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Subject: Agriculture

  • [pib] Rashtriya Kamdhenu Aayog

    Rashtriya Kamdhenu Aayog (RKA) has started a nationwide campaign to celebrate “Kamdhenu Deepawali Abhiyan” this year on the occasion of Deepawali festival.

    Try this PYQ:

    Q.Consider the following statements:

    1. Agricultural soils release nitrogen oxides into the environment.
    2. Cattle release ammonia into the environment.
    3. Poultry industry releases reactive nitrogen compounds into the environment.

    Which of the statements given above is/are correct?

    (a) 1 and 3 only

    (b) 2 and 3 only

    (c) 2 only

    (d) 1, 2 and 3

    Rashtriya Kamdhenu Aayog (RKA)

    • RKA has been constituted by PM for the conservation, protection and development of cows and their progeny and for giving direction to the cattle development programmes.
    • It is a high powered permanent body to formulate policy and to provide direction to the implementation of schemes related to cattle so as to give more emphasis on livelihood generation.

    Why need RKA?

    • Livestock economy sustains nearly 73 million households in rural areas.
    • Even though, the country is the largest producer of milk, the average milk yield in India is only 50% of the world average.
    • The low productivity is largely due to deterioration in genetic stock, poor nutrition and unscientific management.

  • Issues with the MSP in the age of surplus production

    The author analyses the inefficiencies in the MSP regime while comparing it with the sugar sector and the milk sector. The recent agri-reform in the opinion of the author could help to make the Indian agriculture more efficient.

    MSP system Vs. Market-driven system

    • MSP regime was the creation of the era of scarcity in the mid-1960s.
    • Indian agriculture has, since then, turned the corner from scarcity to surplus.
    • In a surplus economy, unless we make agriculture demand-driven, the MSP route can spell financial disaster.
    • This transition is about changing the pricing mix — how much of it should be state-supported and how much market-driven.
    • The new laws are trying to increase the relative role of markets without dismantling the MSP system.
    • Currently, no system is perfect, be it the one based on MSP or that led by the markets, but the MSP system is much more costly and inefficient.
    • The market-led system will be more sustainable provided we can “get the markets right”.

    Issues with the MSP

    • A perusal of the MSP dominated system of rice and wheat shows that the stocks with the government are way above the buffer stock norms.
    • The economic cost (to FCI) of procured rice comes to about Rs 37/kg and that of wheat is around Rs 27/kg.
    • No wonder, market prices of rice and wheat are much lower than the economic cost incurred by the FCI.
    • So, grain stocks with the FCI cannot be exported without a subsidy[i.e. export below the cost], which invites WTO’s objections.
    • The FCI’s burden is touching Rs 3 lakh crore which is not reflected in the Central budget as the FCI is asked to borrow more and more.
    • The FCI can reduce costs if it uses policy instruments like “put options”.

    2 Lessons: from sugarcane and milk pricing

    1) Populism resulted in making sugar industry globally non-competitive

    • In the case of sugarcane, the government announces a “fair and remunerative price” (FRP) [not MSP]to be paid by sugar factories [not paid by the Government].
    • While some states like Uttar Pradesh announces its own “state advised price” (SAP).
    • The sheer populism of SAP has resulted in cane arrears amounting to more than Rs 8,000 crore, with large surpluses of sugar that can’t be exported.
    • This sector has, consequently, become globally non-competitive.
    • Unless sugarcane pricing follows the C Rangarajan Committee’s recommendations the problems of the sugar sector will not go away.

    2) Success story of milk sector

    • In the case of milk co-operatives, pricing is done by the company in consultation with milk federations.
    • It is more in the nature of a contract price.
    • It competes with private companies, be it Nestle, Hatsun or Schreiber Dynamix dairies.
    • The milk sector has been growing at a rate two to three times higher than rice, wheat and sugarcane.
    • Today, India is the largest producer of milk — 187 million tonnes annually.

    So, how the recent reforms will help the farmers

    •  As a result of changes in farm laws in the next three to five years companies will be encouraged to build efficient supply lines somewhat on the lines of milk.
    • These supply lines — be it with farmers producer organisations (FPOs) or through aggregators — will, of course, be created in states where these companies find the right investment climate.
    • These companies will help raise productivity, similar to what has happened in the poultry sector.
    • Milk and poultry don’t have MSP and farmers do not have to go through the mandi system paying high commissions, market fees and cess.

    Conclusion

    The pricing system has its limits in raising farmers’ incomes. More sustainable solutions lie in augmenting productivity, diversifying to high-value crops, and shifting people out of agriculture to high productivity jobs elsewhere, the recent reforms are the steps in this direction.

    Back2Basic: What is MSP

    • 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.
    • The minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations of the Commission for Agricultural Costs and Prices (CACP).
    • The minimum support prices are a guarantee price for their produce from the Government.
    • The major objectives are to support the farmers from distress sales and to procure food grains for public distribution.
    • In case the market price for the commodity falls below the announced minimum price due to bumper production and glut in the market, government agencies purchase the entire quantity offered by the farmers at the announced minimum price.

    What are ‘put options’

    • Put options give holders of the option the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time frame.
    • Put options are available on a wide range of assets, including stocks, indexes, commodities, and currencies.
    • Put option prices are impacted by changes in the price of the underlying asset, the option strike price, time decay, interest rates, and volatility.
    • Put options increase in value as the underlying asset falls in price, as volatility of the underlying asset price increases, and as interest rates decline.
    • They lose value as the underlying asset increases in price, as volatility of the underlying asset price decreases, as interest rates rise, and as the time to expiration nears.

     

  • [pib] Kasturi Cotton

    Now India’s premium Cotton would be known as ‘Kasturi Cotton’ in the world cotton trade.

    Kasturi Cotton

    • It is the first-ever Brand and Logo for Indian Cotton on Second World Cotton Day.
    • The Kasturi Cotton brand will represent Whiteness, Brightness, Softness, Purity, Luster, Uniqueness and Indianness.

    Do you know?

    1. Cotton is one of the principal commercial crops of India and it provides livelihood to about 6.00 million cotton farmers.
    2. India is the 2nd largest cotton producer and the largest consumer of cotton in the world.
    3. India produces about 6.00 Million tons of cotton every year which is about 23% of the world cotton.
    4. India produces about 51% of the total organic cotton production of the world, which demonstrates India’s effort towards sustainability.

  • 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.

  • Explained: How is MSP fixed?

    The recently enacted Farmers bill seeks to dismantle the monopoly of APMC mandis, thereby allowing sale and purchase of crops outside these state government-regulated market yards. This has prompted many fears regarding the continuance of the existing minimum support price (MSP)-based procurement regime.

    Try this PYQ:

    Q.There is also a point of view that agriculture produce market committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine. (UPSC 2014)

    What does the law say about MSP?

    • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill does not give any statutory backing to MSP.
    • There is not even a single mention of either “MSP” or “procurement” in the Bill passed by both Houses of Parliament last week.

    Is there any legal backing for MSP?

    • MSP, by contrast, is devoid of any legal backing. Access to it, unlike subsidised grains through the PDS, isn’t an entitlement for farmers.
    • They cannot demand it as a matter of right.

    What is the basis of MSP then?

    • It is only a government policy that is part of administrative decision-making.
    • The government declares MSPs for crops, but there’s no law mandating their implementation.
    • The Centre currently fixes MSPs for 23 farm commodities based on the Commission for Agricultural Costs and Prices (CACP) recommendations:
    1. 7 cereals (paddy, wheat, maize, bajra, jowar, ragi and barley)
    2. 5 pulses (chana, arhar/tur, urad, moong and masur)
    3. 7 oilseeds (rapeseed-mustard, groundnut, soyabean, sunflower, sesamum, safflower and nigerseed) and
    4. 4 commercial crops (cotton, sugarcane, copra and raw jute) —

    What about CACP?

    • The CACP come to existence in 1965 and MSPs are being announced since the time of the Green Revolution, starting with wheat in 1966-67.
    • The CACP is simply an attached office of the Ministry of Agriculture and Farmers Welfare.
    • It can recommend MSPs, but the decision on fixing (or even not fixing) and enforcement rest finally with the government.
    • The government can procure at the MSPs if it wants to. There is no legal compulsion. Nor can it force others (private traders, organised retailers, processors or exporters) to pay.

    Exceptions to MSP: Fair and remunerative price (FRP)

    • The only crop where MSP payment has some statutory element is sugarcane.
    • This is due to its pricing being governed by the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act.
    • That order, in turn, provides for the fixation of an FRP for cane during every sugar year (October-September).
    • But even the FRP — which, incidentally, was until 2008-09 called the ‘statutory minimum price’ or SMP — is payable not by the government.
    • The responsibility to make FRP payment to farmers within 14 days of cane purchase lies solely with the sugar mills.

    Has there been any move to give MSP legislative backing?

    • The CACP, in its price policy report for the 2018-19 Kharif marketing season, had suggested enactment of legislation conferring on farmers ‘The Right to Sell at MSP’.
    • This, it felt, was necessary “to instil confidence among farmers for procurement of their produce”. That advice, predictably, wasn’t accepted.

    A cause for farmers fury

    • The ongoing farmer protests essentially reflect a loss of that very confidence.
    • Is the dismantling of the monopoly of APMC mandis in wholesale trading of farm produce the first step at ending even the present MSP-based procurement programme, largely limited to wheat and paddy?
    • If APMCs were to turn unviable due to the trades moving outside, how will government agencies undertake procurement that now takes place in mandis?
    • These questions are playing in the minds of farmers, particularly in states such as Punjab, Haryana and MP that have well-established systems of governmental MSP purchases.
    • For them, freedom to sell to anyone, anywhere and anytime has little value compared to the comfort of assured procurement at MSP.

    Govt’s response

    • PM has tweeted that the “system of MSP will remain” and “government procurement will continue”.
    • The Agriculture Minister, too, has pointed out that past governments never thought it necessary to introduce a law for MSP.

  • Explained: How remunerative is farming in India?

    The government’s push to reform India’s agriculture sector has divided opinions and triggered a debate about the state of Indian agriculture.

    Try this PYQ:

    Q.In view of the declining average size of land holdings in India which has made agriculture nonviable for a majority of farmers, should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. (UPSC 2015)

    Features of Indian Agriculture

    In the context of this debate, two long-standing characteristics of Indian agriculture are noteworthy:

    1. Indian agriculture is highly unremunerative
    2. It has been heavily regulated by the government and protected from the free play of market forces

    Why are the new legislation introduced?

    • According to the government, the new Bills passed by Parliament attempt to make it easier for farmers to sell to and produce for the private sector.
    • The hope is that liberalizing the sector and allowing greater play for market forces will make Indian agriculture more efficient and more remunerative for the farmers.
    • In this context, it is important to understand some of the basics of Indian agriculture.

    Basics of Indian agriculture

    (1) Workforce engaged

    • At the time of Independence, about 70% of India’s workforce (a little less than 100 million) was employed in the agriculture sector.
    • Even at that time, agriculture and allied activities accounted for around 54% of India’s national income.
    • Over the years, agriculture’s contribution to national output declined sharply. As of 2019-20, it was less than 17% (in gross value added terms).
    • And yet, the proportion of Indians engaged in agriculture has fallen from 70% to just 55% (Chart 1).
    • As the Committee on Doubling Farmers’ Income (2017) observes, “the dependence of the rural workforce on agriculture for employment has not declined in proportion to the falling contribution of agriculture to GDP”.

    (2) Land holdings

    • While the number of people dependent on agriculture has been burgeoning over the years, the average size of landholdings has become reduced sharply — even to the extent of being unviable for efficient production.
    • Data shows that 86% of all landholdings in India are small (between 1 and 2 hectares) and marginal (less than 1 hectare — roughly half a football field).
    • The average size among marginal holdings is just 0.37 ha which hardly provides enough income to stay above the poverty line.

    (3) Debts

    • The combined result of several such inefficiencies is that most Indian farmers are heavily indebted (Chart 2).
    • The data shows that 40% of the 24 lakh households that operate on landholdings smaller than 0.01 ha are indebted. The average amount is Rs 31,000.
    • A good reason why such a high proportion of farmers is so indebted is that Indian agriculture — for the most part — is unremunerative.
    • Chart 3 provides the monthly income estimates for an agriculture household in four very different states as well as the all-India number.
    • Some of the most populous states like Bihar, West Bengal and Uttar Pradesh have very low levels of income and very high proportions of indebtedness.

    (4) Buying & selling

    • Another way of understanding the plight of the farmers relative to the rest of the economy is to look at the Terms of Trade between farmers and non-farmers.
    • Terms of Trade is the ratio between the prices paid by the farmers for their inputs and the prices received by the farmers for their output.
    • As such, 100 is the benchmark. If the ToT is less than 100, it means farmers are worse off.
    • As Chart 4 shows, ToT rapidly improved between 2004-05 and 2010-11 to breach the 100-mark but since then it has worsened for farmers.

    (5) MSP

    • A key variable in the debate is the role of minimum support prices. Many protesters fear governments will roll back the system of MSPs.
    • MSPs provide “guaranteed prices” and an “assured market” to farmers, and save them from price fluctuations. This is crucial because most farmers are not adequately informed.
    • But although MSPs are announced for around 23 crops, actual procurement happens for very few crops such as wheat and rice.
    • Moreover, the percentage of procurement varies sharply across states (Chart 5). As a result, actual market prices — what the farmers get — are often below MSPs.

  • Redefining essential items: why it was needed, and who it will impact

    Recently, the Rajya Sabha passed the Essential Commodities (Amendment) Bill, 2020 which is aimed at deregulating commodities such as cereals, pulses, oilseeds, edible oils, onion and potatoes.

    Try this question:

    What are the salient features of Essential Commodities (Amendment) Bill, 2020?

    Essential Commodities (Amendment) Bill, 2020

    • It amends the Essential Commodities Act, 1955, by introducing a new Subsection 1(A) in Section 3.
    • After the amendment, the supply of certain foodstuffs — including cereals, pulses, oilseeds, edible oils, potato — can be regulated only under extraordinary circumstances, which include an extraordinary price rise, war, famine, and natural calamity of a severe nature.
    • In effect, the amendment takes these items out from the purview of Section 3(1), which gives powers to the central government to “control production, supply, distribution, etc, of essential commodities”.
    • Earlier, these commodities were not mentioned under Section 3(1) and reasons for invoking the section were not specified.

    How is an ‘essential commodity’ defined?

    • There is no specific definition of essential commodities in the Essential Commodities Act, 1955. Section 2(A) states that an “essential commodity” means a commodity specified in the Schedule of the Act.
    • The Act gives powers to the central government to add or remove a commodity in the Schedule.
    • The Centre, if it is satisfied that it is necessary to do so in the public interest, can notify an item as essential, in consultation with state governments.

    Which are those commodities?

    • According to the Ministry of Consumer Affairs, Food and Public Distribution, which implements the Act, the Schedule at present contain seven commodities.
    • They are drugs; fertilizers, whether inorganic, organic or mixed; foodstuffs including edible oils; hank yarn made wholly from cotton; petroleum and petroleum products; raw jute and jute textiles; seeds of food-crops and seeds of fruits and vegetables, seeds of cattle fodder, jute seed, cottonseed.
    • By declaring a commodity as essential, the government can control the production, supply, and distribution of that commodity, and impose a stock limit.

    Under what circumstances can the government impose stock limits?

    • While the 1955 Act did not provide a clear framework to impose stock limits, the amended Act provides for a price trigger.
    • It says that agricultural foodstuffs can only be regulated under extraordinary circumstances such as war, famine, extraordinary price rise, and natural calamity.
    • However, any action on imposing stock limits will be based on the price trigger.
    • Thus, in case of horticultural produce, a 100% increase in the retail price of a commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower, will be the trigger for invoking the stock limit.
    • For non-perishable agricultural foodstuffs, the price trigger will be a 50% increase in the retail price of the commodity over the immediately preceding 12 months or over the average retail price of the last five years, whichever is lower.

    Why was the need for this felt?

    • The 1955 Act was legislated at a time when the country was facing a scarcity of foodstuffs due to persistently low levels of foodgrains production.
    • The country was dependent on imports and assistance (such as wheat import from the US under PL-480) to feed the population.
    • To prevent hoarding and black marketing of foodstuffs, the Essential Commodities Act was enacted in 1955. But now the situation has changed.
    • The production of wheat has increased 10 times while the production of rice has increased more than four times since five decades.
    • The production of pulses has increased 2.5 times, from 10 million tonnes to 25 million tonnes. In fact, India has now become an exporter of several agricultural products.

    What will be the impact of the amendments?

    • The key changes seek to free agricultural markets from the limitations imposed by permits and mandis that were originally designed for an era of scarcity.
    • The move is expected to attract private investment in the value chain of commodities removed from the list of essentials, such as cereals, pulses, oilseeds, edible oils, onions and potatoes.
    • While the purpose of the Act was originally to check illegal trade practices such as hoarding, it has now become a hurdle for investment in the agriculture sector in general, and in post-harvesting activities in particular.
    • The private sector had so far hesitated about investing in cold chains and storage facilities for perishable items as most of these commodities were under the ambit of the EC Act.
    • The amendment seeks to address such concerns.

    Why is it being opposed?

    • This was one of the three ordinances/Bills that have seen protests from farmers in parts of the country.
    • The Opposition says the amendment will hurt farmers and consumers, and will only benefit hoarders.
    • They say the price triggers envisioned in the Bill are unrealistic — so high that they will hardly ever be invoked.

  • 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.