Cabinet nod for agri marketing reforms

Context: Recently, the Cabinet has approved a proposal to promulgate three separate ordinances to push agriculture marketing and commodities trade reforms in the country.
Key Points

• The Union Cabinet has approved an amendment to the 65-year-old Essential Commodities Act.
• Cabinet also approved ordinances to remove restrictions on farmers selling their produce outside notified market yards, as well as to facilitate contract farming and allow farmers to engage in direct marketing.
• These reforms are part of the third tranche of the economic package announced under Atmanirbhar Bharat Abhiyan to counter Covid-19 pandemic.
• These ordinances are expected to give effect to the amendments proposed to the Essential Commodities Act and bring in two new Central laws on inter-state trading and engagement of the farmers with processors, exports, etc.

Amendments to Essential Commodities Act (1955)

• The Essential Commodities Act (ECA) empowers government to impose curbs on stocking of farm produce.
• The amendment to the ECA, which has been under discussion for more than a decade, will deregulate the production, storage, movement and distribution of these food commodities.
• By removing the private sector’s fears of excessive regulatory interference, the Centre hopes to increase private and foreign investment, especially in cold storage facilities and the modernisation of the food supply chain.
• According to the government, even as India has become surplus in most agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, processing and export.
• Adequate processing and storage facilities will reduce wastage and increase income for farmers of perishable commodities.
• The amendment would remove cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities.
• However, to protect consumers, the amendment allows regulation during war, famine, extraordinary price rise and natural calamity, while providing exemptions for exporters and processors at such times as well.

Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020:

• It aims to open up agricultural marketing outside notified mandis for farmers.
• It will help in the creation of one agriculture market across the country wherein farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce.
• It will also allow for hassle-free inter-state and intra-state trade in agriculture produce.
• While both agriculture and markets are State subjects, the Centre is counting on the fact that trade and commerce in foodstuffs is part of the concurrent list to push through its ordinance.
• Industry sources suggest that 60% of agricultural trade already takes place outside the mandis through unregulated sales. By legalising and facilitating such sales, the Centre hopes that farmers will benefit, rather than middlemen.
• It is believed that allowing the farmer more choices will raise his income and also reduce wastage and improve quality.
• Not all States have been on board with these reforms, especially as State governments will not be allowed to levy fees on these sales.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020:

• It is aimed at facilitating contract farming, where a private buyer contracts to purchase a crop at a certain price at the beginning of a season.
• The ordinance empowers farmers to engage with processors, aggregators, wholesalers, large retailers and exporters.
• This would facilitate transferring the risk of market unpredictability from the farmer to the corporate sponsor.
• It would help attract private investments to the farm sector.
• However, farmers groups have expressed concern that corporates will benefit more than small farmers from such direct marketing measures.