Report of SC-Appointed Committee on Farm Laws (UPSC Economy)

In January 2021, amid mass protests by farmers, the Supreme Court of India stayed the implementation of three contested farm laws passed in 2020 and constituted a four-member expert committee to consult stakeholders and submit recommendations. The committee’s report – submitted in March 2021 but made public only in 2022 – endorsed the laws with modifications. The three laws were subsequently repealed in November 2021. Yet the debate over agricultural marketing reform, MSP and contract farming remains alive in 2024-26, with the Atmanirbharta in Pulses Mission, renewed MSP agitation, and state-level contract farming experiments keeping these issues on the UPSC GS III syllabus.

The three farm laws at a glance

1. Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 – enabling sale outside APMC yards.
2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 – framework for contract farming.
3. Essential Commodities (Amendment) Act, 2020 – removing cereals, pulses, oilseeds, onion and potatoes from stock-holding limits except in exceptional circumstances.

All three were repealed by the Farm Laws Repeal Act, 2021.

Act 1: Trade and Commerce Act

Key provisions:

• Farmers could sell produce anywhere in India, outside APMC yards (farmgate, factory premises, warehouses, cold storages, silos).
• No market fee or cess on trade in the "trade area".
• Dispute resolution through a conciliation board under the Sub-Divisional Magistrate.

Concerns raised:

• Federalism: agriculture is a State subject (Entry 14, List II); Central Acts would override State APMC Acts.
• Erosion of MSP: with APMC decline, procurement at MSP could weaken.
• Price discovery vacuum: APMC auctions provide benchmark prices; trade outside yards lacks a reference mechanism.
• State revenues: mandi fees and cesses would fall.
• Exploitation risk: unequal bargaining between farmers and corporate buyers.

SC committee observations:

• State APMC Acts would continue; Central Act merely created an alternative channel.
• The APMC regime already covers only 25-30% of produce; livestock and fisheries (40% of agricultural GVO) are entirely outside it.
• Rice-wheat procurement concentration in Punjab and Haryana (90% of rice, 70% of wheat) had created a skewed cropping pattern.
• Higher mandi charges and cesses had inflated retail prices.

Act 2: Contract Farming Act

Key provisions:

• Promote farming agreements between farmers and agribusiness firms, processors, wholesalers, exporters or retailers.
• Minimum period: one crop season; maximum: five years.
• Price to be fixed in the agreement (or linked to APMC/benchmark prices).
• State-level registration authority.
• Conciliation board and SDM for dispute resolution.

Benefits:

• Streamlines the supply chain.
• Raises incomes through integration with bulk buyers and exporters.
• Access to seeds, capital, fertilisers and technology.
• Price certainty encourages investment.
• Reduces indebtedness by cutting dependence on moneylenders.
• Fillip to food processing.

Potential problems:

• Exclusion of small and marginal farmers with low marketable surplus.
• Monopsony risk where one buyer dominates several sellers.
• Environmental pressure: monoculture, excessive water and fertiliser use.

SC committee observations:

• 28 States already had contract-farming provisions in their APMC Acts; Punjab and Tamil Nadu had standalone contract-farming laws.
• Contract farming had already transformed the poultry sector (around 80% organised commercial production) and Nestle's dairy partnership in Punjab had improved livelihoods.
• The fears of exploitation, while real, could be addressed through stronger registration and dispute mechanisms.

Act 3: Essential Commodities Amendment

Rationale of the 1955 Act: regulate production, supply and distribution of essential commodities – drugs, fertilisers, pulses, edible oils, petroleum. Centre can notify stock-holding limits when supply is short and prices rise.

How ECA hindered agricultural marketing:

• Fear of stock limits prevented traders and processors from bulk procurement during bumper harvests.
• Poor investment in storage infrastructure.
• Adverse impact on food processing: stock limits curtail operations.
• Export bans triggered by essential-commodity declarations.
• Outdated context: 1955 was a shortage economy; 2020 India is in surplus for most items.

2020 amendment:

• Agricultural commodities outside ECA except in exceptional circumstances (war, famine, natural calamity, extraordinary price rise).
• Stock limits only triggered by 100% retail price rise for horticulture or 50% for non-perishables.

SC committee view: the amendment balanced interests of farmers, traders, processors, exporters and consumers; seasonal agriculture necessitates off-season storage.

Broad recommendations of the SC committee

• Laws should not be repealed: a "silent majority" supported them.
• State flexibility: States allowed to adapt implementation with Centre's approval, keeping the one-nation-one-market spirit intact.
• Alternative dispute resolution: civil courts or arbitration as options.
• Agriculture Marketing Council: on GST Council lines, chaired by the Union Agriculture Minister with all States/UTs as members.
• Compensation mechanism: for State revenue loss from APMC decline, modelled on GST compensation.
• ECA 1955: consider complete abolition or substantial liberalisation.

Latest developments (2024-26)

Farm Laws Repeal Act, 2021: all three laws repealed in November 2021 after year-long protests.

MSP committee: the 2022 committee chaired by former Agriculture Secretary Sanjay Agrawal submitted its report in July 2024, recommending institutional reforms rather than a statutory MSP.

Renewed farmer protests (2024-25): “Delhi Chalo 2.0” demanded legalisation of MSP, implementation of Swaminathan report (C2+50%), debt waiver and pension. Talks between farmer unions and the Centre continue.

Budget 2025-26: Atmanirbharta in Pulses Mission extends unconstrained MSP procurement for tur, urad and masoor by NAFED and NCCF for four years – effectively addressing one of the farmer demands.

Digital Agriculture Mission: 2024-25 rollout of Agristack with farmer ID and digital crop survey improves market linkage, partly operationalising the committee's e-trading ideas.

16th Finance Commission: state submissions emphasise cooperative federalism in agricultural marketing – a direct echo of the committee's Agriculture Marketing Council idea.

GST Council: 2024 decisions on pre-packaged food GST rates have revived the debate on taxing branded agri-processed goods.

Key lessons from the SC committee episode

• Reform agriculture through consultation, not executive speed.
• Respect federal sensitivities – agriculture is a State subject.
• Pair market liberalisation with income-support guarantees.
• Invest in complementary infrastructure (storage, logistics, price discovery) before dismantling existing institutions.

UPSC Relevance

• GS II (Polity): federalism, State vs Union list, SC's role in policy implementation.
• GS III (Agriculture/Economy): APMC reform, MSP, contract farming, ECA, one-nation-one-market.
• Prelims pointers: three 2020 farm laws, Farm Laws Repeal Act 2021, Agriculture Marketing Council proposal, ECA 1955 thresholds (100% horticulture, 50% non-perishable).

Likely question: "Critically examine the recommendations of the Supreme Court-appointed committee on the 2020 farm laws. Do Budget 2025-26 announcements address its core concerns?" (GS III, 250 words)