The Story

The bill was introduced in the Lok Sabha on 14th September 2020. The act claims to provide freedom of choice to parties involved in the sale and purchase of farmer’s produce through the use of competitive alternative channels and claims to reduce barriers to inter and intrastate commerce. The act will take effect from 5th June 2020. The act has these provisions to facilitate trade:

  • The act allows farmers, electronic trading platforms, or other traders to carry on their trade in the specific areas listed in the act. The transaction can be conducted at farm gates, in factory premises, warehouses, storage silos, cold storage, or market yards run by the APMC Act of a state, or in private yards managed by licensed people.
  • The act allows the central government to introduce an electronic registration system for traders, the mode of trading, and the method of payment for the transaction.
  • It gives traders time of 3 days for the products they procure. To defer payment, the trader has to provide farmers with a receipt that specifies the amount to be paid. It also allows the central government to regulate the payment method.
  • The bill allows anyone with a PAN card to establish an electronic trading platform to trade farm produce. The act also allows the central government to regulate the practices of the platform.
  • The act prohibits cess or levies on farm transactions conducted in areas specified in the act. It also requires online trade platforms to provide the central government all information on transactions performed on the platform. It also empowers government offices, government-owned companies, and societies to develop price information systems.
  • The act includes provisions related to dispute settlements. The Sub-divisional Magistrate can appoint a Conciliation Board to resolve settle disputes between a farmer and a trader. The decision of the board is supposed to be binding and mutually acceptable to all the parties in the dispute. The board will consist of a chairperson accountable to the magistrate, and between 2 to 4 members who will represent the parties.

    If any procedure, norms, or guidelines in the act are violated, the act empowers the Agriculture Marketing Advisor, Directorate of Marketing and Inspection, or the government to penalize the violator and suspend their right to operate an electronic trading platform. Violation of provisions in the act is a civil offense, and a civil court can enforce the punishment. The penalty for violation of provisions of the act is a fine of a minimum of 25000 rupees and the maximum fine would be 5 lakh rupees. Additionally, a fine of 5000 rupees per day can be levied for each day a violation occurs after the first violation. The fines are doubled for a person controlling, owning, or operating an electronic trading platform.

    The bill liberalizes the trade of agricultural produce, and thus has the potential to increase the incomes of farmers and traders by reducing barriers for their entry to the market. The act can kick start the rural economy by enabling manufacturer-farmer contracts, ushering a new industrial revolution. The spillover effects of agricultural growth might create new jobs in villages, reducing the burden on the crumbling urban infrastructure. The effects of the act on the rural economy and Indian agriculture depends on the implementation, regulation, and dispute settlement mechanisms.

    Liberalizing markets is generally beneficial to all the people participating in it, and maximizes economic output. On the other hand, if there is an asymmetry in information each party to the transaction has then inadequately regulated markets can prove disastrous. India has a literacy problem that is exasperated in rural areas. According to the 2011 census, only 67.77% of the rural populace is unable to read or write. A significant chunk of the people unable to read or write are marginal farmers or work in the agriculture allied sector. The new bill allows previously unauthorized people to trade with farmers. This can cause farmers to be trapped in exploitative contracts, a phenomenon that might aggravate rural poverty and add to the woes of farmers.

    The actual effect of the act will be seen in the kharif season but one thing is evident, the government must tread with utmost caution.