All you need to know about the new farming laws

   By Power Corridors ,  17-Oct-2020
All you need to know about the new farming laws

The new legislations are enabling provisions, providing farmers with a choice to sell their produce without intermediaries

By: Dr. Vivek Singh, Lawyer, Supreme Court of India

In the ongoing monsoon session, Parliament passed two major bills related to agriculture that has resulted in an eruption of debates and protests all over the country. Unfortunately, there is a great lack of clarity and understanding regarding the new laws themselves and the concerns of farmers. Although a state subject, the Centre seems to have taken recourse to its power under the First Schedule to regulate interstate trade and commerce to bring in these reforms.

Which laws are in contention

The two Bills that became a hot topic of debate throughout the country were the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, and the Farmers (Empowerment and Protection) Agreement of Price (Assurance and Farm Services) Bill, 2020. It should also be noted that the Essential Commodities (Amendment) Bill, 2020, had already been passed.

Farmers’ concerns

Restricting trade practices to identified agricultural market yards has not led to fair price framework. Rather, it led to different market yard operations in different states. While one state has an elected body to supervise functioning of the yards, most other states are nominated and carry heavy administrative expenditures, establishment charges financed by the market fee. Every transaction that happens outside the yard has a fee collection at check posts. Lack of price discovery mechanism, post-harvest facilities and legislative measures have not worked in to the farmer’s advantage. The agent commission system prevalent in most markets has also not empowered them.

What seems to be agitating the minds of farmers, therefore, is the fact that the Central government is doing away with the present minimum support price (MSP) system of procurement of food-grains. Over-dependence on middlemen, commission agents and bureaucratic controls are some of the common issues of the existing MSP system of procurement.

Although not more than 6 per cent farmers have access to the MSP-based procurement system, it is a highly balanced system. In addition to the MSP, the Centre pays 6 per cent as market fee and another 2.5 per cent as agent commission in some states like Punjab, incurring approximately Rs 3,000 crore annually.

This indicates that certain states where maximum agricultural procurement is done benefit from a rent-seeking system at no added value. The government tries to convince farmers that the new laws would ease deregulation of agricultural markets, increase their incomes by opening by private investment in the sector and benefit them. Broadly, farmers demand that the mandi system stays, their loans are cleared, a law is put in place that guarantees payment from the buyers through middlemen, and that banks do not deduct money in the name of loan recovery.

Trade Areas

Definition of the Trade Areas is “as any area or location, place of production, collection, and aggregation including (a) farm gates; (b) factory premises; (c) warehouses; (d) silos; (e) cold storages; or (f) any other structures or places, from where the trade of farmers’ produce may be undertaken in the territory of India.”

The definition does not, however, include “the premises, enclosures, and structures constituting (i) physical boundaries of principal market yards, sub-market yards, and market sub-yards managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act.”

In effect, the existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.

The protesters say this provision will confine APMC mandis to their physical boundaries and give a free hand to big corporate buyers.

Notably, the APMC system was abolished in Bihar in the year 2006, which has resulted in increased participation from the private sector. Consequently, the farmers have also benefitted.


According to the Ministry of the Agriculture and Farmers’ Welfare, “Any trader with a PAN card can buy the farmers’ produce in the trade area.”

As per the new legislation, a trader can operate in both an APMC mandi and a trade area. However, for trading in the mandi, the trader would require a license/registration as provided for in the State APMC Act. In the present mandi system, Arhatiyas (commission agents) have to get a license to trade in a mandi.

The protesters say Arhatiyas have credibility as their financial status is verified during the license approval process. But it will not be easy for a farmer to trust a trader under the new law. But it is also true that the registered companies are, by default, more credible.

This also explains why the protests have mostly been concentrated in Punjab and Haryana. The Arhatiya system is more prevalent in these two states than in other states.

Market fees

Section 6 states that “no market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produces in a trade area.”

This provision will reduce the income of the State and will benefit both the farmers and the traders. The capital that used to go to the state would now go to the farmers.

Dispute resolution mechanism

According to the section 8, in case of a dispute arising out of a transaction between a farmer and a trader, the parties may seek a mutually acceptable solution through conciliation by filing an application to the sub-divisional magistrate or SDM.

The protesters, however, fear that the proposed system of conciliation can be misused against them as the ordinance does not allow farmers to approach a civil court.

What the government says

According to the government, the private sector’s investment and other amendments in legislations will bring significant positive changes in the agriculture sector. Also, the government maintained that the farmers will continue to receive MSP despite these amendments and there will be no change in mandis established under the state laws.

The way forward

While the new laws seem to be in the favor of the farmers, there are certain things that we need to keep in mind:

Farming contractors or their associates should not be allowed to purchase the farmer’s land. There shall be a restricted provision on it because section 8 of the Act is not sufficient.

Farming contracts/agreements drafting must be in the local language of that area so that the farmers can understand the terms of contract.

There should be a farmers’ association on every district level and the association should be part of the dispute resolution authority.

Mandi and MSP must be continued as it is being another options to farmers.

In case of any dispute government should provide legal help to farmers free of cost.

Government shall provide farming contract/agreement terms draft on each and every language.

Recovery proceedings should be strictly up to the farm crops only and not against the farmers’ personal assets/land/house/bank account. Government recovery agencies should not arrest farmers.

Farmers allowed to use Kisan credit cards even after farming contracts.

Inter/intra state toll tax/road tax should not be applicable on farmers.


There are no easy answers to support any one view. Federation of All India Farmer's Association believes that the new farm laws ensure sustainable, profitable future for farming community. The Centre feels that crucial steps it has taken envisioning a fair market for farmers will help them, empowering them to be in control of the prices of their produce. These laws are enabling provisions, providing farmers with a choice to sell their produce without intermediaries. The new laws will discourage monopolization of their produce by large-scale buyers, hoarders, and corporations.