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In depth: What are the new farm laws and why are only Punjab, Haryana farmers upset

New Delhi, Jan 27: The farmer protests on January 26 went out of control and widespread violence was reported in New Delhi.

There have been various rounds of talks between the government and farmers, but all of them have ended in a deadlock. Now what are the farm laws and what has made them so contentious in nature.

In depth: What are the new farm laws and why are only Punjab, Haryana farmers upset

What are the three farm laws:

The laws are- The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, and The Essential Commodities (Amendment) Act.

These had come into effect as ordinances in the month of June 2020, before being approved by the Parliament during the Monsoon Session.

The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act: This provides for setting up of a mechanism that allows the farmers to sell their farm produce outside the Agriculture Produce Market Committees (APMCs). Under this any licence holder trader can buy the produce from the farmers at a price that is mutually agreed. This trade would be free of Mandi tax imposed by the State Governments.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act: This allows farmers to do contract farming. The farmers can market their produce freely.

The Essential Commodities (Amendment) Act: This is an amendment to the existing Essential Commodities Act. This law frees items such as food grains, edible oils, pulses and onions for trade except in extraordinary situations or at the time of crisis.

The government's view point:

The government has said that these new farm laws will strengthen the basic farm sector infrastructure through greater private investments. The government says that with the food markets growing in India, private players would make agriculture profitable for farmers. Various governments have found financial constraints in investing in rural and farm infrastructure.

The government has also likened the farm laws to the 1991 reforms in which the Indian economy was opened up and linked to global markets. These new farm laws would open up new opportunities for the farmers so that they can earn more than their farm produces.

The farmers' point of view:

The farmers fear that allowing outside APMC trade of the farm produces would lead to lesser buying by the government agencies in the approved Mandis.

The farmers argue that the MSP system would become irrelevant and they would not have any assured income from their farming. While the government announces a fixed MSP for around two dozen crops, paddy and wheat apart from some pulses are procured by the government agencies at the APMC Mandis.

MSP:

The MSP system has been beneficial only to a handful of farmers across India. The Narendra Modi government had set up the Shanta Kumar committee, which had said that only six per cent farmers benefit from the MSP regime.

However for farmers in Punjab and Haryana, the MSP system has worked well and procurement of paddy and wheat range at around 75-80 per cent. Hence the farmers from Punjab and Haryana are most vocal about the new farm laws. The farmers of these two states have been demanding that the MSP be made mandatory for both APMC and private Mandis.

Why is the government reluctant:

Some economists have called the MSP system of India one of the costliest food procurements in the world. There are around 7,000 APMC Mandis across the country, where the government agencies including the Food Corporation of India purchase farm precedes.

The wheat and paddy procured are sold to Below Poverty Line families through a Public Distribution System at a concession. This is basically a welfare-oriented or loss making practice.

Basically this practise means that the FCI pays more for the farm produces and bears more loss as the PDS rates remain almost the same. Rising procurements means that the FCI godowns are overflowing and the increasing MSP means that the FCI cannot sell the produce in the international markets at a profit. Most of the time, the government compensates the FCI for its losses. Sometimes, the government sells woodgrains to some countries under an agreement.

In past several years, many governments have tried to find a way out due to the rising food bill under the existing MSP system of the government that translates into pressure on the fiscal deficit in the annual budget.

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