Sweeping Reforms In Agriculture: Cabinet Approves Ordinance To End APMC Monopoly, Amends Essential Commodities Act

Following up on the reform announcements made as part of its Rs 20 Lakh crore economic stimulus package in the area of agriculture and allied activities, Union Cabinet today (3 June) approved an ordinance removing restrictions on the sale of farm goods and enabling farmers to sell produce outside APMC including via electronic platforms without incurring taxes.

The Union Cabinet also approved amendments to the Essential Commodities Act removing commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. The move seeks to address the apprehensions over the current regulatory regime in the minds of private players seeking to make investments in cold storage, processing and export.

Despite surplus production in most agri-commodities, farmers have continued struggle to secure better prices due to lack of investment in cold storage, food processing and export. This has been partially attributed due to draconian provisions of Essential Commodities Act under which government can impose price/stock controls and band exports.

By removing stock limits on all agri-commodities, the government is hoping that 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 and significantly drive up investment in cold storages and modernisation of food supply chain.

Through the amendment, the Union Cabinet also exempted the installed capacity of a value chain participant and the export demand of an exporter any stock limit imposition

The Union Cabinet also approved 'The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 that will remove all restrictions for farmers in selling agri-produce outside the notified APMC market yards.

The farmers are currently restricted to sell the produce only to registered licensees of the State Governments.

The ordinance all removes all barriers that exist in free flow of agriculture produce between various States owing to the prevalence of various APMC legislations enacted by the State Governments.

The government hopes that the Ordinance will allow farmers and traders to enjoy freedom of choice of sale and purchase of agri-produce and promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations.

The ordinance is expected to help 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.

The ordinance is expected to create additional trading opportunities outside the APMC market yards to help farmers get remunerative prices due to additional competition.

In a third significant move, the Union Cabinet approved ‘The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020’ to facilitate contract farming. The Centre will announce modalities of contract farming and will frame terms of the contract for the states to adopt.

The Ordinance has been approved to empower farmers to engage with processors, aggregators, wholesalers, large retailers and exporters.