Two of the three agriculture-related bills piloted by the Narendra Modi government, aimed toward liberalizing or transforming the agriculture sector in the country were passed by the Rajya Sabha by voice vote on Sep 22, 2020, After the Loksabha cleared these bills on 17th Sep 2020. Opposition parties, also as long-time BJP ally Shiromani Akali Dal stating it an "anti-farmer" move also enraged by the refusal of Deputy Chairman Harivansh to permit voting on resolutions they moved, broke microphones, stood up on tables, and flung papers in the air in Rajya Sabha. Harsimrat Kaur Badal, Minister of Food Processing Industries, and SAD representative in the Modi government with the support of framers of Punjab organized a three-day protest against the bill by alleging the Bills to be detrimental to Punjab's agriculture sector and resigned from the Union Cabinet. The other opposition parties including Congress, AAP, Janta Dal, and the other left parties vehemently opposed the bills and asking the government to send them a parliament panel for further scrutiny. And this demand was rejected by Mr. Harivansh. Minister of Agriculture Mr. Narendra Singh Tomar by wrapping the session by replying and en the session, as per schedule and opposition demands to Minister to conclude his statement on Monday.
What are the needs of the Bills?
Agricultural markets in India are mainly regulated by state Agriculture Produce Marketing Committee (APMC) laws. APMCs were set up to ensure fair trade between buyers and sellers for effective price discovery of farmers’ produce. APMCs can: (i) regulate the trade of farmers’ produce by providing licenses to buyers, commission agents, and private markets, (ii) levy market fees or the other charges on such trade, and (iii) provide essential infrastructure in their markets to facilitate the trade. The standing committee on Agriculture (2018-19) observed that the APMC laws are not implemented in their true sense and wish to be reformed urgently. Issues identified by the Committee include: (i) most APMCs have a limited number of traders operating, which results in cartelization and reduces competition, and (ii) undue deductions in the form of commission charges and market fees.13 Traders, commission agents, and other functionaries organize themselves into associations, which don't allow easy entry of new persons into market yards, stifling competition. The Acts are highly restrictive in the promotion of multiple channels of selling (such as more buyers, private markets, direct sales to businesses and retail consumers, and online transactions) and competition in the system.
During 2017-18, the central government released the model APMC and contract farming Acts to permit restriction-free trade of farmers’ produce, promote competition through multiple marketing channels, and promote farming under pre-agreed contracts. The standing committee (2018-19) noted that states must not implement several of the reforms suggested in the model Acts.13 It prescribed that the central government constitute a Committee of Agriculture Ministers of all states to reach a consensus and design a legal framework for agricultural marketing. A High Powered Committee of seven Chief Ministers was set up in July 2019 to discuss, among other things: (i) adoption and time-bound implementation of model Acts by states, and (ii) changes to the Essential Commodities Act, 1955 (which provides for control of production, supply, and trade of essential commodities) for attracting private investment in agricultural marketing and infrastructure.
The central government promulgated three Ordinances on June 5, 2020: (i) the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, (ii) the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, and (iii) the Essential Commodities (Amendment) Ordinance, 2020. The Ordinances collectively seek to (i) facilitate barrier-free trade of farmers’ produce outside the markets notified under the varied state APMC laws, (ii) define a framework for contract farming, and (iii) impose stock limits on agricultural produce on condition that there is a sharp increase in retail prices. The three Bills together aim to extend opportunities for farmers to enter future sale contracts, increase the availability of buyers, and allows buyers to buy farm produce in bulk.
What are the Features of the bills?
Trade of farmers’ produce: The bill permits inter-state trade of farmers’ produce outside: (i) the physical premises of market yards run by market committees formed under the state APMC Acts and (ii) other markets reported under the state APMC Acts. Such trade is sometimes organized in an ‘outside trade area’, i.e., anywhere of production, collection, and aggregation of farmers’ produce including (i) farm gates, (ii) factory premises, (iii) warehouses, (iv) silos, and (v) cold storages.
Electronic trading: The Bill permits the electronic trading of listed farmers’ produce (agricultural produce managed under any state APMC Act) within the particularly defined trade area. An electronic trading and transaction platform could even be acknowledged to help the direct and online buying and selling of such products through electronic devices and thus the net. the following entities may establish and operate such platforms: (i) companies, partnership firms, or registered societies, having permanent account number under the tax Act, 1961 or the other document published by the central government, and (ii) a farmer producer organization or agricultural cooperative society.
Market fee abolished: The Ordinance prohibits state governments from levying any market fee, cess, or levy on farmers, traders, and electronic trading platforms for the trade of farmers’ produce conducted in an ‘outside trade area’.
Farming agreement: The Ordinance provides for a farming agreement between a farmer and a buyer before the assembly or rearing of any farm produce. The minimum period of an agreement is one crop season or one production cycle of livestock. the utmost period is five years unless the assembly cycle is sort of five years.
Pricing of farming produces: the price of farming produce should be mentioned within the agreement. For prices subjected to variation, a guaranteed price for the merchandise, and a transparent reference for any additional amount above the guaranteed price must be laid call at the agreement. Further, the tactic of price determination must be mentioned within the agreement.
Dispute Settlement: A farming agreement must provide for a conciliation board also as a conciliation process for settlement of disputes. The Board should have an honest and balanced representation of parties to the agreement. At first, all disputes must be Stated to the board for resolution. If the dispute remains unresolved by the Board after thirty days, parties may approach the Sub-divisional Magistrate for resolution. Parties will have a right to appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the Magistrate. Both the Magistrate and Appellate Authority is progressing to be required to eliminate a dispute within thirty days from the receipt of the appliance. The Magistrate or the Appellate Authority may impose certain penalties on the party contravening the agreement. However, no action is going to be taken against the agricultural land of the farmer for the recovery of any dues.
Regulation of food items: The Essential Commodities Act, 1955 empowers the central government to designate certain commodities (such as food items, fertilizers, and petroleum products) as essential commodities. The central government may regulate or prohibit the assembly, supply, distribution, trade, and commerce of such essential commodities. These bills provide by the central government to regulate the provision of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances. These include (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature.
Stock limit: The Ordinance requires that the imposition of any stock limit on agricultural produce must be supported price rise. A stock limit could even be imposed as long as there is: (i) a 100% increase within the retail price of horticultural produce; and (ii) a 50% increase within the retail price of non-perishable agricultural food items. the rise is progressing to be calculated over the price prevailing immediately preceding twelve months, or the common retail price of the last five years, whichever is lower.
Key Issues and Analysis
Availability of buyers for farmers’ produce and infrastructure. The Trade and Commerce Ordinance provides buyers the freedom to buy farmers’ produce outside the APMC markets without having any license or paying any fees to APMCs. The Contract Farming Ordinance provides a framework for buyers and farmers to enter into a contract (before a crop season starts) which guarantees farmers a minimum price and buyers an assured supply. The third Ordinance amends the Essential Commodities Act to provide that stock limits for agricultural products can be imposed only when retail prices increase sharply and exempts value chain participants and exporters from any stock limit. The three Ordinances aim to extend the supply of buyers for farmers’ produce, by allowing them to trade freely without any license or stock limit, so that a rise in competition among them leads to better prices for farmers. While the Ordinances aim to liberalize trade and increase the number of buyers, this may not be sufficient to attract more buyers.
For instance, in 2006, Bihar repealed its APMC Act with a similar objective to attract private investment in the sector and gave charge of the markets to the concerned sub-divisional officers in that area. This resulted in a lack of required marketing infrastructure as the existing infrastructure eroded over time due to poor upkeep. In unregulated markets, farmers faced issues such as high transaction charges and a lack of information on prices and arrival of produce. The Committee of State Ministers constituted in 2010 for agricultural marketing reforms, observed that complete deregulation of markets did not help in attracting any private investment. It noted that there is a need for an appropriate legal and institutional structure with a developmental type of regulation to ensure the orderly functioning of markets and to attract investment for infrastructure development.2 The Standing Committee on Agriculture (2018-19) recommended that the central government should create marketing infrastructure in states which do not have APMC markets (i.e. Bihar, Kerala, Manipur, and certain union territories).
Note that the Ordinances do not repeal the existing APMC laws (as done by Bihar), but limit the regulation of APMCs to the physical boundaries of the markets under their control. The Ordinances may result in increased competition, which may also make APMCs more efficient in providing cost-effective marketing services. Further, for farmers selling their produce outside the APMC markets, the prices prevailing in APMC markets can serve as a benchmark price, helping in better price discovery for farmers.
Gramin Agriculture Markets: The Standing Committee noted that the availability of a transparent, easily accessible, and efficient marketing platform is a pre-requisite to ensure remunerative prices for farmers. Most farmers lack access to government procurement facilities and APMC markets. Small and marginal farmers (who hold 86% of the agricultural landholdings in the country) face various issues in selling their produce in APMC markets such as inadequate marketable surplus, long-distance to the nearest APMC markets, and lack of transportation facilities. The average area served by an APMC market is 496 sq. km., much higher than the 80 sq. km. recommended by the National Commission on Farmers (Chair: Dr. M. S. Swaminathan) in 2006.
The Standing Committee (2018-19) noted that Gramin Haats (small rural markets) can emerge as a viable alternative for agricultural marketing if they are provided with adequate infrastructure facilities. It suggested that the Gramin Agricultural Markets scheme (which aims to enhance infrastructure and civic facilities in 22,000 Gramin Haats across the country) should be made a fully funded central scheme and scaled to ensure the presence of a Haat in each panchayat of the country. The central government has proposed the development of basic infrastructure in Gramin Haats through the National Rural Employment Guarantee Scheme and of marketing infrastructure through the Agri-Market Infrastructure Fund. The Fund will be set up by NABARD to provide Rs 1,000 crore to states at a concessional interest rate for the development of marketing infrastructure in Gramin Haats.