Banking Finance 2020, Banking Finance December 2020

Farm amendment bill 2020 and its pros and cons.

There are three bills  which is passed by Government.

First one Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020. For better communication it is  the best to refer to this Bill as “the APMC Bypass Bill 2020” since that is the intent. The purpose of this bill is to create an ecosystem where   farmers and traders enjoy the freedom to sell and purchase farm produce outside registered ‘mandis’ under states’ APMCs.

More over this will promote barrier-free inter-state and intra-state trade of farmers’ produce. Along with that this bill will reduce marketing/transportation costs and help farmers in getting better prices.

In addition to this bill will  provide a facilitative framework for electronic trading.

Contrary to  these facilities State governments have the apprehensions to loose mandi fees as there is no compulsion for farmers to sell in mandi. Also they have anxiety about mandi agents who will loose their jobs. The apprehensions reached at the level of loosing MSP system. As  they consider that MSP is possible till APMC (MANDI) exist. In this way the fate of E-NAM is also their concern. Of course E-NAM requires physical mandi structure but it will not a particular one.

the Central government has decided to throw open the doors of national markets for farmers, allowing them to sell their produce ”wherever” and to ”whoever” without any restrictions on selling only to licensees in Agricultural Produce Market Committees (APMCs) or mandis.

Under the provisions of the APMC Act, farmers are required to sell their produce only in designated mandis at prices that are often regulated and many times lower than prevailing market price. This restricts earnings of the farmers and curbs their ability to take their produce for further processing or exports. While several states have agreed to abrogate or change the APMC Act and abolish the mandi system, it is still largely the market for farmers.

Over and above when there is no restriction of sale for industrial products then why for agriculture.  The statics show that only 36% of farmers’ produce gets traded in regulated markets.In this way the apprehensions are for the time being not for long. The announcement of MSP is done by central government  so no correlation seem to be finished.

The second bill is related to Essential Commodities Amendment Bill 2020. This will remove commodities like cereals , pulses , oilseeds , onion and potatoes from the list of essential will do away with  the imposition of stock holding limits on such items except under circumstances like war.

Besides this  provision will attract private sectors / FDI into farm sectors as it will remove fears of private investors of excessive regulatory interference in business operation. It will  bring investment of farm infrastructure like cold storages and modernizing the food supply chain.  In this way it will  help both farmers and consumers by bringing price stability and To create competitive market environment and cut wastage of farm produce.

Contrary to these facilities they have the doubt that the price limit of extra ordinary substances are so high that these can not be implemented. Also bigger companies have the freedom to stock commodities so they may dictate the terms and condition to small and marginal farmers.

The third bill pertains to  contract farming The farmer ( Empowerment and protection) agreement of price assurance and farm service bill 2020.

Under this bill Farmers can enter into contract with agri business firms, processors, exporters, wholesalers and large retailers for sale of future farming produce at a pre agreed price.

The percentage of small and marginal farmers constitute 86% of the farming community. They can gain via aggregation. Also the market unpredictability will shift from farmers to sponsors.

Besides this will enable farmers to access  modern tech and get better inputs side by side it will  reduce cost of marketing and boost farmers income. More over the Farmers can engage in direct marketing by eliminating intermediaries for full price realization. Also there is 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 as it is apprehension. Also the  sponsors may not like deal with  multitude of small and marginal farmers are the doubts among farmers. In addition to this it is said that the  big private companies like exporters , wholesalers, and processors will have an edge over disputes. Initially these  things may create the suspicion but later on it will be vanished.

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