Paving the way for ‘one nation, one agriculture market’ for farmers, the Union Cabinet approved an ordinance to allow barrier-free trade in agriculture produce outside the notified APMC mandis.

To encourage farmers to diversify crops in view of climate change and help them get better prices, the Cabinet also approved another ordinance to allow farmers to directly market their produce to processors, aggregators, wholesalers, large retailers and exporters.

“The decisions taken by the Union Cabinet removing restrictions on the purchase and sale of crops have fulfilled a decades-old demand of the farmers,” Prime Minister Narendra Modi said.

Trading opportunities outside APMC mandis

The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, proposes to bar state governments from imposing taxes on sale and purchase of farm produce undertaken outside the mandis and give farmers the freedom to sell their produce at remunerative prices.

Besides, any conflicts arising from the transactions will be dealt with exclusively by the Sub-Division Magistrate (SDM) and District Collectorate within 30 days and not in the jurisdiction of civil courts.

At present, farmers are allowed to sell their agriculture produce at 6,900-odd APMC (Agriculture Produce Marketing Committees) mandis spread across the nation. There are restrictions for farmers in selling agri-produce outside the mandis.

Announcing the Cabinet decision, Agriculture Minister Narendra Singh Tomar said: “The existing APMC mandis will continue to function. The state APMC law will continue to remain. But outside the mandis, the ordinance will be operational.”

“The ordinance basically aims at creating additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition,” he said.

What are the benefits of this move?

The minister noted that this is a historic-step in unlocking the vastly regulated agriculture markets in the country.

It will also promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. 

Farmers can sell even from their house directly to companies, processors, farmer producer companies (FPOs) and cooperatives and get a better price. 

Farmers will have the choice to whom and at what rate to sell their produce.

There won’t be any state taxes levied on sale and purchase of produce undertaken outside mandis.

From an individual farmer having a PAN card, to companies, processors and FPOs can sell outside the physical premise of the notified mandis.

Buyers will have to make payments to farmers immediately or within three days and provide a receipt after the delivery of the goods.

Stating that there won’t be any “inspector raj” for undertaking trade outside the mandis, the minister said there won’t be legal hurdles in undertaking barrier-free trade outside mandis.

The ordinance also proposes electronic trading in the transaction platform for ensuring a seamless trade.

It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.

Contract agreement with buyers

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 aims to provide farmers a level playing field to market their produce without any fear of exploitation.

“There has been a lot of discussion on encouraging crop diversification amid climate change challenges. But crop diversification cannot happen without an assured market. This ordinance will encourage farmers to engage with buyers like processors and large retailers,” Tomar said. 

Farmers can now enter into a contract agreement with buyers to sell the produce at predetermined rates before the sowing, he said. 

“For instance, a farmer who enters into a contract to sell banana crop at Rs 10 per kg before the sowing, will get the guaranteed price after harvesting. In case the rates remain high in the market after harvesting, farmers will get a share,” he added. 

According to the minister, it will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs. It will reduce the cost of marketing and improve income of farmers. 

The ordinance also proposes to bar state governments from imposing any tax on such transactions.  

“This ordinance will act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to global markets. Farmers will get access to technology and advice for high value agriculture and get a ready market for such produce,” the ministry said in a statement. 

Amendment to Essential Commodities Act

The Union Cabinet approved an amendment to the six-and-a-half-decade old Essential Commodities Act (ECA) to deregulate food items, including cereals, pulses, and onion, a move aimed at transforming the farm sector and raising farmers’ income.

What is the ECA?

The Essential Commodities Act, which was passed in 1955, controls the production, supply and distribution of, and trade and commerce in, certain goods such as vegetables, pulses, edible oils, sugar, etc which are treated as essential commodities.

Under the Act, the powers to implement the provisions of the Act are delegated to the states. When the price of any of these essential commodities rises, the regulator can impose stockholding limits on the commodity, restrict movement of goods and mandate compulsory purchases under the system of levy.

Consequently, all wholesalers, distributors and retailers dealing in the product must reduce their inventories to comply with the holding limit.

The purported aim of this Act is to ensure affordability of essential commodities for the poor by restricting hoarding. 

Why did the govt make amendment to the Act?

It is an overarching legislation regulating agricultural marketing and production.

With the amendment to the ECA, commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from the list of essential commodities.

The amendment provides for the regulation of food items only under exceptional circumstances like national calamities, famine with a surge in prices. Also, processors and value chain participants are exempted from the stock limit.

“The freedom to produce, hold, move, distribute and supply will lead to harnessing economies of scale and attract private sector/foreign direct investment into the agriculture sector. It will help drive up investment in cold storages and modernisation of the food supply chain,” the ministry said.

“Farmers suffer huge losses when there are bumper harvests of perishable commodities. With adequate processing facilities, much of this wastage can be reduced,” it added.

The ministry also said that while liberalising the regulatory environment has also ensured that the interest of consumers is safeguarded.

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