Agri Reforms Ordinances Promulgated: No Cess On Farm Items Sold Outside APMC Yards, Private E-Trading Allowed, E-Registry For Contract Farming

Promulgating three ordinances to implement its sweeping agricultural reforms in the country, the Narendra Modi government has come up with provisions allowing farmers and traders to buy or sell agricultural produce in any part of the country or a state without facing any problem.

In “The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020," the government has enabled the setting up of private electronic trading platforms by established organisations.

A more bolder step in allowing farmers and buyers to trade freely in agricultural produce across the nation is the doing away with market fee or cess or levy charged by states through the Agricultural Produce Marketing Committee (APMC) Act.

“No market fee or cess or levy, by whatever name called under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produce in a trade area,” the Ordinance said.

This means any trading outside the purview of any APMC yard will not attract any additional costs as levy or cess. This is a provision that will go a long way in helping private trade in agriculture pick up.

Currently, some of the states, especially Punjab, impose nearly 14 per cent cess, on sale of agricultural produce through APMC yards. This also applies to food grains such as rice and wheat procured by the Food Corporation of India for the buffer stocks maintained by the centre.

Such cess and taxes add up to the centre’s financial burden in procuring food grain for supply with regard to various welfare schemes besides keeping reserve stocks to meet any food emergency.

The cess, ranging from eight to 14 per cent, is seen as a huge burden by industrial users, particularly flour mills that procure wheat from APMC yards.

The doing away with the state APMC levy will now encourage industrial users to go for direct purchase from growers, probably at their farm-gates or have the produce supplied at their door.

In order to ensure that growers don’t face the undue risk of being paid a lower price, the Ordinance paves way for the Centre to develop a price information and market intelligence systems for agricultural produce.

A framework for dissemination of the information would also be developed by the centre, which would also ask anyone setting up an electronic trading system to provide information on transactions as specified by it.

The Ordinance, which has provisions for dispute resolution through setting up of a board in the respective trading area, stipulates that growers must be paid the same day or within maximum three working days if procedurally required.

The dispute resolution board will have a maximum of four members besides a chairman. The members will have to be nominated by the disputing parties. It has powers to impose penalties ranging between Rs 25,000 and Rs five lakh.

The Ordinance also has a catch for traders: they should have a permanent account number (PAN) issued by the Income Tax Department or any other document notified by the government.

The Ordinance is significant in that till now, farmers could sell only at the APMC yard in which they had registered. This led to buyer cartels fixing prices at the yards and affecting returns to farmers.

Many states have not amended their APMC Acts to permit growers the freedom to sell their produce to buyers of their choice despite repeated reminders from the centre for nearly two decades now.

In “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020," the government has allowed farmers to enter into a written farming agreement for any agricultural produce.

The onus of compliance of any legal requirement for providing such service is on the sponsor or the one entering into an agreement with the grower.

The Ordinance makes it clear that the contracting parties will have to specify the terms and conditions for the supply of such produce, including the time of supply, quality and grade standards.

If a grower has taken land on lease and has to pay the owner rent or share of the crop, then the agreement cannot derogate the owner’s rights.

The agreement can also specify quality, grade and standards for pesticide residue, food safety standards, good farming practices and labour and social development standards.

The price to be paid for the farm produce should figure in the agreement and if it is subject to any variation then it should explicitly provide for a guaranteed price and a clear price reference over and above the guaranteed price.

This provision will go a long way to help growers take up contract farming since, in earlier instances where farmers went in for such farming, they had suffered on account of these shortcomings.

A feature of the provision of this legislation is states having to notify a registration authority that will have electronic registry providing a framework for registration of contract farming agreements.

Contract farming also has dispute resolution provisions, which will come in only after a conciliation process between the parties that sign the contracts does not yield any result. The Ordinance also has a deadline of a maximum 90 days for dispute resolution, including appeals.

The third Ordinance includes the much-publicised and sought-after amendments to the Essential Commodities Act.

The Essential Commodities (Amendment)Ordinance, 2020, which comes into force immediately, says edible oilseeds, cereals, pulses, potatoes and onions can be regulated only under “extraordinary circumstances such as war, famine, extraordinary price rise and natural calamity of grave nature”.

Any stock limit will be imposed only if there is a 100 per cent rise in retail prices in the case of horticultural produce and 50 per cent rise in retail prices in case of non-perishable agricultural foodstuffs.

This will be based on the prices that prevailed in the preceding 12 months or the average retail price of the previous five years.

However, the order will not apply to processors or value chain participants if the stock limit does not exceed the overall installed capacity or demand for export in the case of an exporter.

This amendment will now help industrial units such as edible oil solvent extractors or flour mills to buy their raw materials from farmers without any worry during the peak harvest season.

Often, the Essential Commodities Act had proved to be a stumbling block in procurement of agricultural produce by industrial users during peak harvest season.

It had two impacts: one, the industrial user was not able to procure his/her requirement at a competitive price. Two, this left farmers holding their produce, forcing them to resort to distress sale to unscrupulous elements.

Finance Minister Nirmala Sitharaman announced the reforms a fortnight ago as part of the Centre’s Rs 20 lakh crore Atmanirbhar Bharat Abhiyan package to revive the economy affected due to the spread of novel coronavirus.

The spread of the pandemic virus forced the centre to announce a total nation-wide lockdown from 25 March. The lockdown has been gradually lifted since the middle of last month.

The agricultural reforms have been welcomed as ones that are equivalent if not more than the 1991 economic reforms of the P V Narasimha Rao government.

The agricultural reforms are seen as path-breaking since they could be the key to redefine and give the much-needed impetus to India’s rural economy.

The reforms will also release farmers and growers from the clutches of local politicians and cartels that have been a stumbling block in getting the freedom to sell to buyers of their choice.