New Farm bill 2020 Explained

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First Bill: The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 was introduced in Lok Sabha by the Minister of Agriculture and Farmers’ Welfare in September 2020.  It replaces the Ordinance promulgated in June 2020.  The Bill provides a framework for farmers to engage in contract farming with the buyer before sowing, under which the farmer sells produce to the buyer at a pre-determined price.

Who is Sponsors: The Bill defines a sponsor as individuals, partnership firms, companies, limited liability groups and societies, who may enter into an agreement with farmers to purchase farming produce.

Farming agreement: The Bill provides for a farming agreement prior to the production or rearing of any farm produce, aimed at facilitating farmers in selling farm produce to sponsors. Such agreement may be between: (a) a farmer and a sponsor, or (b) a farmer, a sponsor, and a third party.  The role and services of any third party, including aggregators (one who acts as an intermediary between farmer(s) and sponsor to provide aggregation related services), involved will have to be explicitly mentioned in the agreement.  State governments may establish a registration authority to provide for the electronic registry of farming agreements.  

Mutually agreed on terms and conditions: The agreement may provide for mutually agreed terms and conditions for supply, quality, standards, price of farming produce, and farm services.

Period of the agreement: The minimum period of an agreement will be one crop season or one production cycle of livestock.  The maximum period will be five years.  For the production cycle beyond five years, the maximum period for the agreement will be mutually decided by the farmer and the sponsor.

Pricing or method of pricing of farming produce: The price to be paid for the purchase of farming produce by the sponsor (including methods of determining any price) may be mentioned in the agreement.  In case the price is subject to variation, the agreement must include: (i) a guaranteed price to be paid for such products, and (ii) a clear price reference for any additional amount over and above the guaranteed price, including bonus or premium.  The price references may be linked to the prevailing prices in APMC market yards or any other suitable benchmark prices.

Exemptions from existing laws: Farming produce under a farming agreement will be exempted from all state Acts aimed at regulating sale and purchase of farming produce.  Such produce will also be exempted from any stock limit obligations applicable under the Essential Commodities Act, 1955, or any other law.

Delivery of produce: The Bill provides that the delivery (i) can be taken by sponsors at farm gate within the agreed time, or (ii) can be made by the farmer.  In case of deliveries by farmers, the sponsor will be responsible for all preparations for the timely acceptance of deliveries.  The Bill specifies that, before accepting deliveries, the sponsor may inspect the quality of the produce as defined in the agreement.  In case the produce is not inspected by the sponsor, he will be deemed to have inspected the produce and will have to accept the delivery within the agreed time.

Payment structure: In the case of seed production, the Bill requires the sponsor to pay at least two-thirds of the agreed amount at the time of delivery.  The remaining amount can be paid after due certification within 30 days from the date of delivery.  For all other cases, the entire agreed amount must be paid at the time of delivery and a receipt slip must be issued with the details of sales proceeds.  The state government may prescribe the payment modes.

Dispute and grievance Settlement: The Bill requires a farming agreement to provide for a conciliation board (comprising of representatives of parties to the agreement) and a conciliation process for settlement of disputes.  At first, all disputes must be referred to the board for resolution.  If the dispute remains unresolved by the Board after thirty days, the Sub-divisional Magistrate (SDM) may be approached for resolution.  Parties can appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the SDM.  Both SDM and Appellate Authority will be required to dispose a dispute within 30 days from the receipt of application.

Second Bill: The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 was introduced in Lok Sabha by the Minister of Agriculture and Farmers’ Welfare on September 2020. The Bill replaces the Ordinance promulgated in June 2020. It seeks to allow barrier-free trade of farmers’ produce outside the physical premises of the markets notified under the various state Agricultural Produce Marketing Committee laws (APMC Acts). The Bill will prevail over the APMC Acts in the area outside such markets.

Farmers’ produce:  Under the Bill, farmers’ produce means: (i) food items, including cereals, pulses, fruits, vegetables, edible oilseeds, oils, sugarcane, spices, nuts, and products of poultry, piggery, goatery, fishery and dairy, (ii) raw cotton and jute and cotton seeds, and (iii) cattle fodder, including oilcake and other concentrates.  The Bill also defines the agricultural produce regulated under any APMC Act as scheduled farmers’ produce.

Barrier-free trade:  The Bill allows barrier-free intra-state and inter-state trade of farmers’ produce outside: (i) the physical premises of market yards and sub-yards run by the state APMCs and (ii) other markets notified under the state APMC Acts, such as private market yards and sub-yards, collection centers, and farmer-consumer markets.  Under the Bill, farmers’ produce may be traded anywhere outside such markets, such as in places of production, collection, and aggregation, including (i) farm gates, (ii) factory premises, (iii) warehouses, (iv) silos, and (v) cold storages.

Farmer:  The Bill defines farmer as an individual who is engaged in the production of farmers’ produce, by self or by hired labour, and includes an FPO (farmer producer organisation).  An FPO means an association or group of farmers: (i) registered under any law, or (ii) promoted under a central or state government scheme.

Eligibility for trade-in farmers’ produce:  The Bill allows farmers, FPOs, and traders to engage in the trade of farmers’ produce.  Trader includes anyone who buys farmers’ produce for: (i) wholesale trade, (ii) export, (iii) processing, (iv) value addition, (v) manufacturing, (vi) retail, (vii) end-use, or (viii) consumption.

Trade-in scheduled farmers’ produce:  To trade in scheduled farmers’ produce, an entity must be either: (i) a farmer, an FPO, or an agricultural cooperative society, or (ii) a trader having a PAN card under the Income Tax Act, 1961, or any other document notified by the central government.  Persons contravening the provisions for trade of scheduled farmers’ produce will be liable to pay a penalty between Rs 25,000 and five lakh rupees.  In case of continuous contravention, such person will be liable to pay a further penalty of up to Rs 5,000 per day.

Payment to farmers:  Traders transacting with farmers must make payments for scheduled farmers’ produce on the same day, or within maximum three working days, provided a receipt is given to farmers on the same day.

No fees to be levied by states:  The Bill prohibits the state governments and APMCs from levying any market fee, cess, or any other charge on the trade of scheduled farmers’ produce outside the APMC notified markets.

Electronic trading platforms:  The Bill provides for setting up of electronic trading platforms to facilitate direct and online buying and selling of farmers’ produce, resulting in physical delivery of the produce.  The following entities may establish and operate such platforms: (i) companies, partnership firms, or societies, having a PAN card under the Income Tax Act, 1961, or any other document notified by the central government, (ii) FPOs, and (iii) agricultural cooperative societies.

The central government may prescribe modalities for such platforms including: (i) procedure, norms, and manner of registration, and (ii) code of conduct, quality assessment, and modes of payment.  If an e-trading platform contravenes the modalities prescribed by the central government or engages in unfair trade practices, its right to operate as a platform may be suspended or cancelled.  If the owner or operator of the e-trading platform contravenes any of the provisions, he will be liable to pay a penalty between Rs 50,000 and Rs 10 lakh.  In case of continuous contravention, a further penalty of up to Rs 10,000 per day will be imposed.

Dispute resolution mechanism:  In case of disputes arising between a farmer and a trader, the parties involved in the dispute may apply to the Sub-Divisional Magistrate (SDM) for relief through conciliation.  The SDM will appoint a Conciliation Board under his officer for resolving the dispute, with equal representation of the two parties in the Board.  If the dispute remains unresolved after 30 days, the parties may approach the SDM for settlement of the dispute.  The parties will have a right to appeal against the decisions of the SDM before the Appellate Authority (the Collector or the Additional Collector nominated by him).

Third Bill: The Essential Commodities (Amendment) Bill, 2020

The Essential Commodities (Amendment) Bill, 2020 was introduced in Lok Sabha on September 14, 2020.  The Bill replaces the Ordinance promulgated on June 2020 to amend the Essential Commodities Act, 1955.  The Act empowers the central government to control the production, supply, distribution, storage, and trade of essential commodities.  The Bill seeks to increase competition in the agriculture sector and enhance farmers’ income.  It seeks to provide that stock limits on agricultural produce can be applied only in extraordinary circumstances based on price rise.

Regulation of food items: The Act empowers the central government to notify certain commodities (such as food items, drugs, fertilisers, and petroleum products) as essential commodities.  The central government can regulate or prohibit the production, supply, distribution, and trade of such essential commodities under the Act.  The Bill provides that the central government can regulate the supply of certain food items (as may be notified), including cereals, pulses, potato, onions, edible oilseeds, and oils, only under extraordinary circumstances.  Such circumstances include: (i) war, (ii) famine, (iii) extraordinary price rise, and (iv) natural calamity of grave nature.

Imposition of stock limit: The Act empowers the central government to regulate the stock of an essential commodity that a person can hold.  The Bill specifies that stock limits should be imposed only based on price rise.  A stock limit may be imposed on agricultural produce only if there is: (i) a 100% increase in the retail price in case of horticultural produce, or (ii) a 50% increase in the retail price in case of non-perishable agricultural food items.  The increase will be calculated over the price prevailing twelve months ago, or the average retail price of the last five years, whichever is lower.

Exemption:  The Bill provides that any stock limit imposed on agricultural produce will not apply to a processor or value chain participant if the stock held by such person is less than: (i) the overall ceiling of installed processing capacity, or (ii) demand for export in case of an exporter.  A value chain participant includes any person engaged in value addition to the produce at any stage, starting from production in the field to final consumption.  These stages include processing, packaging, storage, transport, and distribution of agricultural produce.

Applicability to Public Distribution System: The provisions of the Bill regarding the regulation of food items and the imposition of stock limits will not apply to any government order relating to the Public Distribution System or the Targeted Public Distribution System. Under these systems, food grains are distributed by the government to the eligible persons at subsidized prices.

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