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Agri Reforms 2020- One India, One Agriculture Market

Agri Reforms 2020- One India, One Agriculture Market

UPSC CSE Mains Syllabus: GS-3- Major crops cropping patterns in various parts of the country, different types of irrigation and
irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.

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The Centre recently, approved three major legislative reforms through ordinances intended to create “one India, one agriculture market” while also attracting private investments in a sector hamstrung by varying regulations. This will unlock the growth potential of farm incomes by allowing unrestricted sale of produce.

Essential Commodities Act:

  • It was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketingwould affect the normal life of the people. 
  • Under this, government regulates the production, supply and distributionof a whole host of commodities it declares ‘essential’ in order to make them available to consumers at fair prices.
  • Items under the Act include drugs, fertilisers, pulses and edible oils, and petroleum and petroleum products.

Issues with ESA:

  • Stock limits on agricultural produceare enforced by the government to check hoarding and price rise of essential commodities when the price of the produce
  • This hasinhibited the creation of modern storage systems and investment in food processing on a whole.
  • While India has established surplus in most agri – commodities, farmers have been unable to get better prices on account of a lack of investmentin cold storage, warehouses, processing and export.
  • It attributed the lack of investment to“dampened entrepreneurial spirit” because of the “hanging sword of Essential Commodities Act”.

Changes to the Essential Commodities Act, 1955:

It will “deregulate” various agricultural commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from stock limits, except in case of natural calamities like famine.  

Impacts:

  • It will remove fears of private investorsof excessive regulatory interference in their business operations.
  • Farmers need to get better pricesfor their produce even if there is a slight shortage.
  • Farmers suffer huge losseswhen there are bumper harvests, especially of perishable commodities. With adequate processing facilities, much of this wastage can be reduced.

What about consumer interest?

  • There won’t be any compromise with the consumers’ interests.
  • The amendment has provisions to regulate agricultural itemsin situations such as war, famine, extraordinary price rise and natural calamity.
  • However, the installed capacity of a value chainparticipant and export demand of exporters will remain exempted from such stock limit imposition so as to ensure that investments in agriculture are not discouraged.
  • Such move will also prevent wastage of agri-produce that happens due to lack of storage facilities in the country.
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Under the Madhya Pradesh Mandi Act, only traders need to get a licence for a particular mandi and procure agricultural produce there, whereas the farmer is free to sell their crop wherever they want.”

APMC and agri-mandis:

  • Agricultural Markets in most parts of the Country are established and regulated under the State APMC Acts.
  • The whole geographical areain the State is divided and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments.
  • APMC is a marketing boardestablished by a state government in India to ensure farmers are safeguarded from exploitation by large retailers, as well as ensuring the farm to retail price spread does not reach excessively high levels.
  • The first sale of agricultureproduce can occur only at the market yards (mandis) of APMC.

APMC issue:

  • Indian farmers have thus far been forced to sell their produceto traders registered by state governments, at notified APMC markets.
  • Further, barriers existin the free flow of agriculture produce between several states owing to APMC legislations enacted by their governments.
  • Between farmers and the consumers a series of middlemen and other stakeholders exist.Hence, farmers get less return for their produce whereas the consumers buy the produce at higher cost.

Amendments made:

  • In another landmark reform, the Union Cabinet approved the Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020,that will ensure barrier-free trade in agriculture produce.
  • It will now provide freedom to farmers to sell their crop to anyone, unlike the erstwhile setup.
  • There will be no tax on such trade, and buyers will not require a licence;a PAN card will suffice.
  • Further, the States will not be able to levy any feesor taxes on produce bought under the new central Acts.

Impacts:

  • The ordinance will create an ecosystem where the farmersand traders will enjoy freedom of choice of sale and purchase of agri produce. 
  • It will also promote barrier-free inter-stateand intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.
National Agriculture Market – one nation one market:National Agriculture Market (eNAM) is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.Integration of APMCs across the country through a common online market platform to facilitate pan-India trade in agriculture commodities, providing better price discovery through transparent auction process based on quality of produce along with timely online payment.

Contract farming and price assurance:

  • The ordinance on contract farming – Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.
  • It looks to transfer the risk of market unpredictabilityto the sponsor and also enable the farmer to access modern technology and better inputs.
  • Since the farmers would now be able to enter into contract with traders and private players on pre-agreed prices, it will ensure guaranteed returns even if their prices crash in the market.

Road ahead:

  • More reforms by state governments is needed  to ensure further liberalisationof agricultural trade as it will facilitate better price realisation for farmers.
  • Also, providing multiple purchasing optionsfor farmers will mitigate risks in the event of price crashes during bumper harvests.
  • If farmers are allowed to sell outside the mandis, they need to be provided market intelligenceso that they can sell their crops at appropriate locations at the right time.

Source:” Times of India“.

Possible UPSC CSE Mains Question:

Agricultural market reforms are essential in making farming remunerative. Examine the statement considering the recently rolled out agricultural reforms.