Home Blawgs Controversial Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 Explained

Controversial Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 Explained

The explainer blog is inscribed by Atin Handuja. He is CEO at Legalfoxes.

Introduction

Agriculture is the primary source of livelihood for about 58 percent of India’s population. Gross Value Added (GVA) by agriculture, forestry, and fishing was estimated at Rs 19.48 lakh crore (US$ 276.37 billion) in FY20(PE). Growth in GVA in agriculture and allied sectors stood at 4 percent in FY20.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. Indian food and grocery market is the world’s sixth-largest, with retail contributing 70 percent of the sales. The Indian food processing industry accounts for 32 percent of the country’s total food market, one of the largest industries in India, and is ranked fifth in terms of production, consumption, export, and expected growth.

Recently  The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill 2020 was introduced by the Minister of Agriculture and Farmers’ Welfare, Mr. Narendra Singh Tomar, on September 14, 2020.  The Bill replaces the Ordinance promulgated in June 2020. Bill was duly passed in Lok Sabha on 17 September and in Rajya Sabha on 20th September.

What is this Bill all About?

The Bill seeks to allow barrier-free trade of farmers’ produce outside the physical premises of the markets notified under the various state Agricultural Produce Marketing Committee laws (APMC Acts).  The Bill will prevail over the APMC Acts in the area outside such markets. Now state governments are prohibited from levying any market fee, cess, or levy outside APMC areas.

The bill has defined trade area and the definition does not, however, include “the premises, enclosures, and structures constituting (i) physical boundaries of principal market yards, sub-market yards, and market sub-yards managed and run by the market committees formed under each state APMC (Agricultural Produce Market Committee) Act”. It also excludes “private market yards, private market sub-yards, direct marketing collection centers, and private farmer-consumer market yards managed by persons holding licenses or any warehouses, silos, cold storages or other structures notified as markets or deemed markets under each State APMC Act in force in India”.

Why Farmers Are Protesting Against the bill?

The major concern of farmers is that there is No provision of Minimum support Price which guarantees that this particular amount has to be mandatorily be paid by the buyer of farmers’ produce. After opening the market for everyone Farmers are of the view that initially, corporates will pay a good amount of Price for their Produce but once the Mandi and Middlemen collapse they will create a monopoly and will pay as per their wish for the produce.

Earlier trade was Governed by state laws and there were APMC acts of every state and state charge a fee for that so overall control was with the state but now it is with the central Government. The central government has removed the fees to be paid to the state government.  It is made compulsory for traders to have a license and Pan Number, also if any person wishes to work as middlemen you should have a license from that.

Another point of concern is centre is willing to take it electronically by doing E-trading so that farmers don’t have to move to markets but how many Farmers in India are educated and know how to use smartphones. It is to be noted that the stock market is not allowed here.

In effect of this bill, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation also there will be no state control there are high chances of Hoarding of Agricultural Produce which can lead to an increase in prices of the products. Farmers fear that arhatiyas (commission agents)  have credibility as their financial status is verified during the license approval process. “But how can a farmer trust a trader under the new law.

What is Dispute Mechanism Under this Bill?

In case of a dispute arising out of a transaction between the farmer and a trader, the parties may seek a mutually acceptable solution through conciliation by filing an application to the Sub-Divisional Magistrate, who shall refer such dispute to a Conciliation Board to be appointed by him for facilitating the binding settlement of the dispute. The biggest shortcoming of the bill is that there is no jurisdiction of civil courts in the dispute.

Objects of The New Bill

  1. Earlier States have enacted the Agricultural Produce Market Committee (APMC) Acts to develop market-yard as a market place and to provide regulation on marketing practices of notified agricultural produce. However, the regulatory provisions hindered the freedom of choice-based marketing and also the inflow of investment in the development of alternative markets and marketing infrastructure now bill seeks to allow barrier-free trade of farmers’ produce outside the physical premises of the markets notified under the various state Agricultural Produce Marketing Committee laws (APMC Acts).
  2. Earlier the Government of India had circulated the Model APMC Act, 2003 and the Model Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act, 2017 to the States to reform their APMC Acts with a view to increasing competitiveness in the agriculture supply chain, provide freedom to farmers to sell their produce through alternative marketing channels to get the fair prices through the market framework under the State legislation. However, the States have not embraced the reforms in a uniform manner, and the lack of homogeneity in the laws has been obstructing a competitive pricing environment for the farmers and is becoming an impediment to the evolution of a modern trading system Now after this bill the level of competition will increase and farmers will be able to get a good amount of return for their produce.
  3. Agriculture not only meets the food security requirements of the country but also provides raw material to the agro-industry which culminates in job creation and earning of foreign exchange through export. This bill states directly linking the agro-industry with the farmers shortens the supply chain, reduces the marketing cost and post-harvest losses, and most importantly enhances farmers’ income.
  4. The bill states that to keep pace with the dynamically changing agri-economy, e-commerce, and agri-exports and also to meet the rising expectations of farmers and consumers, the country needs an accessible and competitive trading system outside the physical space of the notified market-yards under the State APMC Acts so the concept of trading in outside APMC is initiated.
  5. The central government believes that due above circumstances, it has become necessary to enact a Central Legislation to provide a more competitive and hassle-free eco-system where farmers and traders have the choice to sell their products in an efficient, transparent and competitive environment to realize remunerative prices.

Bihar’s abolition of its APMC system in 2006

Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns, and administrative buildings, weighbridges, and processing as well as grading units. In 2004-05, the state agricultural board earned  60 crores through taxes and spent 52 crores, of which 31% was on developing infrastructure. With no revenue to maintain it, that infrastructure is now in a dilapidated condition. Also, no major private investment has come in.

In a study of agriculture in Bihar, the National Council for Applied Economic Research reported increased volatility in grain prices after 2006, which negatively affected the crop choices and decisions of farmers to adopt improved cultivation practices. It concluded that Bihar’s repeal of the APMC system and the consequent increase in price volatility could be one of the reasons for the low growth of agriculture in the state.

It concluded, “Farmers are left to the mercy of traders who unscrupulously fix a lower price for agricultural products that they buy from them. Inadequate market facilities and institutional arrangements are responsible for low price realization and instability in prices.” Most of the farmers surveyed reported high storage costs at private warehouses. Further, the need for immediate cash meant that they were forced to sell at whatever prices private traders offered. Recent field studies have also reported traders and farmers both being charged market fees in private unregulated markets, even though infrastructure for weighing, sorting, grading, and storage is missing.

Bihar is among the leading producers of maize in India and the third-largest producer of fruits and vegetables after Uttar Pradesh and West Bengal. For maize, most farmers reported getting a price of 1,000-1,300 per quintal, as against the official minimum support price (MSP) of 1,850. For wheat too, farmers in Bihar reported receiving prices 10-15% lower than the MSP. Besides, wheat procurement in the state was only 5,000 tonnes, compared to 13 million tonnes in Madhya Pradesh, which has the same crop yield as Bihar, and 39 million tonnes nationally. Unlike Bihar, Madhya Pradesh did not abolish and instead strengthened its APMC infrastructure over the years.

Conclusion

Attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers. On the contrary, it might even lead to a decline in the APMC infrastructure if enough revenue for its upkeep and development isn’t generated.

The bill lacks regulation, regulatory oversight, and reporting and it is non-transparent.

Latest update

President Ram Nath Kovind on 27/09/2020 gave assent to this bill along with the other two farm bills.

For comments/Suggestions

Author – Atin Handuja
CEO Legalfoxes
Email – atin.handuja@gmail.com
Contact – 9350096894

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