Recently, the Centre took some serious initiatives to overhaul agricultural market. As a combined package, three laws were introduced through ordinance.
First, the Essential Commodities Act was amended to remove the restrictions on stocking food produce; second, a new law called ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 or the FPTC Ordinance’ was introduced in order to annihilate monopoly of the Agricultural Produce Market Committees (APMCs), as according to the new law anyone can purchase and sell agricultural produce; third, ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 or FAPAFS’, has been brought to life, so as to legalise contract farming which will give legitimacy to big businesses and companies to cultivate vast swathes on contract.
The newly-introduced law on contract farming and FTPC Ordinance coupled with the recently amended Essential Commodities Act, have created a new legal regime for agricultural markets, which attempt to liberate the Indian farmer. In what is a great relief to the farmers, is their ability and freedom under the new law to perform inter-State and intra-State transactions without any hindrance or curbs. However, while it does not do away with mandis or Agricultural Produce Marketing Committees (APMCs), but considerably restricts their power and gives ammunition and way to the farmers to sell outside the designated mandis. But certainly, it is a crucial step in the path of emancipating the Indian farmer from the cobweb of licence-permit raj.
These ordinances will be a game changer for the new age farmers and shall progressively impact the dynamics of the agro-business and agricultural markets.
The law on contract farming or FAPAFS -2020 allows farmers to enter into contracts to produce crops and the ordinance on APMCs or the FPTC Ordinance 2020 authorises the sale of crops produced by the farmer without the need for a prior contract.
The problem that plagues the Indian agricultural community or the farmers is, normally when the farmer enters into the process of sowing crops, the buyer is neither known nor fixed and it is only after the harvest is over, he wanders for locating a buyer. So, this ordinance seeks to regulate such processes and transactions intending to aid the farmer, since, the operation of APMC laws by the States is limited to the market yards.
Private parties are allowed to establish online trading platforms to trade in agricultural commodities which may be inter-State or intra-State but may be subject to Government guidelines and a dispute-resolution system both for buyers and farmers is set up at the end of the sub-divisional magistrate/executive magistrates and not by the usual dispute resolution through the judiciary.
Most importantly this ordinance makes use of APMCs optional and makes it clear that under no circumstances will there be licencing or fee requirements, when a transaction is done outside the physical limits of an APMC yard and that anyone can buy directly from the farmers.
The impact of the new law will be tremendous for the farmers, mostly liberating and progressive, as it loosens the farmers from the clutches of APMCs, which have historically been the heaven for the traders. And now since the farmers have a free hand to sell their produce to the buyers of their choice, this will give scope for fair competition between buyers and on the other hand ensure better prices to the farmer. Moreover, in the absence of a statutorily mandatory intermediary, farmers can enter into direct sales to consumers (like restaurants) which will go a long way in reducing farm-to-fork price. However, it shouldn’t be confused with totally preventing intermediaries from operating, as APMCs will still be existing under the State Government laws, since the new law only seeks to provide an alternative and liberal avenue for the farmers to sell their produce.
Many have alleged that, the Constitution in the Entry 28 of the State List under the Seventh Schedule entitles the States to regulate markets and fares and therefore the interference of Central Government in APMCs through these ordinances is unconstitutional and violates the federal structure.
However, such an argument is flawed, because the Constitution in Part XIII guarantees freedom of trade and commerce across India and most APMC laws, because of their restrictive provisions, infringe upon the constitutional freedom to do inter-State transactions, which the ordinance has tried to remove. Besides, it is neither wrong nor unconstitutional to prescribe that farmers or traders who do not use any APMC facilities, must not pay APMC fees.
One should understand that, the Centre hasn’t scrapped, as it can’t scrap the APMC Act, since agriculture is in item number 14 of the State list under the Seventh Schedule of the Constitution. But interestingly, the inter-State trade comes within the Union list in the Seventh Schedule. Therefore, it is not unconstitutional for the Centre to make laws in the interest of the farmers, which enables them to sell their produce to any buyer outside the State.
The soul of the laws regulating market remains in promoting free trade, fair competition and free participation and this new law stands for all of these.
However, what remains to be achieved in order to reap the best dividends of these ordinances is, to build best infrastructure to cater to the post-harvest needs, establish food processing clusters in rural areas, and connect the farmer with the national and global market in reality, ensure reliable power supply, so far as agro-processing plants are concerned, and as such necessary steps be taken to uplift and augment the crippled power sector, infested with patronage of theft.
(The writer is a lawyer and public policy expert. He can be reached at sjyotiranjan3@gmail.com)
