Key Agriculture Reform

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Subject: Economy

Context:

The Cabinet has approved historic amendment to the Essential Commodities Act and passed ordinances.

Concept:

i) Amendment to ECA

  • While India has become surplus in most agri-commodities, farmers have been unable to get better prices due to lack of investment in cold storage, warehouses, processing and export as the entrepreneurial spirit gets dampened due to hanging sword of Essential Commodities Act.

ECA:

  • The Essential Commodities Act, 1955 was enacted to ensure the easy availability of essential commodities to consumers and to protect them from exploitation by unscrupulous traders. At present, there are seven commodities scheduled under the EC Act, 1955 as essential.
  • Drugs
  • Fertilizer, whether inorganic, organic or mixed
  • Foodstuffs, including edible oilseeds and oils
  • Hank yarn made wholly from cotton
  • Petroleum and petroleum products
  • Raw jute and jute textile
  • seeds of food-crops and seeds of fruits  and vegetables,  seeds of cattle fodder, jute seeds and cotton seed
  • Exercising powers under the Act, various Ministries/Departments of the Central Government and under the delegated powers the State Governments/UT Administrations have issued Control Orders for regulating production, distribution, pricing and other aspects of trading in respect of the commodities declared as essential.
  • The enforcement/implementation of the provisions of the Essential Commodities Act, 1955 lies with the State Governments and UT Administrations

Benefits from amendment: With the amendment to Essential Commodities Act, commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from list of essential commodities.

  • This will remove fears of private investors of excessive regulatory interference in their business operations.
  • The freedom to produce, hold, move, distribute and supply will lead to harnessing of economies of scale and attract private sector/foreign direct investment into agriculture sector. It will help drive up investment in cold storages and modernization of food supply chain.

ii) Barrier-free trade in agriculture produce

  • There are restrictions for farmers in sellingagri-produce outside the notified APMC market The farmers are also restricted to sell the produce only to registered licensees of the State Governments.
  • Further, Barriers exist in free flow of agriculture produce between various States owing to the prevalence of various APMC legislations enacted by the State Governments.
  • Cabinet approved ‘The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020’.

Benefits:

  • Farmers and traders will enjoy freedom of choice of sale and purchase of agri-produce.
  • Promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.
  • Open more choices for the farmer, reduce marketing costs for the farmers and help them in getting better prices.
  • It will also help farmers of regions with surplus produce to get better prices and consumers of regions with shortages, lower prices.
  • The ordinance also proposes an electronic trading in transaction platform for ensuring a seamless trade electronically.
  • Creation of One India, One Agriculture Market

iii) Farmers empowered to engage with processors, aggregators

  • Indian Agriculture is characterized by fragmentation due to small holding sizes and has certain weaknesses such as weather dependence, production uncertainties and market unpredictability.
  • This makes agriculture risky and inefficient in respect of both input & output management.
  • So cabinet approved ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’.

Benefits:

  • Empower farmers for engaging with processors, wholesalers, aggregators, wholesalers, large retailers, exporters etc., on a level playing field without any fear of exploitation.
  • It will transfer the risk of market unpredictability from the farmer to the sponsor and also enable the farmer to access modern technology and better inputs.
  • It will reduce cost of marketing and improve income of farmers.
  • Act as a catalyst to attract private sector investment for building supply chains for supply of Indian farm produce to global markets.
  • Farmers will get access to technology and advice for high value agriculture and get ready market for such produce.
  • Farmers have been provided adequate protection. Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ land is also protected against any recovery.
  • Effective dispute resolution mechanism has been provided for with clear time lines for redressal.