repealed in Winter Session; experts lament the decision; farmer leaders to end stir only when Parliament repeals laws

While the Centre maintained that the laws are pro-farmer, protesters feel they would be left at the mercy of corporations because of the legislation.While the Centre maintained that the laws are pro-farmer, protesters feel they would be left at the mercy of corporations because of the legislation.

The Narendra Modi government, known for its apparent courage of conviction and firm resolve to push various economic reforms aimed at boosting productivity and growth, on Friday backed away and announced withdrawal of the three reform-oriented, but hugely controversial, laws governing agriculture marketing, in the face of determined and prolonged protests by large sections of farmers. In a televised address to the nation on the occasion of the birth anniversary of the celebrated Sikh guru Guru Nanak, Modi said the laws, brought out as Ordinances in early June 2020 and enacted by Parliament in September 2020, would be repealed, adding that the necessary constitutional process would be completed in the Winter session of Parliament starting on November 29.

The announcement came amid a feeling the farm laws could be electorally costly for the BJP, which suffered some reverses in recent bypolls, as state assembly elections are due in five states, including in Punjab and Uttar Pradesh, in February-March next year.

While the Opposition described the decision variously to put the Centre on the mat — as an embarrassing climbdown, a victory of democracy over arrogance, belated dawning of wisdom and so forth — , farmer leaders, who have been at the forefront of the agitation for around a year, asserted that the protests on the Delhi borders won’t be called off until the laws are actually repealed by Parliament. They added that the government must accede to other major demands of farmers including legislative backing for the minimum support price (MSP) system and withdrawal of sections of the Electricity (Amendment) Bill, 2020, that allegedly threatens to undermine the supply of subsidised electricity for farming, through alleged centralisation of the tariff policy.

There have been few precedents of the Modi government taking back its major policies, other than its May 2015 decision to let the land acquisition Bill lapse; that Bill was aimed at easing land availability for various industrial and infrastructure projects, including those under the PPP mode, through waiver of consent requirements.

Experts have been staunch supporters of the farm laws, as they believe the changes would have freed the farmers from the clutches of notified APMC market yards, given them the freedom to sell their produce anywhere in the country and enabled them to earn more. “This is a very unfortunate decision (to repeal the farm laws). Farmers were given some freedom, but now they will be exploited as they have been exploited since independence or since British rule.” said Shetkari Sanghatana President Anil J Ghanwat, a member of the Supreme Court-appointed panel on the contentious laws.

Modi’s decision also cast doubts about his government’s resolve and ability to carry out other major reforms that have been laid out recently, including the comprehensive changes to the labour regulations via four codes passed by Parliament. Along with steps to boost labour welfare and rights, these codes also contain provisions to ease labour market rigidities for the benefit of industry, but require support of the state governments and the larger political spectrum for their implementation.

Modi said: “We tried our best to convince the farmers (about the utility of the farm laws for them), but couldn’t. The matter reached the Supreme Court as well.. We are taking the laws back.”

Given the prolonged farmer agitation on Delhi borders though the winter of 2020, the Supreme Court had, on January 12, 2021, stayed the laws and set up a four-member panel to talk to stakeholders chronicle their views, and suggest amicable solutions. In the subsequent round of talks with farmers, the Centre proposed to suspend the laws for one and half years, and set up a joint committee to discuss the legislation to end the stalemate, but the farmers stuck to their demand that the laws be completely withdrawn and insisted that their ‘ghar wapsi’ from the borders of the national capital was contingent on the abrogation of the laws.

In the 11 rounds of formal dialogue with the farmer organisations, the Centre resolutely resisted the demand for repeal of the laws, while conceding some ground in terms of acceding to some other demands raised by farmers. While the Centre maintained that the laws are pro-farmer, protesters feel they would be left at the mercy of corporations because of the legislation.

Among the three laws, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, seeks to give freedom to farmers to sell their produce outside the notified APMC market yards without any levy. This was supposed to ensure remunerative prices to farmers by facilitating competitive alternative trading channels. The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, proposes to give farmers the right to get into a contract with firms to sell their produce upon harvest at a pre-agreed price. This law was aimed at transferring the risk of market volatility from farmers to companies and giving the peasants access to modern tech and better-quality inputs.

Through the Essential Commodities (Amendment) Act, 2020, the Centre wanted to remove items like cereals, pulses, oilseeds, onion and potatoes from the list of essential commodities and scrap the imposition of stock-holding limits on such items barring under “extraordinary circumstances”. This was aimed at drawing large-scale private investments and FDI into the farm sector.

In his address, Modi also announced the formation of a committee to promote zero budget-based agriculture, a term for farming based on natural fertilisers and local seeds, to change crop patterns as per the changing needs of the country and to make MSP more effective and transparent.

A recent research paper by Icrier for the UN Food Systems Summit pointed out agriculture commodities in India lose their global competitiveness due to presence of a large number of intermediaries in agriculture marketing, leading to high transaction costs (30-50% of the retail consumer price). Via forward and backward linkages, the government can not only ease price fluctuations, but also ensure remunerative price to farmers and lower prices for consumers, the study said, adding, “The current set of farm laws sought to achieve precisely this, but some recent ones are stuck for lack of understanding by farmers and for political reasons.”

The Modi government had ramped up MSP operations in 2020-21 agriculture marketing year, in an apparent bid to pacify the agitating farmers, especially those in Punjab and Haryana, conventionally the biggest beneficiaries of the MSP system. Since this raised the grain stocks with the Food Corporation of India to an unmanageable level, as FE reported recently, the MSP purchases have been regulated in the recent kharif season and the paddy procurement target for the current year has been set at 50 million tonne, as against an all-time high 60 million tonne last year.

The current government also brought the policy that the MSPs for crops would be at least 50% higher than full paid-out costs (A2+FL). In 2018, the year in which the cost-linked norm was introduced ahead of the last general elections, the MSP increases were more dramatic – in the range of 50-97%, but have since been relatively moderate.

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