GameChanger Reform empowering Farmers to directly sell anywhere : End of Monopoly of APMCs

By : CA Vineet Sodhani

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INTRODUCTION

1. The Game-changer reforms empowering farmers to plan their agricultural operations and sell their produce in a manner that yield maximum revenue to them and also to end monopoly of APMCs are already passed by both Houses of the Parliament.

1.1 The Problem : At present, the farmers have two options to sell their produce :

  • to sell to Government using MSP, or,
  • sell in local Mandis/APMCs. The local arhatiyas, then, further sell the crops anywhere in India. (MSP system is discussed in para 5)

The major lacuna in existing laws is that farmers cannot sell directly anywhere in India. A majority of the farmers do not sufficient resources (agricultural tools, implements and techniques) to ensure proper farming and they get very low yields.

1.2 The Objective behind laws : The two legislations are :

NAME OF LAW OBJECTIVE
1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
  1. to 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 which facilitates remunerative prices through competitive ALTERNATIVE trading channels;
  2. to promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce OUTSIDE markets notified under State APMC Acts;
  3. to provide a facilitative framework for electronic trading and
  4. for matters connected therewith or incidental thereto.
2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020
  1. to provide for a national framework on farming agreements that protects and empowers farmers to engage with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework in a fair and transparent manner and
  2. for matters connected therewith or incidental thereto.

This write-up makes an attempt to analyse the provisions of the law vis-à-vis the objective sought to be achieved.

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

2. The key provisions of this legislation are —

POINT SEC. PROVISION
2.1 Setting up of Electronic trading and transaction platform for physical delivery 2(a) A platform will be set up to —

  • facilitate DIRECT and ONLINE buying and selling
  • for conduct of trade and commerce of FARMERS’ PRODUCE
  • through a network of electronic devices and internet applications,
  • where each such transaction results in PHYSICAL DELIVERY of farmers’ produce;
2.2 Farmers may form associations 2(b) & 2(d) “Farmer” means —

  • an individual
  • engaged in the production of farmers’ produce
  • by self or by hired labour or otherwise, and
  • includes the farmer producer organisation;

“Farmer producer organisation” means an association or group of farmers, by whatever name called,––

(i) registered under any law for the time being in force; or

(ii) promoted under a scheme or programme sponsored by the Central or the State Government;

2.3 Covers all foodstuff, dairy, fishery, goatery, piggery, fodder, cotton, jute, etc. 2(c)

“Farmers’ produce” means,––

(i) foodstuffs including cereals like wheat, rice or other coarse grains, pulses, edible oilseeds, oils, vegetables, fruits, nuts, spices, sugarcane and products of poultry, piggery, goatery, fishery and dairy intended for human consumption in its natural or processed form;

(ii) cattle fodder including oilcakes and other concentrates; and

(iii) raw cotton whether ginned or unginned, cotton seeds and raw jute;

2.4 Trading in Any non-APMC area

[areas under State APMC Acts excluded, as they are covered by APMC mechanism]

2(m)

“Trade area” —

♦ MEANS any area or location, place of production, collection and aggregation

♦ INCLUDING––

(a) farm gates;

(b) factory premises;

(c) warehouses;

(d) silos;

(e) cold storages; or

(f) any other structures or places,

from where trade of farmers’ produce may be undertaken in the territory of India

♦ BUT DOES NOT INCLUDE the premises, enclosures and structures constituting markets/yards run by committees/licensees, etc. under State APMC Acts.

2.5 Freedom to conduct trade and commerce in a trade area 3 Any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the INTER-STATE OR INTRA-STATE trade and commerce in farmers’ produce in a trade area.
2.6 Power to trade in products covered by APMC Acts even in non-APMC area 4 Any trader may engage in the inter-State trade or intra-State trade—

  • of scheduled farmers’ produce (viz. produce notified in State-APMC Act)
  • with a farmer or another trader
  • in a trade area (viz. even in non-APMC area)

Further, PAN is required to be had (PAN is not required by farmer producer organisations or agricultural co-operative society)

Central Government may provide for electronic registration for a trader, modalities of trade transaction and mode of payment of the scheduled farmers’ produce in a trade area.

Payment to be made on : (a) same day or (b) within 3 working days subject to acknowledgement on same day : Every trader who transacts with farmers shall make payment for the traded scheduled farmers’ produce —

  • on the same day or
  • within the maximum 3 working days if procedurally so required subject to the condition that the receipt of delivery mentioning the due payment amount shall be given to the farmer on the same day.

♦ The Central Government may prescribe a different procedure of payment by farmer produce organisation or agriculture co-operative society, by whatever name called, linked with the receipt of payment from the buyers.

2.7 Power to set-up online trading platforms for products covered in APMC Acts 5 Electronic  trading and transaction platform may be set-up and operated by :

  • Any person (other than individual), having PAN/other notified document
  • any farmer producer organisation or
  • agricultural co-operative society.

♦  The platform will facilitate inter- State or intra-State trade and commerce of scheduled farmers’ produce in a trade area.

♦ Guidelines will be framed for fair trade practices such as mode of trading, fees, technical parameters including inter-operability with other platforms, logistics arrangments, quality assessment, timely payment, DISSEMINATION OF GUIDELINES IN LOCAL LANGUAGE of the place of operation of the platform and such other matters.

2.8 No FEE to be levied – Freedom from FEE for products covered in APMC Acts if traded in non-APMC area 6 No market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produce in a trade area.
2.9 Set-up of PRICE Intelligence SYSTEM 7 The Central Government may, through any Central Government Organisation, develop —

  • a Price Information and Market Intelligence System for farmers’ produce and
  • a framework for dissemination of information relating thereto.

The Central Government may require any person owning and operating an electronic trading and transaction platform to provide information regarding such transactions as may be prescribed.

2.10 Act to have overriding effect 14 The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any State APMC Act or any other law for time being in force or in any instrument having effect by virtue of any law for the time being in force.

 

FARMERS (EMPOWERMENT AND PROTECTION) AGREEMENT ON PRICE ASSURANCE AND FARM SERVICES ACT, 2020

3. The key provisions of this legislation are —

POINT SEC. PROVISION
3.1 Power to enter into farming agreements 3

♦ A farmer may enter into a written farming agreement in respect of any farming produce.

Agreement may provide for conditions of supply : The agreement may provide for the terms and conditions for supply of such produce, including the time of supply, quality, grade, standards, price and such other matters.

Agreement may provide for ‘farm services’ (seed, machinery, technology, etc.) : The agreement may provide for the terms related to supply of farm services. “Farm services” includes supply of seed, feed, fodder, agro-chemicals, machinery and technology, advice, non-chemical agro-inputs and such other inputs for farming.

Legal compliances shall be burden of sponsor/farm service provider : The responsibility for compliance of any legal requirement for providing such farm services shall be with —

  • the Sponsor (i.e., means a person who has entered into a farming agreement with the farmer to purchase a farming produce) or
  • the farm service provider.
3.2 Rights of ‘share-cropper’ preserved 3

No farming agreement shall be entered into by a farmer under this section in derogation of any rights of a share cropper.

Share-cropper means a tiller or occupier of a farm land who formally or informally agrees to give fixed share of crop or to pay fixed amount to the land owner for growing or rearing of farming produce.

3.3 Period of farming agreement 3

♦ minimum period = one crop season or one production cycle of livestock

♦ Maximum period = 5 years (but, for long-duration crops, if production cycle of any farming produce is longer and may go beyond five years, in such case, the maximum period of farming agreement may be mutually decided by the farmer and the Sponsor and explicitly mentioned in the farming agreement)

3.4 Model Agreements 3 For the purposes of facilitating farmers to enter into written farming agreements, the Central Government may issue necessary guidelines along with model farming agreements, in such manner, as it deems fit.
3.5 Farming agreements to be registered 12 State Government may notify a Registration Authority to provide for electronic registry for that State that provides facilitative framework for registration of farming agreements.
3.6 Farmers may involve their associations 10

An AGGREGATOR or farm service provider may become a party to the farming agreement (with their role specified in agreement).

“Aggregator” = any person, including a Farmer Producer Organisation, who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor

3.7 Farmer shall remain owner of land and no transfer can be made 8 No farming agreement shall be entered into for the purpose of any transfer, including sale, lease and mortgage of the land or premises of the farmer.
3.8 No permanent construction over farmer’s land 8

No farming agreement shall be entered into for raising any permanent structure or making any modification on the land or premises of the farmer.

Permanent structure may be raised but shall be : (a) either removed or (b) transferred free of cost to farmer : Permanent structure may be raised on farmer’s land, if :

  • sponsor agrees to remove such structure or to restore the land to its original condition, AT HIS COST, on the conclusion of the agreement or expiry of the agreement period; or
  • if structure is not removed as agreed by the Sponsor, the ownership of such structure shall vest with the farmer after conclusion of the agreement or expiry of the agreement period.
3.9 Quality Assurance 4

The parties entering into a farming agreement may identify and require as a condition for the performance of such agreement compliance with mutually acceptable quality, grade and standards of a farming produce.

Use of third-party qualified assayers may be made to ensure impartiality and fairness.

3.10 Price fixation 5

Fixed Price contracts : The price to be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself.

Variable-price contracts : In case, such price is subject to variation, then, such agreement shall explicitly provide for—

(a) a guaranteed price to be paid for such produce;

(b) a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium, to ensure best value to the farmer and

(c) such price reference may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices.

Pricing shall form part of agreement : the method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement.

3.11 Due date for payment 6 The Sponsor shall make payment as follows —

(a) where the farming agreement relates to seed production

Minimum 2/3rd of agreed amount at time of delivery

+ Balance after due certification, but within 30 days of delivery;

(b) in other cases Full agreed amount at the time of accepting the delivery of farming produce and issue a receipt slip with details of the sale proceeds.
3.12 Exemption from State Laws and stock-limits 7 Where a farming agreement has been entered into in respect of any farming produce under this Act, —

  • such produce shall be exempt from the application of any State Act
  • stock-limits under Essential Commodities Act, 1955 or other law shall not be applicable to farming produce purchased under a farming agreement.
3.13 Insurance & Finance 9 A farming agreement may be linked with insurance or credit instrument under any scheme of the Central Government or the State Government or any financial service provider to ensure risk mitigation and flow of credit to farmer or Sponsor or both.
3.14 Contract may be altered with mutual consent only 11 At any time after entering into a farming agreement, the parties to such agreement may, with mutual consent, alter or terminate such agreement for any reasonable cause.

DISPUTE RESOLUTION

4. Both the laws provide for resolution of disputes through conciliatory processes and empower sub-divisional magistrates in this behalf.

Protection of farm land – Farm land cannot be used for recovery against farmer : No action for recovery of any amount due in pursuance of an order passed under that section, shall be initiated against the agricultural land of the farmer.

MSP system

5. Minimum Support Price (MSP) is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices. Since 2009, the Commission for Agricultural Costs and Prices (CACP) fixes the minimum support price of a crop based on cost, demand, supply position, price changes, market price trend, different costs and international market prices.

5.1 Only about 6% farmers benefit from MSP : The Shanta Kumar Committee, formed to suggest restructuring of the Food Corporation of India (FCI) in 2015, in its report, had stated that only 6 per cent of the MSP could be received by the farmers, which directly means that 94 per cent of the farmers in the country are deprived from the benefit of the MSP.

5.2 Farmers forced to sell below MSP in APMCs : Farmers are forced to sell products to/through APMCs at a very lower rate (even less than MSP). According to a report by the Organisation of Economic Cooperation Development and the Indian Council of Agricultural Research (OECD-ICAIR), the farmers have lost Rs. 45 lakh crore due to non-proper pricing of the product between 2000 and 2017.

5.3 Fixed MSP is also a problem : The price of any crop decided by the central government remains the same all over the country. This is also a major reason why the farmers are not able to get the benefit of the MSP, because the cost of cultivation varies across states. Further, produce quality also differs and can yield, at time, better prices than MSP.

5.4 Two laws provide for additional options : The two laws empower the farmers :

(a) to directly sell anywhere in India or to directly export ;

(b) to enter into farming agreement to gain maximum yield without losing land.

CONCLUSION

6. The two legislations are going to be game-changer for farmers, as they will not be compelled to sell only to local mandis; they can sell anywhere in India, as any other trader. Secondly, they will not be compelled to restrict their farm-outsourcing to local persons; they can hire any person from anywhere in India with benefits of written agreements, dispute resolutions, written and fixed pricing mechanism, etc.

This will also benefit consumers, as there will be free flow of farm produce directly from farmer at competitively lowered prices without involvement of any black-marketing by certain criminals dressed as traders, etc.

We should strive to ensure that the laws achieve their purpose.

GameChanger Agricultural Reforms VineetSodhani.Com