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No more APMC monopoly, more choice, freedom for farmers to seek better prices for crops: All you need to know about the new bills by the Modi govt

Continuing the reform agenda, the Modi government has now introduced three more bills to promote much easier trade for the farm produce and to provide a competitive market for the producers outside the existing APMC system

One of the biggest factors plaguing the growth of agriculture sector in the country is the inability of the farmer to find a market and to get a fair price to his produce. To address the issue, the erstwhile governments of different states enacted the Agricultural Produce Market Regulation Acts (APMC Acts), which authorised them to set up and regulate marketing practices in wholesale markets. 

The objective of these markets was to ensure that farmers get a fair price for their produce. However, with each passing year, the APMCs turned out to be inefficient with increasing cartelisation of middlemen, ban on private players to enter the trade, increasing corruption etc.

Realising the inadequacies in the existing APMC acts of various states to offer a proper marketing mechanism for the farmers to sell their produce, the Narendra Modi government in 2014 had announced a unified National Agriculture Market (NAM). NAM is a pan-India electronic trading portal which seeks to connect existing APMCs and other market yards to create a unified national market for agricultural commodities.

Continuing the reform agenda, the Modi government has now introduced three more bills to promote much easier trade for the farm produce and to provide a competitive market for the producers outside the existing APMC system.

Three bills introduced by the Modi government

The three bills introduced by the Modi government in the current session of Parliament are: The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, and The Essential Commodities (Amendment) Bill, 2020.

Earlier, these reforms were announced as part of the third tranche of the economic package announced under Atma Nirbhar Bharat Abhiyan.

The new bills, when passed by the Parliament will give effect to the amendments proposed to the Essential Commodities Act and bring in two new central laws on trading and marketing of farm produce in the country.

The objective of the three proposed laws is to make way for creating the Modi government’s ambitious vision of ‘One India, One Agriculture Market’. The law intends to end the monopoly of Agriculture Produce Market Committees (APMCs) in carrying out the trade of farm produce in the country. 

The Farming Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020:

The Farming Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition. Farmers can now sell their agricultural produce in a market of their choice at better prices.

  • The newly proposed law will allow intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets thus giving freedom for the farmers and traders to sell or purchase farm products anywhere.
  • The proposed law also provides buyers with the freedom to buy farmers’ produce outside the APMC markets without having any license or paying any fees to APMCs. 
  • The Bill prohibits state governments from levying any market fee, cess or levy on farmers, traders for the trade conducted on farmers’ produce conducted in an ‘outside trade area’.
  • Under the proposed law, electronic trading in transaction platform has been proposed for ensuring a seamless trade electronically. The proposed law also allows private individuals, FPOs and co-ops to set up electronic trading platforms in these areas.
  • There will also be a separate dispute resolution mechanism for the farmers.

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 creates a framework for contract farming through an agreement between a farmer and a buyer prior to the production or rearing of any farm produce. 

  • The proposed law provides for a farming agreement between a farmer and a buyer prior to the production or rearing of any farm produce. The minimum period of an agreement will be one crop season or one production cycle of livestock. 
  • Under this legislation, farmers are empowered to directly engage with processors, wholesalers, aggregators, retailers exporters etc, thus eliminating intermediaries resulting in full realisation of the price for the farm produce.
  • The proposed law also states that the price of farming produce negotiated between the trader and the farmer should be mentioned in the agreement.
  • The buyer will be responsible for providing necessary means or inputs for good crop yield. Under the bill, it is the responsibility of the buyer to provide agricultural equipment to the farmer.
  • It provides for a three-level dispute settlement mechanism: the conciliation board, Sub-Divisional Magistrate and Appellate Authority.

The Essential Commodities (Amendment) Bill, 2020:

The amendments to the Essential Commodities Act, 1955 allows the central government to regulate the supply of certain food items only under extraordinary circumstances.

  • Under the legislation, the central government may regulate or prohibit the production, supply, distribution, trade, and commerce of such essential commodities.
  • The proposed bill provides for the central government to regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances.  
  • The legislation requires that imposition of any stock limit on agricultural produce must be based on price rise.
  • The bill 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.  

Significance of the proposed laws:

  • The three historic legislation will unlock the overly regulated agricultural markets in the country.
  • The laws will provide more choices for the farmer and lessen the marketing costs for the farmers thus helping them to get better prices. It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.
  • The laws will enable the farmer to make use of modern technology and better inputs to enhance their farm produce and its trade. It will reduce the cost of marketing and improve the income of farmers.
  • These new laws will encourage large companies, food processing firms, exporters, etc, to invest in the farm sector and source good-quality farm produce.
  • The announced amendment to the Essential Commodities Act is expected to help both farmers and consumers while bringing in price stability.
  • The proposed changes will also create a competitive market environment and prevents wastage of agri-produce that happens due to lack of storage facilities.

Many opposition parties, including the Congress, are opposing the bills. The Congress party, however, were once the proponents of the same reforms that are currently being introduced by the Modi government. Interestingly, in 2019, the Congress party under the leadership of Rahul Gandhi had themselves announced these reforms in their election manifesto.

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