How Repealing the Farm Laws Will Hit Exports and the Food Processing Sector

In one of the biggest policy rollbacks since coming to power, Prime Minister Narendra Modi announced on November 19 that the Centre would repeal the three contentious farm laws introduced in September 2020, bowing to pressure from farmers ahead of Assembly elections in Punjab and Uttar Pradesh.

The laws were aimed to remove intermediaries and allow farmers to sell their produce anywhere in the country. Their repeal will jeopardise the Centre’s attempt to link small farmers with the food processing units and may impact India’s prospects as a potential exporter of processed foods. Even the production-linked incentive for the food processing sector, which aimed to grow farmers’ income, reduce agri-waste and expand India’s packaged F&B manufacturing base and exports, may now get impacted.

In his address to the nation on November 19, Modi said the laws were meant to strengthen small farmers. “However, we failed to make them understand the benefits of the new laws, and as such, we have decided to withdraw all three agricultural laws. In the Parliament session that starts at the end of this month (November 29), we will complete the constitutional process to repeal these,” he said, urging farmers to end their protest and return home.

Farmers, mostly from Punjab, Haryana and UP, have been protesting for over a year, demanding repeal of the laws, which they said would allow private players to dictate terms. They have also been demanding a legal guarantee on MSP.

Madan Sabnavis, chief economist, CARE Ratings, said that he was disappointed to see the government repeal the “very progressive farm laws”.

“The government failed to communicate the benefits of these laws to the farmers. A number of strong lobbying groups of middlemen did not want the existing system to get dismantled. Farmers’ income would have seen a considerable improvement had these got enacted,” added Sabnavis.