On 5th June 2020, in the wake of the COVID-19 pandemic, the president gave his assent to the three ordinances passed by the parliament in the name of agricultural reforms, these three ordinances are:
1. Farmers Produce Trade and commerce (Promotion and facilitation) ordinance 2020;
2. The Farmers (Empowerment and protection) agreement on price Assurance and Farm services ordinance 2020;
3. Essential commodities act (Amendment) ordinance 2020. Even since these were passed farmer unions are protesting.

After India gained its independence farmers were able to sell their crops to the consumer directly but then this system got replaced when the zamindari system became prevalent in rural India. Farmers faced immense scrutiny and were not able to handle the debt in which they were trapped. It was because of to the loans they took from local zamindars and money lenders on which heavy interest was charged.

This made farmers vulnerable to losing their land and they had no choice but to sell the harvest to the local money lenders at a much lower amount than the actual price. This called out for reform in the agricultural system to help farmers come out of the debt they were trapped in. Thus while the green revolution was taking place, Agricultural Produce Marketing Committees (APMCs) were set up. The State APMC Act in the bill gives regulations which regulates the agriculture market.[1]

Many experts believe that in the Green Revolution, the APMC Act played a serious role. According to this system, the crops were sold in the state APMC mandis through price discovery and auction. Here the farmers are not selling their crops to the mandis but to the middleman or Arhatiyas who act as a chain or connect between these farmers and buyers. The government gives licenses to these Middlemen shops, storage facilities, etc. are provided to them in APMC markets.

Many people work in these APMCs, there is the storage of grains, so it requires laborers, accountants so overall it is a self-thriving ecosystem. These APMC markets are regulated by state governments. A tax is charged on each transaction in such a way that government knows at price at which the produce is being sold.

Some goods are not brought by the middleman but by the government. These government's procured goods are bought at MSP (Minimum Support Price) which is constant throughout the country.

The problem in this system arose when the middleman started exploiting the farmers by forming cartels or creating an understanding between them where they bought the produce at MSP from the farmer but sold it at a much higher rate to the buyers like a vegetable vendor. For example, the MSP of onions is Rs 4-9/kg according to 2020 data[2] but it is being sold for Rs 35-80/kg depending upon the states. Hence, MSP became Maximum Selling Price.

The Farmer's Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 allows the trade of farmers produce (both interstate as well as intra state) beyond the physical premises like the mandis in the APMC markets. Here, the state governments are not allowed to levy any market fee, cess or levy outside APMC market[3].Any trade outside the market will be exempted from taxes associated with the state APMC.

No license will be required to purchase farm produce directly from the farmers which will encourage buyers to buy outside the market premises. In other words, this new legislation creates an ecosystem that allows farmers to have a choice regarding the sale and purchase of Agri-produce.

Electronic trading: This bill also proposed an electronic trading and transaction platform for a seamless trade electronically. In addition to mandis, farmers are also given the liberty to try and do trade at farmgate, cold storage, processing units, etc. Hence, farmers would be able to engage in direct marketing, effectively removing the middleman and intermediaries resulting in a full realisation of price. E-NAM trading will continue and anybody with a PAN card would be able to trade directly online.

The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 of 24th September 2020 will empower the farmers to engage with processors, wholesalers, aggregators, large retailers, exporters etc, on a level playing field.

According to Chapter 2, 3(l) of the ordinance[4], a farmer may enter into a written agreement which should provide the terms and conditions of the supply including time, quality, grade, standards and price. The minimum period of the agreement shall be one season or one production cycle and the maximum could go up to five years.

In other words, farming would be undertaken on a contractual basis with a pre-decided price and quantity. The important thing to be seen is that the sponsor[5] is not allowed to acquire the land or premises of the farmer for sale, lease or mortgage. However, at the same time, the farming contracts may be terminated or altered by mutual consent under reasonable circumstances.

The Essential Commodities (Amendment) ordinance, 2020 received the President's assent on 26th September 2020. This ordinance further amends the Essential Commodities Act of 1955 which primarily regulates the production and storage of essential commodities. In essence, the amendment amends section 3 of the original act[6] and inserts clause 1A. This empowers the central government to regulate the supply of the food items and impose a stocking limit on it under certain extraordinary circumstances which shall be discussed below:

1. War
2. Famine
3. Extra ordinary price rise (up to 100%)
4. Natural calamity

The stock limit imposition described in the bill mentions that the stock limit shall be imposed on the crops only in cases of price rise up to 100% on horticultural produce and 50% increase in the retail price of non-perishable agricultural food items. The increase will be calculated based on the price trends prevailing over the preceding 12 months or the average retail price of the last 5 years
All these above-mentioned ordinances acted as a factor for the current protest by the farmers of Punjab and Haryana

End-Notes:

1. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (No. 113 of 2020
2. Commission for Agricultural Costs and Prices, GOI
3. The Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 (No. 21 of 2020)
4. The Farmers (Empowerment and Protection) Agreement on price assurance and Farm services Bill, 2020 (No.112 of 2020)
5. Sponsor means a person who has entered into a farming agreement with the farmer to purchase the farming produce, The Farmers (Empowerment and Protection) Agreement on price assurance and Farm services Bill, 2020 (No.112 of 2020), Section 2(o);
6. Essential Commodities Act, 1955 (No.10 of 1955)