The three farm laws of 2020, enacted in September 2020 and repealed in November 2021, aimed to liberalize India’s agricultural markets and reform the existing agricultural land scape. It was aimed to modernize farming by enabling barrier -free trade outside APMC mandis, promoting contract farming, and amending essential commodities regulations to reduce government interventions. The proponents viewed them as a step in right direction, arguing they would empower farmers, especially marginal and small land holders, with wider market access, better price through private buyers and e-trading, and reduced intermediary costs while transferring market risks to sponsors but sparked massive protests over fears of reduced state protections for farmers.
Key Provisions
- Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020:
It offers farmers the flexibility to sell their products outside predesignated mandis, thereby breaking the monopsony of the Agriculture Produce Marketing Committees (APMC). This is a reform that would have happened several years ego. The APMC, an institution, run by the state government, was created to protect the growers at the time of less production and during the economy of shortages and, at that time, it was insisted the farmers to sell their produce only through various mandies constituted under APMC. But when the Indian agriculture economy moved to surplus economy, the space for APMC started diminishing to promote competitive agricultural marketing to ensure better prices to the growers. These opaque institution like mandis started behaving like a state itself without any accountability.
However, the provisions of this law did not do away with these mandies but provided an alternative to the farmers for selling their produce to any organisation or individual other than mandi. In other words, farmers would be free to sell their products in mandis or elsewhere, thereby creating a single national market for every individual farmer, who currently is forced to sell only within a restricted geography mandated by APMCs. Further the act has put in place a dispute resolution mechanism to prevent potential exploitation once the market is opened to the private purchasers also. The burden of dispute resolution was placed on sub-divisional magistrate with the collector as the appellate authority. Certain objections were raised regarding the constitutionality of this Act. The Act is constitutional as the food is in Central list, although agriculture is in state list. Thus, this Act not only intended to provide farmers opportunities to fetch competitive value of their produce but also to operate in protected environment.
- Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020:
It flows out of first law and intended to protect the farmers when they would have dealt with non-APMC buyers such as agri-business firms, processors, wholesalers, exporters etc. It created legal frameworks of agreement with in which the farmers could engage with companies and wholesalers, effectively this law oversights on all the components of any agriculture transaction including pricing, transparency, payment mechanism, manner of delivery and disputes.
It placed compliances on quality and standard, a power held by the middlemen in APMCs where the small farmers have no questioning recourse. It introduced new quality markers in farm practices, such as, climate, pesticide residue and food and safety standard. The provisions of the Act have prohibited, companies, processors or wholesalers from acquiring ownership rights or making permanent modifications on farmer’s land. In other words, the Act was intended to protect the farmers all issues pertaining to their land and its tenurial rights.
- Essential Commodities (Amendment) Act, 2020
The Essential Commodities (Amendment) Act, 2020 substantially liberalises regulation of foodstuffs under the Essential Commodities Act, 1955, while retaining powers for the Union government in clearly defined “extraordinary circumstances”.
The 2020 Amendment modifies section 3 of the Essential Commodities Act, 1955 by inserting a new sub‑section 3(1A) dealing specifically with “foodstuffs”. Its stated objective is to remove stringent restrictions on stocking, movement and price control of agricultural foodstuffs to encourage private investment, while safeguarding consumer interests in crisis situations.
The Amendment provides that supply of specified foodstuffs (cereals, pulses, potatoes, onions, edible oilseeds and edible oils) can be regulated or controlled only under “extraordinary circumstances”. These extraordinary circumstances are explicitly listed as: war, famine, extraordinary price rise, or natural calamity of grave nature, and any regulation must be by government notification.
Commodities such as cereals, pulses, oilseeds, edible oils, onions and potatoes are effectively deregulated in ordinary times and are not subject to routine stock or movement controls under the 1955 ActThe central government, however, retains the overarching power under the parent Act to declare or treat items as essential if conditions for extraordinary regulation are met and notifiedStock limit provisions
Any imposition of stock limits on agricultural produce under the amended law must be strictly “price‑trigger based”. A stock limit can be imposed only if:
- There is at least a 100% increase in the retail price of horticultural produce, or
- At least a 50% increase in the retail price of non‑perishable agricultural foodstuffs,
calculated over either the preceding 12‑month price or the five‑year average retail price, whichever is lower.
The Amendment specifies that stock‑limit orders will not apply to:
- Processors of agricultural produce, and
- Other value‑chain participants (including entities involved in storage, packaging, transport and distribution), to the extent of their installed processing capacity or, in case of exporters, to the extent of export demand.
This exemption is meant to ensure that large investments in storage and supply‑chain infrastructure are not discouraged by fear of sudden stock‑limit orders.
Intended Reforms
These laws sought to dismantle barriers in agricultural marketing, boost private investment in supply chains, enable farm-gate sales, and raise farmer incomes through competition—potentially increasing prices by up to 11% via interstate trade freedom. Supporters viewed them as transformative, akin to 1991 economic reforms, addressing low yields and subsistence farming while preserving APMC options.
It is not that these reforms were brought out of the blue. Over last two decades, there have been at least seventeen reports authored by Parliamentary Standing Committees, expert committees, task forces, Farmers commission, and economic surveys that have studied before bring this legislation to the Parliament.
The most important recommendation which was the basis for drafting these three reformist laws is the report of Parliament’s Standing Committee on Agriculture. On 3RD Janaury2019, the committee came down heavily on the problems of the farmers and made certain observations and recommendation. Excerpts from the committee report are:
“The Committee notes that APMC Acts which were enacted in various State Governments with the objective to ensure an environment for fair play for supply and demand forces thereby resulting in an effective price discovery for farm produce, to regulate market practices and attain transparency in the transactions has become hot bed of politics, corruption and monopoly of traders and middle men. The Committee observes that APMC markets across the country are not working in the interests of the farmers due to various reasons such as limited number of traders in APMCs markets thereby reducing competition, cartelization of traders, undue deduction in the name of market fee, commission charges etc. The Committee was also informed that provisions of APMC Act are not implemented in true sense. Marke fee and commission charges are legally to be levied on traders however, the same is collected from farmers net proceed.
The Committee feel that scarcity of marketing platform for agriculture produce and mismanagement and corruption in APMC markets have created a situation where farmers are being deprived of fruits of their hard-earned labour leading to low price realisation for farm produce.
——————————————————————————————————————————-The Committee observe that there is urgent need for radical reform in APMC Act in the country, if we intend to provide justice to farmers. Remunerative pricing for farmers cannot be ensured unless number of marketing platform for the farm products are enhanced and functioning of APMC markets is made democratic and transparent”
Probable Benefits to Farmers
- These laws expanded trade options beyond APMC mandis, allowing sales at farm gates, electronic platforms, or any location without state taxes, fees, or cess, fostering competition among buyers for better prices. Small and marginal farmers (86% of total) gained freedom to access competitive markets, potentially increasing price realization and cutting transportation costs
- The agreement act enabled pre-sowing price assurance and risk transfer to sponsors, mitigating market volatility while providing access to quality inputs like seeds and technology. It promoted direct ties with private players, boosting productivity and income through assured markets.
- By easing stocking limits on essentials and encouraging entrepreneurship, the laws sought to attract investments in supply chains, reduce middlemen dominance, and create a national market for surplus produce movement. Dispute resolution within 30 days and no licensing barriers for PAN-holding traders further facilitated efficient trade.
Protests and Repeal
Farmers protested for over a year, fearing corporate dominance, MSP erosion, and vulnerability without statutory guarantees, leading to the Supreme Court staying implementation in January 2021. Prime Minister Narendra Modi announced repeal on November 19, 2021, ahead of state elections, with Parliament passing the Farm Laws Repeal Bill on November 29, 2021