Understanding India’s Controversial Farm Laws

In September 2020, the Indian Parliament passed three sweeping agricultural reform laws that were described by the government as a long-overdue liberation of the farming sector. Within months, they had triggered one of the largest protest movements in India’s history. By November 2021, they were repealed. The story of these farm laws is not just a political episode – it is a window into the deep tensions between market reform and farmer welfare that define agricultural policy across developing economies.

The state of Indian agriculture before the laws 🔗

To understand the farm laws, you first need to understand the system they were trying to change. India’s agricultural markets have long been regulated through Agricultural Produce Market Committees (APMCs) – state-run bodies that operate designated wholesale markets called mandis. Under this system, farmers were required to sell their produce only in licensed mandis, and buyers had to be registered with the state government. While this framework was originally designed to protect farmers from exploitation by middlemen and private traders, over decades it developed its own inefficiencies – cartelisation among traders, excessive commissions, outdated infrastructure, and limited market access for small farmers.

Alongside the APMC structure, the Minimum Support Price (MSP) system has been a cornerstone of Indian agricultural policy since the Green Revolution era. The MSP is a government-set price floor for select crops, announced before the sowing season, designed to ensure farmers receive a minimum remunerative price for their harvest. The central government notifies MSP for 23 crops every year, based on recommendations from the Commission for Agricultural Costs and Prices (CACP). In states like Punjab and Haryana, where government procurement of wheat and rice is extremely active, the MSP system had become deeply embedded in the agricultural economy – and in farmers’ livelihoods.

What the three farm laws actually proposed 🔗

The three farm laws passed in September 2020 were: the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, and the Essential Commodities (Amendment) Act. Each addressed a different aspect of agricultural marketing.

The APMC bypass act 🔗

The first and most contentious law – the Farmers’ Produce Trade and Commerce Act – aimed to liberalize agricultural trade by allowing farmers to sell their produce outside the APMC mandis. Farmers could now sell directly to private buyers anywhere in the country, including at their farm gates, in warehouses, or through electronic platforms. The law also removed the market fees and levies that state governments collected on trades within APMC mandis – with the intention of making trade more competitive. The government argued this would increase market access, reduce exploitation by middlemen, and allow farmers to get better prices through competition.

The contract farming law 🔗

The second law created a legal framework for contract farming, allowing farmers to enter into advance agreements with private buyers – including large corporations – before the sowing season, at pre-determined prices. This was meant to reduce market unpredictability by transferring price risk from the farmer to the buyer. However, the law contained no mention of MSP as a floor price for such contracts, which became a central grievance.

The essential commodities amendment 🔗

The third law amended the Essential Commodities Act of 1955 to remove the central government’s power to impose stock-holding limits on food items under normal circumstances. The idea was to encourage private investment in agricultural storage and supply chains by freeing large traders and corporations from restrictions on how much grain they could store. Critics feared this would enable large players to corner supplies and manipulate prices.

Why farmers were alarmed 🔗

The government’s stated intent was to give farmers more choices and better market access. But for many farmers – especially those in Punjab, Haryana, and western Uttar Pradesh – the laws felt like a threat to the very foundations of their economic security. The primary fear was that once private players started trading outside the mandis, the APMC markets would lose business and eventually shut down – and with them, the MSP-based procurement system.

This fear had a clear financial logic. In Punjab and Haryana, government agencies procure over 80% of wheat and rice output at the MSP. For farmers in these states, the MSP is not a theoretical safety net – it is their primary selling price. Any weakening of the mandi system directly threatened their income. The concern was also structural: since trade in private markets would not be taxed while APMC trade would continue to be taxed, private mandis would operate at a competitive advantage – potentially driving the state-regulated markets out of business over time.

Farmers also worried about the loss of their existing relationships with commission agents, who served not just as middlemen but as informal lenders, ensuring timely procurement and adequate prices. Replacing this with direct corporate contracts – where large companies would hold far greater bargaining power – raised fears of exploitation, especially for the 86% of Indian farmers who are small and marginal, operating on average landholdings of just over one hectare, and who rely heavily on aggregators to sell their produce.

A critical structural issue reinforced these concerns: none of the three laws mentioned MSP as a guaranteed floor price – even in private contracts. This silence left farmers with no legal protection against corporations purchasing their produce below the support price once APMC mandis became redundant.

The protest movement and its scale 🔗

The 2020-2021 farmers’ protest was a protest against the three farm acts passed by the Parliament of India in September 2020, with many farmer unions describing the laws as “anti-farmer” legislation that would leave farmers at the mercy of large corporations. Under the coordination of the Samyukt Kisan Morcha, an alliance of dozens of farmer unions, tens of thousands of farmers marched to Delhi and camped at the capital’s border crossings for over a year. The protests attracted international attention and political solidarity from opposition-ruled states. Six state governments – including Kerala, Punjab, Chhattisgarh, Rajasthan, Delhi, and West Bengal – passed resolutions against the farm acts.

The Supreme Court of India stayed the implementation of the farm laws in January 2021 and appointed an expert committee to review the legislation, though farmer leaders refused to engage with the panel, questioning its impartiality. Multiple rounds of talks between the government and farmer unions failed to reach a resolution, with farmers holding firm on their primary demand: a complete repeal of all three laws and a legally guaranteed MSP.

The repeal and its aftermath 🔗

In November 2021, the Indian government announced the repeal of the three controversial farm laws – a significant victory for the farmers and a testament to the power of collective action. Both houses of Parliament passed the Farm Laws Repeal Bill on 29 November 2021. Prime Minister Narendra Modi, in a nationally televised address, acknowledged his government’s failure to convince a section of farmers and apologised to the nation – a rare public admission for a government that had strongly defended the laws throughout the protest.

However, the repeal did not fully resolve the underlying tensions. Following the repeal announcement, farmer unions renewed their demand for a guaranteed MSP, reminding the government of its target of doubling farmers’ incomes. In February 2024, thousands of farmers from Punjab and Haryana again gathered outside Delhi, demanding a new law that would officially guarantee MSP for 23 crops – a demand that remains unmet.

What the episode reveals about agricultural reform 🔗

The farm law controversy exposed a fundamental challenge in reforming agrarian economies: market liberalization that may be theoretically sound can be deeply destabilizing in practice when the safety nets that protect vulnerable participants have not been strengthened first. The APMC system had well-documented deficiencies – inadequate storage, outdated equipment, costly transportation – but evidence from Bihar, which had already dismantled its APMC system, showed that simply removing the regulated market structure did not attract private investment in market infrastructure or rural roads. Dismantling without building an alternative is not reform – it is abandonment.

The Bihar example is instructive. When Bihar repealed its APMC Act in 2006, private mandis did not flood in to replace the state-regulated markets. Farmers were left more exposed to price volatility, not less. Research from the University of Illinois found that the fragmented and state-specific way in which India’s MSP program is implemented means that farmers in states with weaker procurement systems face significantly greater price volatility – a clear warning about what could happen at scale if the mandi system were undermined nationally.

At the same time, the existing system has its own limitations. Awareness of the MSP among Indian farmers stands at only around 23%, and only about 20-25% of wheat and paddy production is actually sold at the MSP price. The benefits of the current system are concentrated in a small number of states and among farmers with larger landholdings and established market access. Genuine reform – whether through expanding e-trading platforms like e-NAM, strengthening APMC infrastructure, or introducing deficiency payment schemes – is needed. The question is how to pursue it without dismantling the protections that millions of vulnerable farmers currently depend on.

The path to balanced reform 🔗

The lesson from India’s farm law episode is not that agricultural markets should be frozen in place. India faces a “triple challenge” of supplying affordable food, sustaining farmer livelihoods, and addressing serious resource and climate-related pressures. All of these require structural change. But reforms of this magnitude – especially those that touch on price guarantees and market access for hundreds of millions of smallholders – require genuine consultation, clear legal protections, phased implementation, and strong institutional alternatives before existing structures are dismantled.

The government’s approach of passing three sweeping laws through Parliament during a session disrupted by the Covid-19 pandemic, without adequately consulting farmer unions or opposition-ruled states, contributed significantly to the breakdown in trust. What ultimately galvanized farmers into sustained protest was not simply the content of the laws, but the anxiety that government price guarantees and the associated procurement culture would be taken over by corporate actors – a fear rooted in the economic reality of farming in India, not in misinformation.

Effective agricultural market reform in India must pursue efficiency without eroding security. That means investing in APMC infrastructure, expanding transparent digital trading platforms, making MSP procurement more accessible to small and marginal farmers, and – critically – giving farmers a legal right to a minimum price floor that holds even in private trade. These are not goals in opposition to market reform. They are prerequisites for it.

What do you think? Should a guaranteed legal minimum support price be a non-negotiable foundation for any future agricultural market reform in India? And given the Bihar experience, what evidence should policymakers require before dismantling state-regulated market structures in favor of private alternatives?

References

1. https://krishijagran.com/agriculture-world/what-is-apmc-and-msp-why-farmers-are-protesting-for-it/
2. https://en.wikipedia.org/wiki/Minimum_support_price_(India)
3. https://prsindia.org/theprsblog/msp-and-public-procurement?page=2&per-page=1
4. https://byjus.com/free-ias-prep/farm-acts-2020/
5. https://lexibal.com/the-farmers-produce-trade-and-commerce-promotion-and-facilitation-act-2020/
6. https://thehindufirst.com/farm-laws-repealed-what-was-the-controversy-surrounding-them-and-why-were-they-being-opposed/
7. https://www.shankariasparliament.com/current-affairs/repeal-of-farm-laws
8. https://www.policycornerjsgp.org/post/digging-deeper-an-inquiry-into-the-2020-farm-laws-and-msp
9. https://en.wikipedia.org/wiki/2020%E2%80%932021_Indian_farmers'_protest
10. https://www.ritimo.org/The-Resilience-of-Farmers-Protests
11. https://www.cdpp.co.in/articles/msp-as-a-legal-right-benefits-and-challenges
12. https://journals.sagepub.com/doi/10.1177/09763996211056996
13. https://farmdocdaily.illinois.edu/2022/12/minimum-support-prices-for-agricultural-commodities-in-india-do-price-floors-really-matter.html
14. https://isas.nus.edu.sg/wp-content/uploads/2021/11/879.pdf