Following the announcement of reforms in the agri-sector, the government issued ordinances to make good on its promise. These ordinances deal with- ECA-1955, APMC Act and Contract farming. The author in this article examines whether these ordinances deliver on the promises made or not.

1) Ordinance for amendment of APMC Act

• ‘Farming Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020.’ seek to address the problems farmers face in selling their produce.
• Due to the unionisation of middlemen (arhatias) and their financial clout, politicians in the states have been reluctant to amend agriculture marketing laws which are exploitative and don’t allow farmers to receive a fair price.
• Rather than coax the states financially to correct the markets, an unregulated marketplace has been created where 15 crore farmers will be exposed to the skulduggery of traders.
• Imagine the mayhem in stock markets if ROC and SEBI were similarly made redundant.

Issues and benefits

• Rather than replicate Punjab’s successful agriculture mandi model, now states will lose vital revenue to even upgrade and repair rural infrastructure.
• The ordinance may be challenged by the states for its constitutional overreach.
•  But, on the flip side, over time, the largest informal sector in the country will begin to get formalised and new business models will develop.
• A different breed of aggregators will create the much-needed competition to the existing monopoly of local traders.
• Additionally, henceforth, when farmers sell agricultural produce outside of APMC market yards, they cannot legally be charged commission on the sale of farm produce.
• To survive, the APMCs across the nation will have to radically standardise and rationalise their mandi fee structure and limit the commission charged by traders on sale of farmers’ produce.

2) ECA 1955: Not enough has been done

• Here, the amendment was supposed to allay the genuine fears of traders emitting from the bureaucracy’s draconian powers to arbitrarily evoke stockholding limits etc.
• Rather than forego its own powers for the larger good, the amendment’s fine print makes it ambiguous and leaves space for whimsical interpretations as before.
• The trader’s uncertainty is compounded by the arbitrary import-export policy decisions which dilute the purpose of the amendment itself.

3) Ordinance on Contract farming

•  “The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020” tries to placate the fears of both the farmer and the contractor when they sign an agreement.
• For the farmer, the legal recourse is never a practical choice as the persuasive powers of the aggregators’ deep pockets cast a dark shadow over the redressal process.
• Likewise, the tediously stretched legal proceedings are dissuasion enough to either not seek redressal or settle for unfavourable terms.
• That produce derived from contract farming operations will not be subject to any obstructionist laws is a very good step.
• Farmer-producer organisations and new aggregators will get a boost with these laws, and become harbingers of prosperity in some small corners of the countryside.
• There are green shoots in the ordinances, but the downside dwarfs the upside.

So, what are the implications of these 3 reforms?

• The union of the three ordinances appears to be a precursor to implementing the Shanta Kumar Committee recommendations to dilute and dismantle FCI, MSP & PDS which will push farmers from the frying into the fire.
• It may also be interpreted to mean that now the sugar industry needn’t pay farmers the central government FRP or the state government SAP price for sugarcane.

Consider the question ” There was a mention of reforms related to agri-sector in the recently announced stimulus package. Examine the issues with segments of agri-sector which necessitated these reforms.”

Conclusion

The reforms in these 3 areas if carried out earnestly could go a long way in helping the farmers get out of the misery and help achieve the goal of doubling of farmers income in the set time frame.

Back2Basics: Agriculture Produce Marketing Committee Regulation (APMC) Act.

• All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as “regulated markets”.
• With the exception of Kerala, J & K, and Manipur, all other states have enacted the APMC Act.
• It mandates that the sale/purchase of agricultural commodities notified under it are to be carried out in specified market areas, yards or sub-yards. These markets are required to have the proper infrastructure for the sale of farmers’ produce.
• Prices in them are to be determined by open auction, conducted in a transparent manner in the presence of an official of the market committee.
• Market charges for various agencies, such as commissions for commission agents (arhtiyas); statutory charges, such as market fees and taxes; and produce-handling charges, such as for cleaning of produce, and loading and unloading, are clearly defined, and no other deduction can be made from the sale proceeds of farmers.
• Market charges, costs, and taxes vary across states and commodities.

Essential Commodities Act 1955

• The ECA is an act which was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people.
• The ECA was enacted in 1955. This includes foodstuff, drugs, fuel (petroleum products) etc.
• It has since been used by the Government to regulate the production, supply and distribution of a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
• Additionally, the government can also fix the maximum retail price (MRP) of any packaged product that it declares an “essential commodity”.
• The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products.
• The Centre can include new commodities as and when the need arises, and takes them off the list once the situation improves.

How ECA works?

• If the Centre finds that a certain commodity is in short supply and its price is spiking, it can notify stock-holding limits on it for a specified period.
• The States act on this notification to specify limits and take steps to ensure that these are adhered to.
• Anybody trading or dealing in the commodity, be it wholesalers, retailers or even importers are prevented from stockpiling it beyond a certain quantity.
• A State can, however, choose not to impose any restrictions. But once it does, traders have to immediately sell into the market any stocks held beyond the mandated quantity.
• This improves supplies and brings down prices. As not all shopkeepers and traders comply, State agencies conduct raids to get everyone to toe the line and the errant are punished.
• The excess stocks are auctioned or sold through fair price shops.

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