New Farm Bills




 
When the farmers harvest their agriculture produce, they cannot enter into the market and sell their produce directly to the end customers. Instead, they are required to sell their produce in their designated ‘Mandis’, which are regulated by the Agricultural Produce Market Committee (APMC). In a Mandi, the farmer gets in touch with an agent to help him through the auction process. The produce is auctioned in the Mandi, where traders or arhatiyas licensed by the APMC bid for the produce. The highest bidder takes home the produce and the farmer receives a fair price.

Ideally, this whole system was designed to provide the farmers with a free place to trade and receive a fair price. Although the system is highly flawed as it creates a monopsony — a market situation with a single buyer — since it is compulsory for the farmers to sell their produce at government-regulated Mandis under the APMC act, 1964. And this single buyer has been taking advantage of the farmer by keeping the Arhatiyas club exclusive giving them an opportunity to collude in the auctions and pay a meagre price compared to the actual worth of the product. And since the farmer is not allowed to sell his produce anywhere else, the farmer is left with no choice than to accept the price offered in the auction.

In order to address this issue, three new bills were passed in the Parliament :

1. Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

This legislation aims to break the monopsony by providing farmers with the freedom to trade their harvest outside the state-regulated Mandis. It also allows ‘barrier-free’ intra-state and inter-state trade of farmers’ produce outside state APMCs.

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

Farming is an unpredictable business and many small farmers in our country procure loans in order to grow their crops. This makes it quite risky for these small farmers in case of an unfortunate event. In order to shift this burden of risk and unpredictability from the farmers to other businesses, this bill has been passed. Under this, the farmers will be able to enter into binding contracts with other businesses laying a system of contract farming. The farmers will be able to sell their produce to such firms, processors, wholesalers, exporters, or large retailers at a future date at a pre-agreed price

3. The Essential Commodities (Amendment) Bill, 2020

Agriculture is a seasonal activity. The harvest from one season needs to be stored and distributed in the market to maintain a consistent supply until the next harvest season. The Essential Commodities Act, 1955 provides the state government with the power to moderate the storage of some essential commodities such as cereals, pulses, onions, potatoes, etc. This act aims to stop agri-businesses and agri-commodity traders from hoarding excess supplies to inflate prices. But this also disincentivizes any private investments in building storage facilities for such supplies as the government can impose stocking limits as and when they deem fit. Furthermore, invoking this act does not guarantee that the prices can be brought back to normal. Last year’s onion price fiasco is still afresh when the onion prices touched Rs. 200 per kg in December.

In order to promote private investments and foreign direct investments, the government has passed an amendment in the Essential Commodities Act by removing remove cereals, pulses, oilseeds, onions and potatoes from the list of essential commodities.

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