Regulation of Agricultural

Markets
Farmers’ Produce Trade and Commerce (Promotion and Facilitation)
Act, 2020
• This act allows farmers to engage in trade of their agricultural produce outside
the physical markets notified under various state Agricultural Produce
Marketing Committee laws (APMC acts).
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• It limits APMC’s oversight and jurisdiction to the APMC 2@
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a ‘market yard’. Outside of
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the market yard, entities are free to transactmin e e r.gagricultural produce in what
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a trade area is where trade
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happens that is not already under APMC.

• Transactions in the trade area are free of an obligation to pay a fee to the APMC
and no licences are required by buyers(anyone with a PAN card can buy). These
trade areas across the country therefore constitute an alternate marketing space
that purports to operate seamlessly across the country.
• Promotes barrier-free intra-state and inter-state trade of farmer’s
produce.

• Proposes an electronic trading platform for direct and online trading

of produce. Entities that can establish such platforms include
companies, partnership firms, or societies. gmail.com
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• Allows farmers the freedom to trade
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or anywhere outside state-
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notified APMC markets, and this includes allowing trade at farm
gates, warehouses, cold storages, and so on.

• Prohibits state governments or APMCs from levying fees, cess, or

any other charge on farmers produce.
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Farmers (Empowerment and Protection) Agreement of Price
Assurance, Farm Services Act, 2020
• The acts seeks to provide farmers with a framework to engage in contract
farming, where farmers can enter into a direct agreement with a buyer (before
sowing season) to sell the produce to them at pre-determined prices.
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• The new effort is a lighter framework that permits w an
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• Entities that may strike agreements with farmers to buy agricultural produce are
defined as “sponsors’’ and can include individuals, companies, partnership firms,
limited liability groups, and societies.

• The act provides for setting up farming agreements between farmers and
sponsors. Any third parties involved in the transaction (like aggregators) will have
to be explicitly mentioned in the agreement. Registration authorities can be
established by state governments to provide for electronic registry of farming
agreements.
• Agreements can cover mutually agreed terms between farmers and
sponsors, and the terms can cover supply, quality, standards, price, as
well as farm services. These include supply of seeds, feed, fodder, agro-
chemicals, machinery and technology, non-chemical agro-inputs, and other
farming inputs.

• Agreements must have a minimum duration of one a il.c cropping season, or

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one production cycle of livestock. The maximum w an
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years. For production cycles beyond five years, m e e r.g
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• Purchase price of the farming produce—including the methods of

determining price—may be added in the agreement. In case the price is
subject to variations, the agreement must include a guaranteed price to be
paid as well as clear references for any additional amounts the farmer may
receive, like bonus or premium
• Delivery of farmers’ produce may be undertaken by either parties within
the agreed time frame. Sponsors are liable to inspect the quality of
products as per the agreement, otherwise they will be deemed to have
inspected the produce and have to accept the delivery within the agreed
time frame.

• Produce generated under farming agreements are gm

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acts aimed at regulating the sale and purchase an
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therefore leaving no room for states to impose e r.g

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MSPs on such produce.
Such agreements also exempt the sponsor f or
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from any stock-limit
obligations applicable under the Essential
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Commodities Act, 1955.

• Provides for a three-level dispute settlement mechanism: the conciliation

board—comprising representatives of parties to the agreement, the sub-
divisional magistrate, and appellate authority.
Need to amend ECA
• Essential Commodities Act (1955) bestows the centre with wide-
ranging powers to impose restrictions on storage and movement of
certain ‘essential’ commodities by private parties, mainly to protect
consumer interests. om
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• State governments are free to set stocking w an
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• The ECA, often described as “draconian”,
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is seen as thwarting private
investment in post-harvest storage, warehousing and processing,
especially because these controls are implemented somewhat
arbitrarily.
• Historically, ECA-related restrictions have been neither predictable
nor infrequent. And since restrictions are imposed temporarily,
typically, for six months or a year at a time, the attendant uncertainty
hinders operations of agribusinesses, logistics firms and traders
alike.
Essential Commodities (Amendment) Act, 2020
• Attempts to remove the arbitrariness and unpredictability in
notifying stocking limits, by linking it to transparent rule-based price
triggers. Accordingly, a form of restriction will be deployed only in
“exceptional circumstances” il.c
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• The act removes cereals, pulses, oilseeds,
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potatoes from the list of essentialOnlycommodities.

• Government can impose stock holding limits and regulate the prices
for the above commodities—under the Essential Commodities,
1955—only under exceptional circumstances. These include war,
famine, extraordinary price rise, and natural calamity of grave nature.
• Stock limits on farming produce to be based on price rise in the
market. They may be imposed only if there is:
• (i) a 100 percent increase in retail price of horticultural produce, and
• (ii) a 50 percent increase in the retail price of non-perishable agricultural food
items.
• The increase is to be calculated over the price prevailing during the
preceding twelve months, or the average retail price il.c
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• The act aims at removing fears ofOnprivate investors of regulatory
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influence in their business operations.

• Gives freedom to produce, hold, move, distribute, and supply

produce, leading to harnessing private sector/foreign direct
investment in agricultural infrastructure.