Centre's recent reforms on agri-trading give farmers more leeway to choose buyers, cut travel costs

Some reforms brought into effect by the ordinances as a part of the ‘Aatmanirbhar Bharat Package’ can ensure that the benefits of the market reach farmers

Tarkesh Jha July 30, 2020 17:55:55 IST
Centre's recent reforms on agri-trading give farmers more leeway to choose buyers, cut travel costs

Although some people claim that the country has broken free from the shackles of license raj, people engaged in agriculture, unfortunately, continue to face unfair restrictions. However, some reforms brought into effect by the ordinances as a part of the ‘Aatmanirbhar Bharat Package’ can potentially start a fresh era for farmers in India.

Firstly, the Union government has allowed direct business between farmers and private players in the market. Electronic trading platforms and setting up of private physical ‘mandis’ can help create a competitive environment for cultivators. This also attempts to undo the monopolistic approach of the Agricultural Produce Market Committee (APMC) and its state government-approved agents.

Until now, farmers were compelled to sell their produce through commission agents referred to as ‘arathiyas’ in mandis. The motive behind the creation of this system was to prevent retailers from exploiting farmers. The middlemen were supposed to be working for the benefit of the sellers.

However, the agents perhaps succumbed to political clout, which gave rise to an order through which the farmers earned very less despite paying the 0.5 percent-6 percent tax to the agent. Contrarily, the consumer paid high prices to avail the product, largely due to the commissions that were obtained by the broker.

Maharashtra earns Rs 50,000 crore annually via the taxes levied by its 305 APMC ‘mandis’. On the other hand, the Punjab government reportedly earns Rs 3,500 crore through the same practice. The states refused to comply with the Centre's exhortations to amend their respective APMC Acts and integrate the ‘mandis’ into the electronic National Agricultural Market (e-NAM).

Yet, a difficulty for the farmers in opting for eNAM is the uncertainty, as compared to the instant payments that the commission agents guarantee. Most crop producers travel a long way to reach the ‘mandis’ early in the morning and require cash for the journey back home. This prevents them from trading outside the purview of their respective APMC setups.

The new ordinance ensures that the private electronic or physical buyers have to pay the required amount to the seller on the same day or in three working days. Their refusal to do so will invite penalties ranging from Rs 25,000-Rs 5, 00,000 from the dispute resolution board.

A further reason for encouragement for farmers is that the conventional ‘mandi fee’ or tax will not be applicable if they sell their produce to these private ‘mandis’ or electronic trading platforms. Multiple such markets can emerge in areas which have only a single APMC hub. It can reduce the travelling costs borne by the growers, and offer them independence to choose the appropriate price for their products from numerous buyers.

The traders are permitted to engage in both inter-state and intra-state transactions with farmers, thus opening up wider avenues for both parties. The sole requirement for an individual or a company to set up a trading platform is the possession of a Permanent Account Number (PAN) card.

Another important development was an ordinance through which an amendment was made to the Essential Commodities Act, 1955. This Act enables the government to control production, supply and distribution of an ‘essential product’, whilst also maintaining a limit over the quantity of the item that can be stocked at one point in time.

The ECA was implemented in the decade after independence to prevent hoarding of critical commodities at a time when the country faced shortage in production. Through recent alterations, cereals, pulses, oilseeds, edible oils, potatoes and onions have been removed from the list of essential items. These commodities can now be regulated only under exceptional circumstances.

Right now, we face the issue of over-production of some of the items. Couple this with the poor storage facilities and infrastructure in rural areas and hence it potentially causes wastage of agricultural produce.

The amendment to the ECA will particularly interest private entities as they can now buy valuable items like onions, potatoes amongst others en masse, and utilize their arguably better storage amenities completely.

Furthermore, Rs 1 lakh crore, i.e. 5 percent of the government's package is devoted towards improving farm gate infrastructure, which includes better cold storage and post-harvest facilities. The ECA amendment allows the farmers to participate in both high and low inflation scenarios, thereby receiving their deserved remuneration according to the nature of the market.

Unlike the usual measures that are in the form of instant funds or loan reliefs, these measures can turn farmers into competitive businessmen.

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