Complete Farm Bill 2020 explanation in a very easy way.
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What Are The Three Bills?
- The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020, seeks to give freedom to farmers to sell their produce outside the notified APMC market yards (mandis). The government says this is aimed at facilitating remunerative prices through competitive alternative trading channels.
- The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Act, 2020, seeks to give farmers the right to enter into a contract with agribusiness firms, processors, wholesalers, exporters, or large retailers for the sale of future farming produce at a pre-agreed price.
- The Essential Commodities (Amendment) Act, 2020, seeks to remove commodities like cereals, pulses, oilseeds, onion, and potato from the list of essential commodities and will do away with the imposition of stock holding limits.
Bill on Agri market
The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020,
- To create an ecosystem where farmers and traders enjoy the freedom to sell and purchase farm produce outside registered ‘mandis’ under states’ APMCs.
- To promote barrier-free inter-state and intra-state trade of farmers’ produce.
- To reduce marketing/transportation costs and help farmers in getting better prices.
- To provide a facilitative framework for electronic trading.
- States will lose revenue as they won’t be able to collect ‘mandi fees’ if farmers sell their produce outside registered APMC markets.
- What happens to ‘commission agents’ in states if entire farm trade moves out of mandis?
- It may eventually end the MSP-based procurement system.
- Electronic trading like in e-NAM uses physical ‘mandi’ structure. What will happen to e-NAM if ‘mandis’ are destroyed in absence of trading?
2. Bill on contract farming
The Farmer (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
- Farmers can enter into a contract with agribusiness firms, processors, wholesalers, exporters or large retailers for sale of future farming produce at a pre-agreed price.
- Marginal and small farmers, with land less than five hectare to gain via aggregation and contract (Marginal and small farmers account for 86% of total farmers in India).
- To transfer the risk of market unpredictability from farmers to sponsors.
- To enable farmers to access modern tech and get better inputs.
- To reduce cost of marketing and boost farmer’s income.
- Farmers can engage in direct marketing by eliminating intermediaries for full price realisation.
- Effective dispute resolution mechanism with redressal timelines.
- Farmers in contract farming arrangements will be the weaker players in terms of their ability to negotiate what they need.
- The sponsors may not like to deal with a multitude of small and marginal farmers.
- Being big private companies, exporters, wholesalers and processors, the sponsors will have an edge in disputes.
3. Bill relating to commodities
The Essential Commodities (Amendment) Bill, 2020
- To remove commodities like cereals, pulses, oilseeds, onion and potatoes from the list of essential commodities. It will do away with the imposition of stockholding limits on such items except under “extraordinary circumstances” like war.
- This provision will attract private sector/FDI into farm sector as it will remove fears of private investors of excessive regulatory interference in business operations.
- To bring investment for farm infrastructure like cold storages, and modernising food supply chain.
- To help both farmers and consumers by bringing in price stability.
- To create competitive market environment and cut wastage of farm produce.
- Price limits for “extraordinary circumstances” are so high that they are likely to be never triggered.
- Big companies will have the freedom to stock commodities- it means they will dictate terms to farmers which may lead to less prices for the cultivators.
- Recent decision on export ban on onion creates doubt on its implementation.
Here is what we must know about the Farm Bill 2020 passed in the Upper and Lower House of Parliament.
- The Farm Bill envisages providing farmers an alternative platform to sell. Since it will be outside the APMC Mandi, the transactions in such “trade areas” will not be charged APMC market fee or cess.
- The APMCs will not stop functioning but will now have to compete with these alternate platforms since farmers will have a choice. It is like allowing private competition in banking, insurance or telecom.
- The Farm Bill does not envisage discontinuation of the current MSP-based procurement of food grains. The modalities of how the mandi purchase will co-exist with alternate platforms remains to be seen.
- This bill gives the farmer the power to sell directly to the corporate or exporter buying in bulk from the farm gate and can enter into forward contracts too. Even the barriers on inter-state sale are removed.
- In 2019-20, government agencies procured 201 lakh tons of wheat and 227 lakh tons of paddy at MSP from Punjab and Haryana worth Rs80,300cr through commission agents (Arhatiyas). These Arhatiyas will lose their 2.5% commission and interest on loans.