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Agriculture Reforms (20 September 2020)

Agriculture Reforms (20 September 2020)

Why in News:

Rajya Sabha passed two bills related to Agriculture Sector Reforms today.

The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020.

Context:

The ordinance basically aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition

Background:

Except two to three states, in all other state, there is a APMC Act. That Act governs the rules regarding sale and purchase of notified commodities. According to APMC rule, a farmer is required to bring his or her produce to principal yards or sub yards or any area declared by APMC as a market for its sale and the produce in this market are sold through auction.

So, farmer whether he or she likes to sell their produce at the farm gate in some other city, in some other state or to some trader, processor, that freedom is not there according to APMC Act. Hence, according to rules of APMC Act, every farmer is required to sell their produce only and only through APMC channel.

From the last 18 years, this was being discussed that the changes in this APMC Act are required, farmers need to give wider option, choice and they should not have a force that they have to sell the produce only through one system.

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 were passed by Lok Sabha on 17th September 2020.

Summary of the Debate

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

  • It allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets.
  • State governments are prohibited from levying any market fee, cess or levy outside APMC areas.
  • Private player will setup e-platform where farmers can register their reserve price and produce which they would like to sell.
  • The Act defines “trade area” as any area or location, place of production, collection and aggregation. It includes:
    • Farm gates
    • Factory premises
    • Warehouses
    • Silos
    • Cold storages
    • Any other structures or places, from where the trade of farmers’ produce may be undertaken in the territory of India.
  • In effect, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.

Advantages:

  • The farmers have the option, the private people offer to them for the delivery of the produce, whether it’s in factory, in warehouse or in any designated area based on the price which is agreed between the two parties.
  • There is always one compliant of the farmer that agriculture is the only commodity where farmer cannot dictate his price, he is a price taker in the system of auction in the APMC. But according to this new Act, farmer can bargain.
  • This new Act give this long sought after freedom to the farmers that you are free, you can enter into an agreement with a private trade and ask him to buy your produce in the farm gate, in your home or wherever you want.
  • The farmers have remained only as producers but according to the new Act, they can themselves become trader. Their own children can integrate produce, collect the produce, take it to market, consumer, city or other states. So, entire ecosystem which free farmers completely from his winding to the APMC has been removed.

            18th September 2020 Current Affairs Analysis - IASToppers | IASToppers

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

  • In India, 30-40 percent cultivation done through the Tenancy farming. That is some kind of contract farming itself basically now and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 gives a legal framework to that. It does not talk about landholding.
  • The new bill 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.  The maximum period will be five years.
  • The price to be paid for the purchase of a farming produce will be mentioned in the agreement.
  • A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes.

Advantages:

  • It will allow private investment.
  • It will reduce the transaction cost. Because of reduction, this will allow even the processor to access commodity from their own state.
  • Quality of product will increase because of the contract farming system; the processor will ask for the quality products. So, this is the win-win for processor and the farmers.
  • Farmers will get access to technology and advice for high value agriculture and get ready market for such produce.

           Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm  Services Bill 2020 | IASToppers

Conclusion:

Availability of a transparent, easily accessible, and efficient marketing platform is a pre-requisite to ensure remunerative prices for farmers. It can emerge as a viable alternative for agricultural marketing if they are provided with adequate infrastructure facilities.

Important points made by the Guests

Prof. Ramesh Chand, Member, Niti Ayog (Agriculture)

  • Under the new Act, a farmer or a farmer group can act both as a producer of commodities and also as a trader of the commodities. If they satisfy the only simple condition that having a Permanent Account Number, if you are an individual, if you are a producer group, FPO cooperative, then even a permanent account number is not required.
  • If a farmer so wishes, he can take his produce to APMC market also, APMC mandi are intact. They are governed by the state Act, the Central Act does not affect APMC.
  • These two bills do not affect support price system in any way giving MSP or not giving MSP, procuring or not procuring, that is purely an administrative decision. So, MSP is an administrative decision, it has nothing to do with APMC.
  • In the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, the competition is the best protector of stakeholders, whether it is consumer or producer. If the farmer has only one channel to sell his produce then he has no option whatever that market treats him as he has to accept that treatment.
  • More than 10 crore people in this country sell their milk daily, there is no APMC for that, crop is sold only for 5 days in a week, Milk is sold for 365 days. If some dispute happens, it is the state machinery which has to deal with it.
  • After 2013, fruits and vegetables have been taken out of APMC Act by most of the states, but still fruits and vegetables are coming in the APMC market. So, if APMC offer better service, people will reach an equilibrium. Some produce will go directly to the private people, but some produce will keep coming to APMC mandi. This denotification was earlier restricted to fruits and vegetables, the new trading Act expand it to all the crops.
  • Earlier, we had a contract farming in some states. It was incomplete, not very transparent, rights of farmers were not clearly defined there. So, the farmer price assurance and service agreement is a past improvement over whatever existing Contract Farming Acts were there, like state of Punjab has its Contract Farming Act.

Alok Sinha, Former Addl Secretary, Ministry of Agriculture

  • The passing of these bills is like the 1991 movement for agriculture. The farmers have been freed from the legal constraint they had till now that they can sell their produce only to a commission agent or a middle man.
  • This is the Kurien movement of Indian agriculture when Dr. Kurien had sought to abolish the middle man from the dairy trade in Gujarat 50 years back. There was a hue and cry from the existing body of the middlemen because they were losing their hold on trade. Now, the middlemen are very scared, the Arthias is very scared that the farmer where he gets the better price would go outside the mandi, then Arthias loses its commission, the state government loses its mandi tax.
  • That in a way it is coalition of the middlemen, the Arthias and the state government, which is scared that the implementation of these two new farm laws which are liberating the farmer will pay a big hit to the economic stranglehold that the middleman has on the mandi.
  • This agitation is only in Punjab and Haryana. In other states, there is no protest because the middleman’s hold on the mandi is not as much as in Punjab and Haryana. In Punjab and Haryana, it is institutionalized.
  • Even amongst the commission agents, the better amongst them, the ones with more ethical practices, they are bound to bloom if they give better price than in the open market. Obviously, the farmers will still go to the commission agent. Therefore, it is not like the commission agent is being killed forever, but instead the commission agent will not have the privilege of a totally subjugated market. The commission agent will now have to compete with someone else outside the mandi to give best services to the farmers.

Sandip Das, Senior Consultant, ICRIER

  • The mandi tax, the Arthias commission and other kind of cess imposed by the state government in Punjab constitute around Rs 7000 crore annually from these taxes which is a transaction cost.
  • In Punjab, there is around 8-8.5 percent transaction cost, In Haryana, it is about 7 percent transaction cost and most of the states has 2 to 2.5 percent transaction cost. 8.5 percent is the huge transaction cost and farmers pays for the transaction cost.
  • In a direct purchase mechanism, the transaction cost reduces and also allows farmer remunerative price and the farmers are free to go anywhere.
  • The delisting of the fruits and vegetables from the APMC has been done in most of the states. Today farmers can sell fruits and vegetables anywhere.
  • Under APMC, 15 states created provision for contract farming, but they were not comprehensive Act, they did not protect interest of the farmers, they did not cover a large range of activities which have been brought under the contract farming. 

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