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GS Paper: GS3-06.Storage, transport and marketing of Agricultural produce and issues and related constraints

  • Need to address farmers’ apprehensions

    Farmers are protesting the farm laws which brought changes in the agri-produce marketing and the contract farming. Farmers are also demanding the legal backing of MSP. The article analyses the issues and suggests the measures to address them.

    Analysing merits and feasibility of demands of protesting farmers

    1) The Farmer Produce Trade and Commerce (Promotion and Facilitation) Act

    • The Act creates a new “trade area” outside the APMC market yards/sub-yards.
    • Any buyer with a Permanent Account Number (PAN) can buy directly from farmer sellers outside APMC market.
    • The state government can’t impose any taxes on such a transaction.
    • Therefore, it is expected that this would lower buying costs for buyers and that would automatically mean higher prices for farmers.

    Concerns with the law

    • Buyers buying at lower cost does not necessarily mean they would pass on the cost saved on procurement to selling farmers.
    • The claim is also made that now farmers would have a choice of channels.
    • However, the majority of the farm produce across India with the exception of states like Punjab and Haryana does not go through APMCs.
    • Anybody with a PAN card allowed to buy agricultural produce could mean a free-for-all situation, which is not desirable.

    2) The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act

    What necessitated law on contract farming?

    • Contract farming has shown that marginal and small farmers are generally excluded.
    • The problems they face include the following-
    • Highly one-sided i.e. pro-contracting agency contracts.
    • Delayed payments.
    • Undue rejections and outright cheating.
    • Poor enforcement of contract farming regulation by the state governments.

    Concerns with the law

    • The Act defined FPOs (farmer producer organisations) as farmers, which restricts them to the supply side.
    • But there is hardly any FPO in farm production.
    • Further, the contract farming Act does not provide for remedies when companies cancel contracts or there is delay in taking delivery of produce.
    • The Act says that sponsor would also pay, besides the minimum guaranteed price, a premium or bonus which will be linked to APMC or e-trading price.
    • This goes against the very concept of contract farming.
    • The contract price should be left to the contracting parties to decide.
    • Further, if the understanding is that mandis are not discovering prices well, then why peg the contract price to such mandi price?

    Lessons from 2003 APMC Act

    • The government must go back to the 2003 Model APMC Act, which also had model contract agreement with mandatory and optional provisions in a contract.
    • In the 2003 Model APMC Act, the APMC was supposed to resolve the disputes.
    • Further under 2003 APMC Act when a licence is given to a trader or commission agent, there is a counterparty risk assurance.

    Apprehensions about MSP

    • The Shanta Kumar Committee report and the CACP reports had suggested reducing procurement and an end to open-ended procurement from states like Punjab to cut down costs of FCI.
    • It is feared that FCI itself may start procuring directly from the new trade area to cut down buying costs like market fees and arhtiya commission.
    • It is more about the changes in the “social contract” between the state’s farmers and the Union government.
    • The demand for legal backing to MSP also arises from the fact that the government has been announcing MSP for 23 crops, but procurement is limited to a few crops.
    • Also, CACP in one of its reports in 2017-18 (kharif) suggested that “to instil confidence among farmers for procurement of their produce, a legislation conferring on farmers ‘the right to sell at MSP’ may be brought out.”
    • Punjab’s amendments to farm Acts — making MSP mandatory for wheat and paddy are ill-advised as this law will discourage private buyers from buying.
    • It is difficult to enforce such a law. Private agricultural markets cannot be run through such diktats.
    •  By creating stringent rules (fine or imprisonment), the government may create a situation where farmers would not be able to sell at all.
    • Maharashtra attempted this legality in 2018 in its APMC Act but had to reverse it after protests by traders.

    Consider the question “What are the factors that necessitated the robust contract farming Act? What are the issues related to the Act? Suggest the measures to address these issues.”

    Conclusion

    Apprehension among the farmers related to the farm laws needs to be addressed and the concern in the laws need to be addressed.

  • The perils of deregulated imperfect agrimarkets

    The article examine issue of agriculture produce marketing. The passage of FPTC Act 2020 sought to address the challenges faced by the farmers. However, these are several issues the Act fails to resolve. These issues are discussed here.

    Why do farmers sell outside mandis?

    • Official data show that even for paddy and wheat, respectively, only 29% and 44% of the harvest is sold in a mandi.
    • In other words a large proportion of Indian harvest is not directly sold in a mandi.
    • Farmers are forced to sell outside the mandis for two reasons.

    1) There are not enough mandis

    • The National Commission on Agriculture (NCA) had recommended that every Indian farmer should be able to reach a mandi in one hour by a cart.
    • Thus, the average area served by a mandi was to be reduced to 80 km2.
    • For this, the number of mandis was to increase to at least 41,000.
    • But there were only 6,630 mandis in 2019 with an average area served of 463 km2.
    • Using another set of criteria, a government committee in 2017 had recommended that India should have at least 10,130 mandis.
    • So, by all counts, India needs not less but more mandis.

    2) Transport cost

    • Most small and marginal farmers, do not find it economical to bear the transport costs to take their harvests to mandis.
    • Thus, they end up selling their harvest to a village trader even if at a lower price.
    • Even if private markets replace mandis, small and marginal farmers will continue to sell to traders in the village itself.
    • The situation will change only if economies of scale rise substantially at the farm-level.

    Why there is poor private investment in markets?

    • Already, 18 States have allowed the establishment of private markets outside the APMC; 19 States have allowed the direct purchase of agricultural produce from farmers; and 13 States have allowed the establishment of farmer’s markets outside the APMC.
    • Despite such legislative changes, no significant private investment has flowed in to establish private markets in these States.
    • The reason for poor private investment in markets is the presence of high transaction costs in produce collection and aggregation.
    • When private players try to take over the role of mandis and the village trader, they incur considerable costs in opening collection centres and for salaries, grading, storage and transport.
    • Corporate retail chains face additional costs in urban sales and storage, as well as the risk of perishability.
    • This is why many retail chains prefer purchasing from mandis rather than directly from farmers.

    Issue of mandi tax

    • Many commentaries treat taxes in mandis as wasteful. This assertion is not fully true for two reasons:
    • 1) Much of the mandi taxes are reinvested by APMCs to improve market infrastructure.
    • A fall in mandi taxes would reduce the surplus available with APMCs for such investment.
    • 2) In States such as Punjab, the government charges a market committee fee and a rural development fee.
    • The Punjab Mandi Board uses these revenues to construct rural roads, run medical and veterinary dispensaries, supply drinking wate etc.
    • Such rural investments will also be adversely affected if mandis are weakened.

    Weakening of MSP regime

    • Many policy signals point to a strategic design to weaken the MSPs.
    • 1) Rising input and labour costs necessitates a regular upward revision of MSPs to keep pace with costs of living.
    • However, MSPs are rising at a far slower rate over the past five to six years than in the past.
    • 2) The government has not yet agreed to fix MSPs at 50% above the C2 cost of production.
    • As a result, farmers continue to suffer a price loss of ₹200 to ₹500 per quintal in many crops.
    • 3) The Commission for Agricultural Costs and Prices (CACP) has been recommending to the government that open-ended procurement of food grains should end.
    • These policy stances have set alarm bells ringing among farmers.
    • The farmers Punjab, Haryana and western Uttar Pradesh feel that if mandis weaken and private markets with no commitment to MSPs expand, they fear a gradual erosion of their entitlement to a remunerative price.

    Steps to be taken

    • 1) India needs an increase in the density of mandis, expansion of investment in mandi infrastructure and a spread of the MSP system to more regions and crops.
    • 2) This increase in density should happen hand-in-hand with a universalisation of the Public Distribution System.
    • 3) APMCs need internal reform to ease the entry of new players, reduce trader collusion and link them up with national e-trading platforms.
    • The introduction of unified national licences for traders and a single point levy of market fees are also steps in the right direction.

    Consider the question “The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was passed with a view to address the challenges faced by the farmers in selling their produce. However, there are concerns with the provision of the Act and its efficacy to addresss these challenges. What are the issues with the Act? Suggest the measures to address these issues.” 

    Conclusion

    The government’s must try to allay the fears of farmers over the Farm Bills and it is never too late to rethink. Unconditional talks with farmers would be an appropriate starting point.

  • Give reforms a chance

    Agri-bill passed by the Parliament resulted in the protest from farmers from several states. The bills have also been challenged on the legal footing as well. This article explains how the bills will benefit the farmers and also examines the legal basis used for their passage.

    States trying to nullify the agri bills passed by Parliament

    • Parliament has passed three bills on agriculture reform. This has evoked protests, largely in Punjab and Haryana.
    • Taking recourse to Article 254 of the Constitution, the Punjab government has passed its own bills to nullify some provisions of the central acts.
    • Similar action by the Chhattisgarh and Rajasthan governments seems to be on the anvil.

    Legal justification for Parliament passing the laws related to agriculture

    • The Constitution has placed agriculture on the state list.
    • Various petitions have also been filed in the Supreme Court claiming that the central laws infringe upon the jurisdiction of state governments.
    • However, it is the Centre which decides and announces support prices for major crops for the entire country.
    • It also decides issues such as bank loan waivers.
    • International agreements and multilateral trade in agricultural products also fall in the Union government’s domain.
    • Agricultural and dairy products, in fact, had a prominent role in India not joining the Regional Comprehensive Economic Partnership (RCEP).
    • Entry 33 in the concurrent list limits the power of states in agriculture, by empowering both governments to legislate on production, trade and supply of a range of agricultural foodstuffs and raw material.

    Use of Article 254 to bypass Central law

    • The Punjab bill has set in motion the process of states taking refuge under Article 254 to pass their own pieces of legislation.
    • All state bills that seek to nullify central acts have to be approved by the President after they have received the consent of the governor of the state.

    Way forward

    • Reformist chief ministers and astute policy planners should grab this opportunity and encourage investment in private infrastructure to create supply chains and give the farmer the benefit of demand-led prices.
    • They should also take appropriate action to create institutional mechanisms, such as farmer producer organisations or aggregators, to ensure greater farmer participation.

    Conclusion

    It would be in the interests of the farming community and state governments to give the much-delayed reform measures a fair chance by giving them access to competitive purchases, affording better prices.

  • Politics and economics of farm bills

    Reforms in agriculture have been overdue. But the passage of farm bills by the Parliament has evoked opposition from several stakeholders. However, the passage of bills by the Punjab Assembly is the first from any State Assembly. The article explains how politics dominates agriculture reforms and its implications for economic growth.

    States trying the negate the farm bill passed by Parliament

    • By passing its farm bills, Punjab has become the first state to legislate to negate impact of legislation enacted by Parliament last month.
    • Other states like Rajasthan and Chhattisgarh, could follow suit soon.
    • Notwithstanding whether President Ram Nath Kovind gives his assent to the state bills that undermine the central ones, the important issue is to determine how much of this conflict is about economics aimed at helping farmers and how much sheer politics.

    Issues with Punjab’s farm bills

    • Punjab’s farm bills prohibit private players from buying wheat and paddy below the MSP even outside the APMC markets.
    • It doesn’t apply to other crops, say maize, cotton, pulses and oilseeds that are under the ambit of the central MSP system.
    • The point is that this pertains only to wheat and paddy.
    • The bill could even have been extended to milk and vegetables by declaring local MSPs for them, but it didn’t do that.
    • Because the state government knows full well that it will create a fiasco in agri-markets, which might boomerang on it politically.
    • Law for wheat and paddy will not help farmers as the Centre already buys more than 95 per cent of Punjab’s wheat and paddy at MSP through the Food Corporation of India (FCI) and state procurement agencies.

    Economic roots of politics over MSP: Lessons from the past

    • Demand that MSP be made a legal instrument (rather than indicative) actually exhibit deep distrust of the private sector and markets.
    • In1972 government announced that the wholesale trade in wheat and rice (paddy) will be taken over by the government as traders were being unscrupulous in not giving farmers their due MSP and manipulating prices.
    • The first marketing season of the government takeover of wholesale wheat trade, in 1973-74, saw a major fiasco.
    • Market arrivals dropped, and wheat prices shot up by more than 50 per cent. It was a bitter lesson.

    Long overdue reforms in agriculture

    • Economic reforms in 1991 took some time to yield results, but, by the 2000s, India was taking 7 per cent.
    • But even the 1991 economic reforms bypassed agriculture marketing reforms.
    • It was only in 2003, a model act on agri-marketing was circulated to the states.
    • But that model act did not go far enough.
    • From 2004 to 2014 government did not pursue any major agri-marketing reforms.
    • In food government enacted the National Food Security Act in 2013, giving 5 kg wheat or rice to 67 per cent of the population at Rs 2/kg and Rs 3/kg.
    • A high-level committee (HLC) under Shanta Kumar was formed in 2014 to restructure the grain management system.
    • The committee suggested major changes, including cash transfers in the public distribution system, and overhauling the FCI’s operations and free markets to make the system more efficient.
    • But the government could not undertake bold reforms, except some marginal tinkering of labour rules in the FCI.

    Conclusion

    The COVID-19 crisis opened a window of opportunity to reform the agri-marketing system. The government grabbed it — this is somewhat akin to the crisis of 1991 leading to de-licensing of industry. Patience and professionalism will bring rich rewards in due course, not noisy politics.

  • [pib] Asafoetida (Heeng) cultivation in Himalayan Region

    Farmers of the remote Lahaul valley in Himachal Pradesh are taking up cultivation of asafoetida (Heeng) to utilize vast expanses of waste land in the cold desert conditions of the region.

    Try this PYQ:
    Q.Which one of the following reflects back more sunlight as compared to other three?
    (a) Sand desert
    (b) Paddy crop land
    (c) Land covered with fresh snow
    (d) Prairie land

    Asafoetida cultivation in India

    • Asafoetida is one of the top condiments and is a high-value spice crop in India.
    • Raw asafoetida is extracted from the fleshy roots of Ferula assafoetida as an oleo-gum resin.
    • Although, there are about 130 species of Ferula found in the world, but only Ferula asafoetidais the economically important species used for the production of asafoetida.

    Why cultivate it?

    • Heeng is not cultivated in India.
    • Government data states that India imports about 1,200 tonnes of raw heeng worth Rs 600 crore from Iran, Afghanistan and Uzbekistan.

    Regions for its cultivation

    • Asafoetida best grows in dry and cold conditions.
    • The plant can withstand a maximum temperature between 35 and 40 degree, whereas during winters, it can survive in temperatures up to minus 4 degree.
    • During extreme weather, the plant can get dormant.
    • Regions with sandy soil, very little moisture and annual rainfall of not more than 200mm are considered conducive for heeng cultivation in India.

  • Farm Bills latest step in sequential freeing up of farm sector

    The recently passed agri bills seek to expand the choices and opportunities available with the farmers and will help in increasing their income.

    Diversified product segment

    • The Minimum Support Price (MSP) evolved as a mechanism to guard farmers against supply and demand shocks in the cereals segment. 
    •  Now, however, farmers and agricultural producers have diversified their product segments, cereals no longer dominate production.
    • In the last decade itself, India has witnessed tremendous change in the GVA composition of the agri-sector.
    • The share of crops has decreased from 65.4% in 2011-12 to 55.3% in 2018-19, projected to further fall to 45.6% in 2024-25.
    •  In the same period, value add of livestock and fishing & aquaculture is steadily increasing, as are the total value outputs of sub-segments like horticulture, milk and meat.
    • With differentiated production strategies that are less reliant on cereals and more on other segments, farmers are accruing better incomes.
    • By diversifying their produce, they are moving away from one-crop risks.

    Government schemes and policies

    • Keeping farmers dependent on subsidies and restricted by APMCs, and acts like the Essential Commodities Act wasn’t in the nation’s long-term interests.
    • Recognising this, the government has been making sequential changes in the system.
    • It started with the introduction of the National Agriculture Market (e-NAM) to facilitate online trading of agri-produce.
    • Then PM-KISAN was introduced to provide minimum income support to nine crore marginal farmers, at Rs 6,000 annually.
    • The KISAN credit card with an allotment of a total of Rs 2 lakh crore credit to maintain larger workforces and implements during harvest season is helping farmers plan and organise their harvests better.
    • The Rs 1 lakh crore Agri Infrastructure Fund as part of Atmanirbhar Bharat Abhiyan will help by the creation of agri-infrastructure.

    Need for structural changes

    • The government recently passed three agri-bills, these are:-
    • 1) The Farmers’ Produce Trade and Commerce Bill.
    • 2) Farmers Agreement on Price Assurance and Farm Services Bill.
    • 3) Essential Commodities (Amendment) Bill.
    • They enable farmers the freedom to diversify their crops and produce, which reduces mono-crop dependence and increases income avenues.
    • They can also now sell their produce anywhere, to the highest bidder across the country.
    • The farmers are no longer are they required to go to the mandis where they are subject to middlemen and layers of bureaucracy.
    • Contract farming enable farmers them to boost the value-add of their products via contracts and assured procurement by the food processing industries.
    • Retaining the MSP system means the government is underwriting the whole network for certain crops to ensure farmers receive assured income for those crops.

    Focusing on the export market

    • The passage of agri bills gives India the long-awaited opportunity to orient its agriculture sector towards export markets.
    • By catering to just the Indian economy, the exposure is hardly $3 trillion ; instead, export-orientation caters to an $82 trillion global economy —a 27x expansion.
    • India’s agri exports in 2018 were at $38.5 billion.
    • India can comfortably triple this by providing infrastructure for grading, sorting, and supply chain distribution.

    Conclusion

    The farm Bills are liberating farmers at a pivotal juncture, the nation and farmers have a generational opportunity here to break out of a 70-year sectoral stagnation and aim bigger.

    Source:-

    https://www.financialexpress.com/opinion/agri-reforms-farm-bills-latest-step-in-sequential-freeing-up-of-farm-sector/2107611/

  • Lessons from Bihar’s abolition of its APMC system for farmers

    The article analyses the results of complete abolition of APMC in Bihar in the context of current protest against the agri bills.

    Context

    • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 has been a source of anger among farmers.
    • By allowing unregulated trading areas beyond APMC mandis, the law seeks to remove intermediaries from agricultural trade and raise price realization for farmers.

    Excessive politicization of APMCs

    • APMC’s excessive politicization has resulted in cartelization and price-fixing.
    • For this reason, there have been several attempts at reforming their functioning.
    • Easier licensing norms, the removal of entry and exit barriers and computerization and transparency have been introduced in most APMC markets.
    • However, the Bihar government decided to abolish the APMC system altogether in 2006.

    Analysing the impact of abolition of APMC in Bihar

    • It was hoped that abolition would ensure better prices for farmers of the state and attract large sums of private investment.
    • Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns and administrative buildings, weighbridges, and processing as well as grading units.
    •  With no revenue to maintain it, that infrastructure is now in a dilapidated condition.
    •  A study by the National Council for Applied Economic Research reported increased volatility in grain prices after 2006.
    • Most of the farmers surveyed reported high storage costs at private warehouses.
    • Farmers this year in Bihar received lower price for maize compared to the farmers in states with APMC.

    Lessons from Bihar

    • The Bihar experiment has important lessons for future marketing reforms in agriculture.
    • The benefits of these reforms will only accrue to farmers if they are accompanied by private investment in creating the physical infrastructure and institutional mechanisms needed to allow for greater participation of farmers.
    • The record of states on attracting private investment isn’t much better.

    Conclusion

    By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.

  • Putting farmers first

    The faremers have been protesting against the agri bill. This article explains the rationale behind the bill and how it could help the farmers.

    Challenges Indian agriculture face

    • Indian agriculture has been characterised by fragmentation due to small holding sizes, weather dependence, production uncertainties, huge wastage and market unpredictability.
    • This makes agriculture risky and inefficient with respect to both input and output management.

    Recent steps to help farmers

    • The  government has taken various steps in this direction, for example-
    • The implementation of the Swaminathan committee’s recommendation regarding fixing MSP at least 50 per cent profits on the cost of production.
    • Increasing the agri budget by more than 11 times in the past 10 years.
    • Establishing e-NAM mandis.
    • An Agriculture Infrastructure Fund of Rs 1 lakh crore under the Atmanirbhar Bharat Package, the scheme for the formation of 10,000 FPOs, etc.

    What the agri bills seek to achieve

    • The bills will create an ecosystem where farmers and traders enjoy the freedom of choice of sale and purchase of farming produce.
    • This freedom of choice will help to facilitate remunerative prices to farmers through competitive alternative trading channels.
    • This will promote barrier-free inter-state and intra-state trade and commerce of farming produce outside the physical premises of markets notified under state agricultural produce marketing legislation.
    • The farm bills also lay the ground of a legal framework for fair and transparent farming agreements between farmers and sponsors.
    • This framework will facilitate greater certainty in quality and price, adoption of quality and grading standards, linkage of farming agreements with insurance and credit instruments and also enable the farmer to access modern technology and better inputs.
    • These recommendations have been made by the Swaminathan Committee, which suggested the removal of the mandi tax, creation of a single market and facilitating contract farming.

    Safeguard in the bill

    • The bill have several safeguards such as the prohibition of sale, lease or mortgage of farmers’ land and farmers’ land is also protected against any recovery.
    • Farming agreements cannot be entered into, if they are in derogation of the rights of a sharecropper.
    • Farmers will have access to flexible prices subject to a guaranteed price in agreements.
    • The sponsor has to ensure the timely acceptance of delivery and payment of produce to farmers and farmers’ liability is limited to only the advance received and cost of inputs provided by the sponsor.
    • Disputes will be resolved through a Conciliation Board, to be constituted by the sub-divisional magistrate (SDM), failing which an aggrieved party may approach the concerned SDM for the settlement of the dispute.

    Consider the question “What are the changes introduced by the two recent bills passed by the government related to agri markets and contract farming how will these changes be helpful to the farmers?”

    Conclusion

    These farm bills will bring transformative changes in our agricultural sector and reduce wastage, increase efficiency, unlock value for our farmers and increase farmers’ incomes.

  • Understanding the opposition of farmers to agriculture Bills

    The article analyses the issue of farmers opposition to the three agricultural bills.

    Context

    • Farmers have been protesting against the three bills related to agriculture.
    • These three Bills are-
    • 1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
    • 2) The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020.
    • 3) The Essential Commodities (Amendment) Bill, 2020.

    What are the aims of the bills?

    • The Bills aim to do away with government interference in agricultural trade by creating trading areas outside the structure of Agricultural Produce Market Committees (APMCs).
    • One of the bills aims at removing restrictions of private stockholding (under Essential Commodities Act 1955) of agricultural produce.
    • One of the bills deals with the regulation of contract farming.

    Issues with the Bills

    • The government has failed to hold any discussion with the various stakeholders including farmers and middlemen.
    • The attempt to pass the Bills without proper consultation adds to the mistrust among various stakeholders including State governments.
    • Farmer organisations see these Bills as an attempt to weaken the APMCs and eventual withdrawal of the Minimum Support Prices (MSP).
    • Farmers in Punjab and Haryana have genuine concern about the continuance of the MSP-based public procurement given the large-scale procurement operations in these States.

    Understanding the role of APMC

    • APMCs do play an important role of price discovery essential for agricultural trade and production choices.
    • The middlemen are a part of the larger ecosystem of agricultural trade, with deep links between farmers and traders.
    • 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.
    • To understand the role of APMC, consider the example of Bihar.
    • After Bihar abolished APMCs in 2006, farmers in Bihar on average received lower prices compared to the MSP for most crops.
    • Despite the shortcomings and regional variations, farmers still see the APMC mandis as essential to ensuring the survival of MSP regime.

    Conclusion

    The protests by farmers are essentially a reflection of the mistrust between farmers and the stated objective of these reforms.

  • Agricultural reform bills introduced in Parliament

    Farmers in Punjab and Haryana have been protesting against three ordinances promulgated by the Centre back in June this year.  After the Monsoon Session of Parliament began this week, the government has introduced three Bills to replace these ordinances.

    Try this PYQ:

    The economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus:

    (a) Transportation cost only

    (b) Interest cost only

    (c) Procurement incidentals and distribution cost

    (d) Procurement incidentals and charges for godowns

    What are these ordinances?

    The ordinances included:

    • The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020;
    • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020; and
    • The Essential Commodities (Amendment) Ordinance, 2020 (It is the Bill replacing the third that has been passed in Lok Sabha)

    The cause of discontent

    • While farmers are protesting against all three ordinances, their objections are mostly against the provisions of the first.
    • Their concerns are mainly about sections relating to “trade area”, “trader”, “dispute resolution” and “market fee” in the first ordinance.

    What is a ‘trade area’, as mentioned in the Bill?

    • Section 2(m) of The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 defines “trade area” as any area or location, place of production, collection and aggregation.
    • It includes (a) farm gates; (b) factory premises; (c) warehouses; (d) silos; (e) cold storages; or (f) any other structures or places, from where the trade of farmers’ produce may be undertaken in the territory of India.
    • In effect, existing mandis established under APMC Acts have been excluded from the definition of trade area under the new legislation.
    • The government says the creation of an additional trade area outside of mandis will provide farmers with the freedom of choice to conduct trade in their produce.

    Why are farmers protesting?

    • The protesters say this provision will confine APMC mandis to their physical boundaries and give a free hand to big corporate buyers.
    • The APMC mandi system has developed very well as every mandi caters to 200-300 villages.
    • But the new ordinance has confined the mandis to their physical boundaries.

    What is ‘trader’ and how is it linked to the protests?

    • Section 2(n) of the first ordinance defines a “trader” as “a person who buys farmers’ produce by way of inter-State trade or intra-State trade or a combination thereof.
    • Thus, it includes processor, exporter, wholesaler, miller, and retailer.
    • According to the Ministry of the Agriculture and Farmers’ Welfare, “Any trader with a PAN card can buy the farmers’ produce in the trade area.”
    • In the present mandi system, arhatiyas (commission agents) have to get a licence to trade in a mandi.
    • The protesters say arhatiyas have credibility as their financial status is verified during the licence approval process.

    Why does the provision on ‘market fee’ worry protesters?

    • Section 6 states that no market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied in a trade area.
    • Government officials say this provision will reduce the cost of the transaction and will benefit both the farmers and the traders.
    • Under the existing system, such charges in states like Punjab come to around 8.5% — a market fee of 3%, a rural development charge of 3% and the arhatiya’s commission of about 2.5%.
    • By removing the fee on trade, the government is indirectly incentivizing big corporates.