Looking into the intended benefits of the bills, potential drawbacks identified by the opposition as well as some key issues that the bills do not address.

Intended Benefits:

1. The promotion of inter-state and intra-state trade outside of specified mandis (which was previously not allowed under the APMC Act).

2. Farmers would have more choices as they can choose to sell either at mandis or private markets.

3. Creation of a pan-India, national market for agriculture.

4. The risk of market unpredictability would be transferred to sponsors.

5. Farmers can enter into a contract with agri-business firms, wholesalers, retailers or exporters for sale of future produce at a pre-agreed price.

6. Farmers would no longer need to engage in direct marketing (and no longer have to engage with middlemen and pay some commission), and could receive better prices for their harvest.

7. To attract private sector investments to build supply chains for farm produce.

8. To provide an effective dispute resolution mechanism.

9. To end the monopsony at mandis. Previously, what would often occur at mandis was that traders would form a cartel and agree upon a price – farmers would then either have to sell at this price or MSP (assuming that MSP is actually functional in this mandi). The entrance of private firms was intended to create greater competition, thereby leading to higher prices. However, it is possible that the monopsony may just expand.

Potential Drawbacks:

1. States will lose revenue since private markets cannot be taxed. Some states will lose much more revenue than others.

2. Mandis may be phased out if too many people turn to private markets. However, this is highly unlikely if we inspect the case of Maharashtra. Maharashtra had removed fruits and vegetables from the purview of the APMC Act and had allowed for private markets. Despite this, the business of APMCs from 2019-2020 was six times that of private markets – showing that farmers did not switch en-masse to private markets. Some economists have also mentioned that private companies prefer to buy from mandis since there is a greater variety of crops and it’s more convenient. This also means that in this respect, the bills may not lead to any revolutionary changes in farming.

3. Big private companies will likely still have the edge when it comes to disputes.

4. For contract farming, sponsors may not want to work with a multitude of small farmers.

Inadequacies:

1. 18 states have already allowed for the establishment of private markets outside of the APMC as well as the direct purchase of agricultural produce from farmers. These changes have not led to any significant private investment in the states due to a number of reasons, including high transaction costs.

2. Small-holder farmers comprise nearly 78% of India’s farmers and face an issue of small economies of scale. With limited resources, most small farmers are unable to afford travelling long distances to designated mandis as notified by the APMC Acts. Consequently, they sell to village traders (middlemen) at prices much lower than the MSP. Even if private markets are established, small-holder farmers will likely continue to sell at their villages. Although it is possible that private companies will purchase at said villages, the system of exploitive middlemen might arise again and farmers may only be left marginally better off.

3. The National Commission on Agriculture had recommended that every farmer should be able to reach a mandi within an hour – for which each mandi should serve an area of 80 square kilometres. However, this is far from the current area served and it would appear that there is a need for more mandis – especially for small-holder farmers who cannot travel such long distances.

Citations:

https://timesofindia.indiatimes.com/india/deregulated-apmcs-rule-in-maharashtra/articleshow/78630519.cms

https://blog.finology.in/recent-updates/farm-bill-2020-pros-and-cons

https://www.oneindia.com/india/farm-bill-2020-pros-and-cons-all-you-should-know-3152048.html

https://www.drishtiias.com/daily-updates/daily-news-editorials/mandi-system-in-india

https://www.drishtiias.com/to-the-points/paper3/agricultural-reforms

https://www.youtube.com/watch?v=YcqVWFZXyaE

https://www.drishtiias.com/daily-updates/daily-news-editorials/agricultural-marketing-reforms

https://www.orfonline.org/expert-speak/agriculture-reforms-ignore-political-rhetoric-embrace-prosperity-economics-73938/