Farm Bill 2020: Creating New Market & Opportunities

With an aim to transform agriculture and increasing farmers’ incomes, the three farm legislations recently passed by the Parliament are expected to bring in private investments in agriculture sector.

Introduction

Recently the agricultural sector in India has been liberalised to a great extent with features of privatisation which have also been incorporated within it with the introduction of the new Farmer’s Bill, 2020 which has sought to eliminate an discard the existence of manipulative middlemen through better facilitation of farmers which in turn would attract higher investments and enhanced technology within this sector. In India, the agricultural sector comprises f 58 per cent of the population which in turns leads to a contribution of 15 per cent in the GDP and in the year 2020, this sector has shown a growth percentage of 4 per cent. Prior to this, the Maharashtra Agricultural Marketing Rules had specifically provided hat all of the agricultural produce within the market must only be marketed through the APMCs in order to prevent the exploitation of the farming sector. However, these laws were found to be ineffective, impractical and lead to the monopoly of the middlemen as the market players within this sector causing greater exploitation of the farmers and higher distress, leading to the rising cases of farmer’s suicides and a very average growth of the sector.

For example, all of the produce passed on to the wholesalers within the city, who in turn would sell this to the small retailers or peddlers. Further, it is to be note that there exists a price rise from Rs 4 to 5 at every tranche. This ultimately resulted in most of these vegetables aka produce being purchased at Rs 2 or 3 a kg from the farmers only to be sold at Rs 20 to 30 per kilogram to the ultimate urban consumers. This has been the perennial system in practice since he past 30 to 40 years now with this blatant exploitation being a natural part of the system.. Hence, crores of modern families pay a much higher price while millions of farmers were left underpaid, exploited and earning scraps. Furthermore, any rise in the prices, never really resulted in any gain to the farmers whatsoever since if any sort of open marketing was allowed, scores of impoverished farmers would have at least made a profit of Rs. 4 or 5 or even more per kilogram of their produce an hereby not been at the impoverished state that they are in presently. Furthermore millions of farmers who are situated far away from cities and thus are unable to travel due to the higher costs of transportation, lose out on this very factor in itself. To remove these loopholes the new Farmers bill has been passed by the government.

How the three new Farm Bills will benefit the Agricultural Sector?

The recent Farm Bills have been given the presidential assent primarily to aid the growth and boost business within the agricultural industry. While these three bills make some drastic changes, its benefits will be immense as far as investment within the agricultural sector is concerned. This can be better explained through the following points:
  • Since these Bills have now established a system wherein he farmers and the traders can sell and purchase their produce outside just mandis, as was the case before, it widens the scope for growth for the farmers since they will now be able to sell more and thus earn better. This would also imply the widening of the industry in totality and with newer avenues available for sale and purchase, this is to result in more investments pouring in from abroad which was usually not the case before due to the monopolised farmers’ rules.
  • These Bills further encourage inter-state and intra-state trade which in turn results in a massive reduction of cost in transportation as well. This means that traders would now easily be able to circulate their produce within the country at a much lower cost, thereby attracting bigger investors to reap the benefits of low costs and higher returns in the sector.
  • These Bills have also created a new system wherein the farmers can directly remain in contact with high end agricultural investors and businesses along with the retailers and the exporters which only results in the greater usage of better and high grade technology which only accelerates the growth within this sector.
  • Due to the much reformed and liberalised rules and the permit for private companies to invest within the farming and agricultural sectors, businesses and corporates stand to gain along with the farmers who can now negotiate better and higher prices for their produce and welcome newer investors through these private sector companies.
  • These Bills not only provide benefits to the small and marginal farmers but they bring about a revolutionary change by removing products like cereals and pulses from the list of essential commodities which makes investments from foreign investors smoother and results in attracting a greater degree of FI within the agricultural sector.
Thus the new farm bills not only create expansion and growth opportunities for the farmers but also create newer investment opportunities from the private sector corporates, thereby increasing competition and facilitating the growth of this Agricultural Sector.

The details of these three bills have been provided below:

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020
Main provisions
  • There will now exist the freedom of options with regards to selling and purchasing of agricultural produce amongst farmers and traders alike.
  • The new bill would enable barrier-free inter-state as well as intra-state trade along with the growth of businesses beyond the physical boundaries of markets. Furthermore, farmers now, will not be required to pay any cess or levy for the sale of their own produce and thus shall not be liable to pay for any transport costs either. A system of electronic trading has been established and proposed to be implemented for making sure that trade occurs easily and without any impediments. Moreover, in addition to mandis, the farmers shall now enjoy the freedom to trade at farmgate, cold storage, warehouse, processing units etc. These farmers shall now be able to engage in direct marketing thereby eliminating all such exploitative intermediaries which result in the realization of higher and exorbitant prices.
The Procurement of Minimum Support Price 

There has been a lot of contention and public outcry over the fact that is selling in mandis would be made optional then will mandis exist at all? And will this ultimately result in the elimination of the minimum support price, thereby exploiting farmers at the hands of large corporates?

No individual or entity shall be permitted to make any purchases below the minimum support price, as has been made clear by the Government and if any person or entity is found to have engaged in such exploitation then there shall now be legal consequences for this as well. It has also been made clear that the government has explicitly stated that mandis will continue to remain open as before but farmers will now additionally have the option to be able to sell at other places as well. Moreover, the e-NAM trading method will be functional in the mandis. Electronic platforms trading would increase which would raise transparency and augment time-saving.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020
Main provisions: 
  • This new legislation shall empower the farmers to engage directly with the processors, wholesalers, aggregators, wholesalers, large retailers, exporters and others in a very competitive yet healthy environment. The price assurance shall also be provided to the farmers prior to even the sowing of the crops itself. Furthermore, in case of any high market prices, the farmers shall now be entitled to this profit much above the minimum price, which was the case before.
  • This new bill will result in the shift in the risk of market unpredictability from the farmers directly to the financially powerful sponsors instead. Since this bill advocates for prior price determination, the farmers will thus be shielded from the volatility of market prices and its unpredictability.
  • This new bill shall also provide much needed access to the farmers to be able to adopt to higher and more complicated technology, higher quality seeds and various other resources. This shall result in mitigating the cost involved in the marketing process and thereby increase the income of the farmers considerably. Furthermore, a highly competent dispute resolution mechanism has also been incorporated with proper avenues for redressals.
  • This has also resulted in greater support from the Government to support the farmers for imbibing research and newer technology for bringing forth much needed progress within the agriculture sector.
  • It must be noted that India’s small farmers (those owning less than 2 hectares of land) comprise f nearly 78% of all farmers, but own only about 33% of the total cultivated land and thus are only able to produce 41% of the country’s food-grains. Their productivity is somewhat higher than that of medium- and large-size farms which has been the main consideration before formulating this bill.
The Farmer’s choice
  • In contract farming, the farmers shall now have complete power to determine prices for their produce and they shall also receive their payments within a period of 3 days and no longer than that which is a huge improvement over the past system which did not stipulate any such time-period.
  • Nearly 10000 Farmer Producer organizations have now been brought into existence across the country. These FPOs shall amalgamate the small farmers and work towards the enforcement of a remunerative pricing mechanism for farm produce in our country.
  • Once this contract has been duly signed, the farmers would not have to seek out the traders, since now, the purchasing consumer will be able to pick up the produce directly from the farm and thereby have direct access to the farmer.
  • In case of dispute, there shall be no need to go to court time and again since there shall now exist a local dispute redressal system for addressing any grievances.
The Essential Commodities (Amendment) Ordinance, 2020
  • This ordinance brings about greater regulation of all food items. It is said that the Government may bring about much needed regulation within the production, supply, distribution, trade and commerce of all such essential commodities such as food items which include, cereals, pulses, potatoes, onions, edible oilseeds and oils under serious or extraordinary conditions only.
  • These would comprise of the following:
a) War
b) Famine
c) Extraordinary price rise( stock limits could be modified on 100% rise for horticulture products and 50% rise of non-perishable agricultural food items) and
d) Natural calamity of grave nature

  • As per the Procurement Policy, the Food Corporation of India shall continue to operate as it did before and purchase the food grains from the farmers at the MSP as was the case, before. For instance, just after the passing of these bills, the government decided to begin the procurement of paddy in Punjab and Haryana as Kharif crops are hitting the markets right now.
  • PDS and ration shops would continue to be functioning as they did before with regards to distributing the food grains to the masses at subsidized prices. However, there have been rumours about the lifting of food subsidies within the Government too.
  • However, at present, there has been no directive provided by the government to lift the procurement policy or the  PDS.
Electronic trading platforms

The E-NAM platforms had been inaugurated in April 2016 in order to forge a better and more unified national market for agricultural goods through better networking with the APMCs. This comprised of 16.6 million farmers and 131,000 traders registered within its platform until May 2020. Now, more than a 1,000 mandis in India are already linked to e-NAM and 22,000 additional mandis are projected to be linked by the year 2022.

The agricultural commodities trading, accounts for nearly 12% of the total commodities trading within India. NCDEX and NMCE also completely deal in just farm products. Moreover, the exchange trading minimizes the seasonal variations of prices and farmers therefore gain from stable prices and incomes.

Conclusion
 
Farmers have now been provided with better prices by asking the consumers for lower prices through this purchase made by the organised retailers which curtails the length of the supply chain. There has always been the trend of middlemen charging a higher rate than organized retail players which shall now be completely eliminated. Moreover, contract farming by the corporates implies that these corporates shall now provide higher technology to the farmers thereby improving their produce quality. This benefits both, the farmer through increased yield and the corporates, who will now be able to get higher production from these suppliers. Thus, the new Farmers bill is indeed a boon for the economy in general.