The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

NOTE: This Bill replaces Farmer’s (Empowerment and Protection) Price Assurance Agreement and Farm Services Ordinance, 2020.

What is in The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020?

Contents of Ordinance

Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020 allows intra-state and inter-state trade outside the physical building of farmers to produce the APMC market. state governments are prohibited from collecting any fees markets, cess, or duties outside the area APMC.

Farmers Ordinance Agreement 

Farmers Ordinance Agreement creates a framework for contract farming through an agreement. Between farmers and buyers before production or raising of any agricultural product. It provides a three-level dispute resolution mechanism: conciliation board, Sub-Division of Judges, and Appellate Authority.

The essential commodities(Amendment) Ordinance 2020

The essential commodities(Amendment) Ordinance 2020 allows. The central government to regulate the supply of certain foods. Only in exceptional circumstances (such as war and famine). Stock limits may be imposed on agricultural produce. Only if there is a steep rise in prices.

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Key Issues and Analysis

The Ordinance aims to increase the availability of buyers. The products of farmers, by allowing them to trade freely. Without a license or stock limits, thereby increasing competition between them to produce better prices for farmers. While Tata aims to liberalize trade and increase, the number of buyers, deregulation may not be enough to attract more buyers.

Standing Committee on Agriculture (2018-19) noted that the availability of a marketing platform that is transparent, accessible, and efficient is a prerequisite to ensure favorable prices for farmers. Most farmers do not have access to government procurement and the APMC market.

Noting that small rural markets can emerge as an alternative to agricultural marketing if they are provided with adequate infrastructure facilities.

Standing Committee also recommended that the Agricultural Market Gramin scheme (aimed at improving civilian infrastructure in 22,000 Gramin Haats across the country) should be made as a central scheme that is fully funded and scale to ensure the presence Haat in every panchayat of the country.

SECTION A: Highlights of this ordinance

Context

The agricultural market in India is mainly governed by the Agriculture Produce Marketing Committee (APMC) laws. APMC’s are established with the aim to ensure fair trade between buyers and sellers for the discovery of the effective price of products by farmers.

APMC’s can: (i) regulate the trade of the farmers by giving license to the buyer, commission agents, and private markets,

(ii) the market cost of fees or other charges on such trade

(iii) provide the necessary infrastructure in their markets to facilitate trade,

Standing Committee on Agriculture (2018-19) observed that the APMC law is not implemented in the true sense and needs to be reformed first.

 Problems identified by the Committee include: (i) the APMC’s have a number of traders operating, leading to cartelization and reduce competition

 (ii) improper deductions in the form of commissions and fees cost the market. Traders, commission agents, and other functionaries organize themselves into associations, which do not allow easy entry of new people into the market yard, stifling competition. Stories that are tight in the promotion of multiple marketing channels (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 Acts and contract farming to allow free trade of Farmer produce without restrictions to promote competition through multiple marketing channels and promote agriculture under a previously agreed contract.

Standing Committee (2018-19) noted that the state has not implemented some of the reforms suggested in the model of Acts. It is recommended that the central government shall constitute a Committee of Ministers of Agriculture from all states to arrive at a consensus and devise a legal framework for agricultural marketing.

Committee Powered by seven Chief Ministers

A Committee Powered by seven Chief Ministers was established in July 2019 to discuss, among the following: (i) the adoption and time-bound implementation of the model Act by the states

 (ii) changes to the Commodities Act Essential 1955 (which provides to control production, supply, and trading of essential commodities) to attract private investment in agricultural marketing and infrastructure.

Central government announced its three ordinances on June 5, 2020

The central government announced its three ordinances on June 5, 2020: (i) Farmers(producer) Trade and Commerce (for Promotion and Facilitation) Ordinance of 2020

 (ii) The Farmers (for Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020

 (iii) The Essential Commodities (Amendment) Ordinance of 2020.

Collective governance

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The collective governance seeks to (i) facilitate trade freeway from the farmers market outside notified under various state APMC

 (ii) defines a framework for contract farming

 (iii) to give stock limits on agricultural produce only if there is a sharp increase in the retail price. These three ordinance aims to increase opportunities for farmers to enter into long-term sales contracts, increasing the availability of buyers, and allows buyers to purchase agricultural products in large quantities.

Main feature

The Farmers Produce, Trade and Commerce (Promotion and Facilitation) Ordinance of 2020

Trade of farmers produce

Trade of farmers produce: The Ordinance allows intra-state and inter-state trade farmers produced beyond: (i) a physical place for yard market run by the Market Committee was formed under the APMCs of state

 (ii) other markets which are notified under the APMC Act.

Trade can be conducted in other areas, I.e, the place of production, collection, and aggregation of produce farmers, including (i) the farm gate, (ii) local factories, (iii) warehouse, (iv) silo, and (v) cold storage facility.

Electronic commerce

Electronic commerce: The Ordinance allows electronic commerce generates scheduled farmer (agricultural products regulated in every country APMC Act) in certain commercial areas. Trade and electronic transaction platforms can be set up to facilitate direct and online purchases and sales of such products through electronic devices and the Internet.

The following entities may establish and operate a platform such as

  • a company, partnership firm, or people who are registered, have an account number fixed pursuant to the Income Tax Act 1961 or other documents notified by the central government
  • producers farmer organization or agricultural cooperatives.
Fee waived market

Fee waived market: The Ordinance prohibits state governments from levying fees in any market, cess or levy farmers, traders, and electronic trading platforms for trading are done in farmers produce ‘outside the area of trade’.

Farmers (Empowerment and Protection) Price of Assurance Agreement and Farming Service Ordinance of 2020

Agricultural Agreement: The Ordinance provides for the agricultural agreement between farmers and buyers before production or raising of any agricultural product. The minimum period of the agreement will be one of the growing season or the livestock production cycle. The maximum period of five years unless the production cycle of more than five years.

Pricing of agricultural produce: Prices of Farmers Agreement agricultural products should be mentioned in the agreement. experienced price variations, a guaranteed price for the product, and a clear reference to any additional amount above

Dispute Resolution: An Farmers agricultural agreement should provide for a conciliation board and the conciliation process for the settlement of disputes. The board must have a fair and balanced representation of the parties in the agreement. At first, all disputes should be referred to the board for resolution. If the dispute remains unresolved by the Council after thirty days, the parties can approach the Judges of Sub-division(sub-divisional magistrate) for resolution.

Parties will have the right to appeal to the Appellate Authority (headed by the collector or additional collector) against the judge’s decision. Both Judge and Appellate Authority will be required to dispose of disputes within thirty days of receipt of the request.

Appeal Authority or the judge can give a certain penalty on the party disputing the agreement. However, no action can be taken against the farmers of agricultural land for the recovery of any dues.

The Essential Commodities(Amendment) Ordinance of 2020

Regulation for food items: The Essential Commodities Act, 1955 empowers the central government to designate certain commodities (such as food, fertilizer, and petroleum products) as an important commodity. The central government is powered to regulate or prohibit any production, supply, distribution, and trading of essential commodities.

The ordinance states that the central government can regulate the supply of certain foods, including cereals, pulses, potatoes, onion, edible vegetable oil, and the oil, only in exceptional circumstances. These include (i) war, (ii) hunger, (iii) extraordinary price increases, and (iv) natural disasters grave.

Stock limit: The Ordinance requires the imposition of limits on agricultural stocks should be based on the price increase. The stock limit can be imposed only if: (i) a 100% increase in the retail price of horticultural products; and (ii) a 50% increase in the retail prices of non-durable food agriculture. The increase would be calculated on the prevailing price immediately preceding twelve months, or with an average retail price of the last five years, whichever is lower.

SECTION B: KEY ISSUES AND ANALYSIS
Availability of buyers for the products and infrastructure farmers

Trade and Commerce Ordinance provides buyers the freedom to buy the products of farmers outside the APMC market without a license or paying any fee for APMCs. Contract Farming Ordinance provides the framework for buyers and farmers to enter into a contract (before the harvest season begins), which guarantees farmers a minimum price and a guaranteed supply of buyers.

 The Essential Commodities Act is amended to provide that the stock limits for agricultural products may be imposed only when retail prices rose sharply and frees value chain participants and exporters of stock limits. The third bill aims to increase the availability of buyers for the products of farmers, by allowing them to trade freely without a license or stock limits, thereby increasing competition between them produce better prices for farmers. While the bill aims to liberalize trade and increase the number of buyers, this may not be enough to attract more buyers.

For example, in 2006, Bihar revoked APMC Act with the same purpose to attract private investment in the sector and provide the cost of the market for sub-division officers concerned in that area. This resulted in a lack of marketing infrastructure required as the existing infrastructure which eroded over time due to poor maintenance. In an unregulated market, farmers face problems such as high transaction costs and a lack of pricing information and arrival produce.

 Committee of Ministers of State, created in the year 2010 for agricultural marketing reforms observed that the complete deregulation of the market does not help to attract any private investment. It decided that there is a need for legal and institutional frameworks in accordance with the type of regulatory developments to ensure the orderly function of the market and to attract investment for infrastructure development. Standing Committee on Agriculture (2018-19) recommends that the federal government should create a marketing infrastructure in states that do not have an APMC market (ie Bihar, Kerala, Manipur, and certain union territory).

Rules may result in increased competition, which can also make APMCs more efficient in providing cost-effective services for marketing. Furthermore, for farmers to sell their products outside the APMC market, the prices prevailing at the APMC market can serve as a reference price, helped in the discovery of better prices for farmers.

Gramin Agricultural Markets: The Standing Committee noted that the availability of a marketing platform that is transparent, accessible, and efficient is a prerequisite to ensure favorable prices for farmers. Most farmers do not have access to government procurement and markets. APMC Small and marginal farmers (who hold 86% of the ownership of agricultural land in the country) face problems in selling their products in the APMC market as marketable surplus inadequate, distance to the nearest APMC market, and the lack of transport facilities.1 average area served by the APMC market is 496 sq, km., far higher than the 80 square. km. recommended by the National Commission on Farmers (Chairman: Dr. M. S. Swaminathan) in 2006.

Standing Committee (2018-19) noted that the Gramin Haats (small rural markets) could emerge as an alternative to agricultural marketing if they are provided with adequate infrastructure facilities. It is recommended that the Agricultural Market Gramin scheme (aimed at improving civilian infrastructure in 22,000 Gramin Haats across the country) should be made the central scheme is fully funded and scale to ensure the presence Haat in every panchayat countries. The central government has proposed the construction of basic infrastructure in Gramin Haats through the National Rural Employment Guarantee Scheme and marketing infrastructure through the Agri-Market Infrastructure Fund.

The funds will be established by National Bank For Agriculture And Rural Development(NABARD) to provide Rs 1,000 crore to the state at a concessional interest rate of marketing infrastructure development in Gramin Haats

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

FAQs

Will an Individual farmer be allowed to sell outside APMC’s?

Yes, the farmer can sell outside APMC’s and all markets of trade.

Does this act Promote Contract Farming?

Yes, it promotes contract farming and frames rules for it.

Does the bill promote e-Trade?

Yes, it promotes e- Trade .Trade and electronic transaction platforms can be set up to facilitate direct and online purchases and sales of such products through electronic devices and the Internet.

Has the bill empowered the Central Government more powers to include products under Essential Commodities(Amendment) of 2020?

Yes, The bill has empowered Centre more Powers

Will the new bill benefit more small and marginal farmers?

In paper it is supposed to benefit all, but it is based on the implementation by the executives and working of the bill

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