31st July 2021

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Three agricultural reform bills

The 2020 bill on agricultural trade and commerce (promotion and facilitation); The Agreement on Price Insurance and Agricultural Services for Farmers (Empowerment and Protection), 2020 and the Essential Products (Amendment) Bill, 2020, were introduced to Parliament on September 14 to replace the ordinances issued upon closing.

  • Opposition members in Lok Sabha plan to table a resolution against the Trade and Commerce Ordinance and Price Guarantee Ordinance on September 16, after which Agriculture Minister Narendra Singh Tomar will propose that the two bills that replace these ordinances.
  • Farmers and farmer associations across the country protested the ordinances. The protest against the tractors by farmers in Punjab and Haryana in July opposed it. The Punjab Assembly passed a resolution on August 28 rejecting the Centre’s ordinances.

What do ordinances imply, the provisions of which will prevail over all state APMC laws? Why are they opposed to it?

Cooperative federalism: As agriculture and markets are affairs of state (entries 14 and 28 respectively in List II), ordinances are seen as direct interference in the functions of states and against the spirit of cooperative federalism enshrined in the Constitution. The Center, however, argued that commerce and food trade are on the concomitant list, giving it constitutional ownership.

End of MSP?

The Agricultural Trade and Trade (Promotion and Facilitation) Ordinance aims to open up the sale and marketing of agricultural products outside the notified mandate of the Agricultural Products Market Committee (APMC) for farmers, removes barriers interstate commerce and provides a framework for electronic commerce in agricultural products. Prohibits state governments from charging market fees, duties or levies for transactions outside of APMC markets.

  • According to PRS Legislative Research, APMCs were created with the aim of ensuring fair trade between buyers and sellers for efficient price discovery of agricultural products.
  • The APMC can regulate trade in farmers’ products by licensing buyers, commission agents and private markets; impose market rates or any other charge on said trade; and provide the necessary infrastructure in their markets to facilitate trade.
  • Critics see the dismantling of the APMC monopoly as a sign of the end of the assured purchase of food grains at minimum support prices (MSP). Calling the Center “one nation, one market”, critics searched for “one nation, one MSP”.
  • Critics argue that ensuring more farmers get PSM for their products and correcting problems in the APMC, rather than making these state mechanisms redundant, is the need of the moment.

Framework for contract farming

The Agricultural Services Agreement and Farmers’ Price Guarantee (Empowerment and Protection) Ordinance relates to contract farming and provides a framework for trade agreements for the sale and purchase of agricultural products. The mutually agreed remunerative pricing framework envisioned in the legislation is presented as a framework that would protect and empower farmers.

  • The written agricultural contract, concluded before the production or breeding of any agricultural product, lists the conditions of supply, quality, grade, standards and price of agricultural products and services.
  • The price to be paid for the purchase must be mentioned in the contract. In case of prices subject to variations, the contract must include a guaranteed price to be paid for the said product, and a clear reference – linked to the current prices or any other appropriate reference price – for any additional amount above the guaranteed price including bonus or premium.
  • The method of determining this price, including the guaranteed price and the additional amount, will be provided in the contract as supporting documents.

No price mechanism

The price insurance bill, while protecting farmers against price exploitation, does not prescribe the price mechanism. It is feared that the freedom granted to private companies could lead to the exploitation of farmers.

  • Contract farming is not a new concept for the country’s farmers: informal contracts for food grains, formal contracts in the sugarcane and poultry sectors are common.
  • Critics fear formal contractual obligations due to the disorganized nature of the agricultural sector and the lack of resources for a legal battle with private companies.

Food Product Deregulation

The Essential Products Ordinance (amendment) removes cereals, legumes, oilseeds, edible oils, onions and potatoes from the list of essential products. The amendment will deregulate the production, storage, movement and distribution of these foods.

  • The central government can regulate supply during wars, famines, price spikes, and natural disasters, while granting exemptions to exporters and processors at those times.
  • The ordinance requires that the imposition of any limit on stocks of agricultural products be based on price increases.
  • A stock limit can only be imposed if there is a 100% increase in the retail price of horticultural products; and a 50% increase in the retail price of non-perishable agricultural food products, according to PRS.

Is food safety compromised?

Punjab Chief Minister Amarinder Singh said of the relaxation of food regulations that would lead exporters, processors and traders to stockpile agricultural products during the harvest season, when prices are low, generally lower, and post them later when prices go up. He said this could negatively affect food security as states would not have information on stock availability in the state. Critics anticipate irrational volatility in commodity prices and an increase in black marketing.

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