The agriculture sector contributes nearly 15 per cent of the India's $2.9 trillion economy
The three farm laws at the heart of fierce protests by farmers over the past 14 months will be withdrawn, Prime Minister Narendra Modi said Friday. The U-turn comes months before elections in several states, including the agricultural belt of Punjab and Uttar Pradesh.
"While apologising to the nation, I want to say with a sincere and pure heart that maybe something was lacking... that we could not explain the truth to some of our farmer brothers... we have decided to repeal the three farm laws," the Prime Minister said in an address to the nation.
So, what are the three farm laws? And why are they so controversial?
Law 1: Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act
This is supposed to allow "contract farming", or allow farmers to enter into direct agreements with agri-firms, exporters or large buyers to produce a certain crop for a pre-agreed price.
What the government said: The government had stressed that crop prices under this law would be determined by market forces - i.e., farmers would get paid more for sowing in-demand crops.
The government also referred to a law (allowing barrier-free intra- and inter-state trade) to say farmers could sell in-demand crops at the highest possible prices, thereby maximising returns.
Another benefit, the government claimed, was that this would eliminate agricultural middlemen, since the farmers would now deal directly with the end-buyers - the agri-companies.
What the farmers said: Farmers were worried the new law would eliminate MSP - the guaranteed minimum price for their produce). They also feared the 'corporatisation of agriculture' - a scenario in which large corporates use their financial might to force unreasonably low prices on farmers.
Farmers were worried that small and marginal landholders would be vulnerable to such disadvantageous contracts unless sale prices were regulated. Congress MP P Chidambaram underlined that concern, calling for a clause linking MSP to the lowest price offered by private buyers.
The law did not explicitly discontinue MSPs (and the Prime Minister had insisted it would not) but farmers were concerned that allowing prices to be settled outside regulated spaces - i.e., the mandis - would make it difficult for the government to monitor each transaction and ensure fair prices.
As per census of 2011, 52.7 per cent of people in India are employed in agriculture-related activities
Law 2: Farmers Produce Trade and Commerce (Promotion and Facilitation) Act
What the government said: The government said this law would enable farmers barrier-free intra- and inter-state trade of all farm produce, which they could, again theoretically, sell at markets of their choice, even if in other states. Farmers would also not have to pay a tax collected by the state.
Currently farm produce is sold at notified wholesale markets, or mandis, run by Agricultural Produce Marketing Committees, or APMCs. Farmers take their produce to local markets, where licensed middlemen buy from them - at prices set by auction - before selling to institutional buyers.
What the farmers said: Farmers, however, pointed out that in practice small and marginal farmers may find it difficult to avail the potentially better prices at markets further away because of constraints on travel and storage, as well as associated costs. That was precisely why, they argued, some chose to sell in local wholesale markets even though prices were better elsewhere.
Farmers were also angry with the wording of Section 8 of this law, which said farmers could approach a sub-divisional magistrate (SDM) for dispute resolution. They argued that they - particularly the smaller farmers - were not powerful or influential enough to access the SDM office.
Law 3: Essential Commodities (Amendment) Act
This law was to scrap the government's power to limit stocks of essential food items, except under extraordinary circumstances. It also removed certain goods - like edible oil and onions - from that list.
It further enabled the government to regulate the supply of such commodities, or even re-include them on the list. The stock limit would be based on price rise in the market.
In the case of this law, there was no real disagreement between the farmers and the government.