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Agriculture Reforms 2020

In a latest development, Rajya Sabha passed three bills related to Agriculture Sector Reforms namely-

  • The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

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

  • The Essential Commodities (Amendment) Bill, 2020


  • The three Bills on agriculture reforms – The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020; The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 and The Essential Commodities (Amendment) Bill, 2020 were introduced in the Parliament to replace the ordinances issued during the lockdown.

  • The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 are passed in the Rajya Sabha.

  • The Bills aim to do away with government interference in agricultural trade by creating trading areas free of middlemen and government taxes outside the structure of Agricultural Produce Market Committees (APMCs) along with removing restrictions of private stock holding of agricultural produce. This has led to different concerns which has led to a situation of mistrust among different stakeholders.

APMC: The whole geographical area in the State is divided and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Even otherwise, APMCs account for less than a fourth of total agricultural trade. But APMCs do play an important role in price discovery essential for agricultural trade and production choices.

What the important provisions in the Bill?

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020

  • The Ordinance allows intra-state and inter-state trade of farmers’ produce outside: the physical premises of market yards run by market committees formed under the state APMC Acts and other markets notified under the state APMC Acts.

  • It opens up agricultural sale and marketing outside the notified Agricultural Produce Market Committee (APMC) mandis for farmers.

  • It provides a framework for electronic trading of agricultural produce.

  • The Ordinance prohibits state governments from levying any market fee, cess or levy on farmers, traders, and electronic trading platforms for trade of farmers’ produce conducted in an ‘outside trade area’.

  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020

  • The Ordinance provides for a farming agreement between a farmer and a buyer prior to the production or rearing of any farm produce.

  • The minimum period of an agreement will be one crop season, or one production cycle of livestock. The maximum period is five years, unless the production cycle is more than five years.

  • The price of farming produce should be mentioned in the agreement. For prices subjected to variation, a guaranteed price for the produce and a clear reference for any additional amount above the guaranteed price must be specified in the agreement.

  • A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes.

  • The Essential Commodities (Amendment) Ordinance

  • Removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. The amendment will deregulate the production, storage, movement and distribution of these food commodities.

  • The central government is allowed regulation of supply during war, famine, extraordinary price rise and natural calamity, while providing exemptions for exporters and processors at such times as well.

  • Imposition of any stock limit on agricultural produce must be based on price rise. A stock limit may be imposed only if there is a 100% increase in retail price of horticultural produce; and a 50% increase in the retail price of non-perishable agricultural food items.

Why are these bills being opposed?

  • Direct encroachment of States’ rights: Since agriculture and markets are State subjects entry 14 and 28 respectively in List II, they have not been consulted and the ordinances are being seen as a direct encroachment upon the functions of the States and against the spirit of cooperative federalism enshrined in the Constitution.

  • Dismantling of MSP: Farmers are apprehensive that once these bills are passed, they would pave the way for dismantling of the minimum support price (MSP) system and leave the farming community at the mercy of big corporate.

  • Exploitation by private houses: The Price Assurance Bill, while offering protection to farmers against price exploitation, does not prescribe the mechanism for price fixation. There is apprehension that the free hand given to private corporate houses could lead to farmer exploitation.

  • Removal of important commodities: The Essential Commodities (Amendment) Ordinance removes cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities.

  • Risk to food security: Easing of regulation of food items would lead to exporters, processors and traders hoarding farm produce during the harvest season, when prices are generally lower, and releasing it later when prices increase. This could undermine food security since the States would have no information about the availability of stocks within the State.

The attempts to reform the APMC are not new and have been part of the agenda of successive governments for the last two decades. Most farmer organisations also agree that there is excessive political interference and there is need for reform as far as functioning of mandis are concerned. However, the stakeholders have still found different issues with the bills that include:

  1. The government has failed to have or hold any discussion with the various stakeholders including farmers and middlemen.

  2. The farmer organisations see these Bills as part of the larger agenda of corporatisation of agriculture and a withdrawal of government support.

  3. There may not be direct evidence of crony capitalism, but the entry, in a big way, of two of the biggest corporate groups (Adani and Reliance) in food and agricultural retail and the timing of the Bills have not gone unnoticed.

  4. Ad hoc interventions by the government such as raising import duties on masur and a ban on onion exports also raise suspicion about the intent of the government to leave the price discovery mechanism on the market.

While the proposed Bills do not do away with the APMC mandis, the preference for corporate interests at the cost of farmers’ interests and a lack of regulation in these non-APMC mandis are cause for concern. The absence of any regulation in non-APMC mandis is being seen as a precursor to the withdrawal of the guarantee of MSP-based procurement. The dominant concern is being expressed by the farmers of Punjab and Haryana.

Why are the farmers of Haryana and Punjab more concerned?

The public procurement in these States is large. These fears gain strength with the experience of States such as Bihar which abolished APMCs in 2006. After the abolition of mandis, farmers in Bihar on average received lower prices compared to the MSP for most crops. For example, as against the MSP of ₹1,850 a quintal for maize, most farmers in Bihar reported selling their produce at less than ₹1,000 a quintal. So, despite the shortcomings and regional variations, farmers still see the APMC mandis as essential to ensuring the survival of the MSP regime.

What are the possible benefits from these various acts?

  • Freedom of choice: Farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce.

  • Barrier free trade: New legislation will promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.

  • Reduced marketing cost: It will reduce marketing costs for the farmers and help them in getting better prices.

  • Better price: It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.

  • Attracting investment: It will act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to national and global markets, and in agricultural infrastructure.

  • Empowering farmers: It will empower farmers for engaging with processors, wholesalers, aggregators, large retailers, exporters etc., on a level playing field without any fear of exploitation.


The reforms of 1991 came out of various committee reports through the 1980s – Abid Hussain committee, Narasimhan committee, Dagli committee and many others that recommended all those changes. Though it was done in a dramatic manner, the ideas were not last minute thinking. Similarly, here too a lot of work has been done and case for reform of the APMC was made by economists during the Manmohan Singh government, especially the former Planning Commission member, the late Saumitra Choudhuri.

farmers bill ordinances 2020

While retail prices have remained high, data from the Wholesale Price Index (WPI) suggest a deceleration in farm gate prices for most agricultural produce. This has happened despite increased procurement through the MSP-based regime for paddy and wheat. Decline in basmati rice prices by more than 30% and despite higher international prices suggests the limitation of market intervention in raising farm gate prices. For most crops where MSP-led procurement is non-existent, the decline has been sharper. Even cash crops such as cotton have seen a collapse in prices in the absence of government intervention. With rising input costs, farmers do not see the market providing them remunerative prices. The protests by farmers are essentially a reflection of the mistrust between farmers and the stated objective of these reforms.

Source: The Hindu


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