RECENT REFORMS IN AGRICULTURE MARKETING

BACKGROUND:

• With the aim of revamping the agriculture sector and doubling farmer’s income, Government has recently announced three major measures to deregulate agriculture marketing. It includes:
  • Amendments in Essential Commodities Act (ECA)
  • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020
  • Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020

AMENDMENTS IN ESSENTIAL COMMODITIES ACT (ECA):

• The Union Cabinet has approved an ordinance to amend The Essential Commodities Act, 1955, to deregulate commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes.

• What is ECA?
• Under the ECA, if the Central government thinks that it is necessary to maintain or increase supplies of any essential commodity or make it available at fair prices, it can regulate or prohibit the production, supply, distribution and sale of that commodity, and impose a stock limit
• Some of the essential commodities listed drugs, fertilisers, foodstuffs, including edible oils, raw jute, cotton seed etc.
• Centre has the power to add or remove any commodity in public interest from this list. The latest items added are face masks and hand sanitisers
• When the prices of any of these commodities rise, the government imposes stock-holding limits to prevent hoarding, confiscates the stocks of violators and imposes punishment.

• Why ECA need amendment?
• The EC Act was legislated at a time when the country was facing scarcity of foodstuffs due to persistent abysmal levels of foodgrain production.
• The country was dependent on imports and assistance (such as wheat import form US under PL-480) to feed the population.
• In this scenario, to stop the hoarding and black marketing of foodstuffs, The Essential Commodities Act was enacted in 1955.
• But now the situation has changed. The production of wheat, rice and pulses have increased manifold. India has now become an exporter of several agricultural products. With these developments, the EC Act has become anachronistic.
• Further, the Act dis-incentivises development of storage infrastructure, thereby leading to increased volatility in prices following production or consumption shocks
• Drug Price Control Order issued under the ECA also distorted the market and actually made medicines less affordable

• Amendments made:
• Under the amended EC Act, agri-food stuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.
• There will no stock limit for processors and supply chain owners based on their capacity and for exporters based on the export demand

• How it benefits?
• Liberalising the farm economy: The prices of the essential agricultural produce will now be governed by market forces, hence better reward for famers.
• Incentivise private sector to invest in storage facilities, as they are longer affected by government’s imposition of stock limits through ECA
• Higher investment in storage facilities reduces supply-demand mismatches, hence higher price stability.
• Reduced government intervention means lesser corruption
• Government is relieved from imposing ECA provisions, hence it can channelize its resources for improving logistics infrastructure in agriculture marketing

FARMERS’ PRODUCE TRADE AND COMMERCE (PROMOTION AND FACILITATION) ORDINANCE, 2020

• It seeks to provide for barrier-free trade of farmers’ produce outside the markets notified under the various state agricultural produce market laws (state APMC Acts).
• This Ordinance will prevail over state APMC Acts.
• Salient features:
• Trade of farmers’ produce: The Ordinance allows intra-state and inter-state trade of farmers’ produce outside:
  • (i) the physical premises of market yards run by market committees formed under the state APMC Acts and
  • (ii) other markets notified under the state APMC acts such as private market yards.
• Eligibility for trade: The Ordinance allows farmers, farm producer organisations as well as anyone who buys farmers’ produce to engage in such intra-state or inter-state trade.
• Electronic trading: The Ordinance permits the electronic trading of farmers’ produce in the specified trade area.
• Payment to farmers: A person transacting with a farmer will be required to make payments to the farmer on the same day, or within three working days in certain conditions, for any transaction of scheduled farmers’ produce
• No fees to be levied by states: The Ordinance prohibits state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for any trade under the Ordinance.
• Dispute resolution mechanism: The parties involved in a trade-related dispute may apply to the Sub-Divisional Magistrate for relief through conciliation.  The Magistrate will appoint a Conciliation Board and refer the dispute to the Board
• Benefits:
• Freedom of choice: It will provide for the creation of an ecosystem where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce. Monopoly of APMCs came to an end
• Enable better price realisation for farmers: It facilitates remunerative prices through competitive alternative trading channels
• Lower marketing cost, as the ordinance prohibits state governments from levying any market fee, cess etc.
• Farmers are protected from undue delay in receiving payment
• Transparency in dispute resolution

THE FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ORDINANCE 2020

• It provides a framework for the protection and empowerment of farmers with reference to the sale and purchase of farm products.
• The provisions of the Ordinance will override all state APMC laws.

• Salient features:
• Farming agreement: The Ordinance provides for a farming agreement prior to the production or rearing of any farm produce, aimed at facilitating farmers in selling farm produces to sponsors. State governments may establish a registration authority to provide for the electronic registry of farming agreements. 
• Duration of agreement: The minimum period of an agreement will be one crop season, or one production cycle of livestock.  The maximum period will be five years
• Exemptions from existing laws: Farming produce under a farming agreement will be exempted from all state Acts aimed at regulating sale and purchase of farming produce.  These produce will be exempted from provisions of the Essential Commodities Act, 1955 and will not have any stock limit obligations.
• Pricing of farming produce: The price to be paid for the purchase of a farming produce will be mentioned in the agreement.
• Dispute Settlement: The Ordinance requires a farming agreement to provide for a conciliation board as well as a conciliation process for settlement of disputes.  The Board should have a fair and balanced representation of parties to the agreement
• The Ordinance prohibits sponsors from acquiring ownership rights or making permanent modifications on a farmer’s land or premises under a farming agreement.
• The farming agreement may be linked with insurance or credit instruments under schemes of central and state governments or any financial service provider.

• Benefits:
• Encourage contract farming: It empowers farmers to engage with agri- business firms, wholesalers or  exporters for farm services and sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner
• It provides farmers more security in terms of prices at the end of the sowing season. 
• Lesser burden on farmers: Ordinance provides that the sponsor will be responsible for all preparations for the timely acceptance of deliveries
• New technology and advanced inputs: Sponsors often introduce new technology and also enable farmers to learn new skills. Inputs and production services are often supplied by the sponsor
• Wider market: Sponsors can open up new markets which would otherwise be unavailable to small farmers
• Farmers are protected from losing their ownership right over a farming agreement, hence prevents exploitation.

PRACTICE QUESTION:

Q. “Issues in agricultural marketing in India lie in its structural failures”. Critically analyse.