Finance minister Nirmala Sitharaman’s announcement regarding the enactment of a Central law to provide adequate choices to farmers to sell produce at attractive prices and allow barrier-free inter-state trade will go a long way in ensuring the cultivator gets a better remuneration for his crop.
As of now, states are controlling the law governing APMCs and its political reach.
“Amendments to the Essential Commodities Act, reforms in agricultural marketing and risk mitigation through predictable prices will empower farmers, strengthen agri-food processing linkages and enable demand-driven value added agriculture. The reforms will encourage investments in food processing and together with the infrastructure outlays will contribute in shaping a competitive agri value chain, reduce wastages and raise farmer incomes,” said Sanjiv Puri, Chairman, ITC Limited.
Relieving farmers from compulsion to sell their produce using Agriculture Produce Marketing Committees (APMCs) will prove a major relief under scenarios of both, scarcity and abundance. Bringing the produce to mandi and selling to the middleman at the price asked for not only reduces the cultivator’s chance of getting a fair price, but also adds to his cost.
If these restrictions are removed, the processing industry will be ready to pay better price for perishables. Middlemen will find business in such a scenario too, by connecting both parties, but farmers stand a chance to get a better remuneration. As of now, states have to categorically exempt farmers from the APMC Act.
“At present ‘one-nation-one-tax has not been practically implemented due to APMCs, when one APMC trader sell to a trader in another APMC, and both states charge a mandi fee. A Central law ensuring barrier-free inter-state trade can address this issue which we have been asking for long, including permission to edible oil processors to buy directly from farmers. This is a much-awaited reform for whole agri processing sector,” said Atul Chaturvedi, Executive Chairman Shree Renuka Sugars and the President of Solvent Extractors Association (the apex body of Oil Trade in India).
However, there has been a big debate whether central government can rule over agriculture marketing? Vijay Sardana, well known agri business expert and advocate said that, “chaper 13 of Indian constitution given freedom to centre to regulate agri trade because agriculture is a state subject and not the marking but this was always mis-interpreted.”
He noted that, Model act for Agricultural Produce & Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 can allow centre to ensure business contracts between farmers and processors when they deal directly.
“With the prospective central act APMC Mandis ,private mandis, warehouses and farm gate will come closer for completing trade chain and will emphasis on e-trading of agriculture produce for creating one nation -one market. Farmers will have choice to sell their produce freely anywhere within the country including commodity exchanges. Traders and processors will store the commodity as per their requirement,” said Kedar Deshpande, MD & CEO, National E-Repository Limited.
As of now farmers sell whatever they produce but standardised products depending upon grade etc generates higher price which farmers get only if it is sold through online platform.
E-Nam or nationwide electronic platform for trading in agriculture allows these facilities using its infrastructure for selling produce o the platform as per standardised products. But government will have to ensure state level APMC Act doesn’t hinder that process and central law is expected to overcome that difficulty. Price at which commodities are traded are transparent and available everywhere while price indications at the time of sowing can be given by commodity futures platforms.
Farmers have to hedge on futures platform by selling in futures contract maturing at the time of harvesting. So that he will know at what price he will be able to sell his produce. This can be doe directly or through their formal groups like FPOs. Exchange infrastructure will ensure hedgers get facilities to manage risk by providing insurance, finance and standardising produce.