Agri-marketing Reforms - Rationale

What is the issue?

• The government announced some agricultural marketing reforms as part of the Atmanirbhar Bharat Abhiyan. Click here to know more.
• The reforms can be viewed essentially as already pending work that will be pursued now.

What are the key reforms?

• The three legal reforms in agricultural marketing announced as part of the Rs 20-trillion package for the economy are:

1. amending the outmoded Essential Commodities Act (ECA), 1955
2. enacting a new Central statute (bypassing the APMC regime) to enable farmers to get remunerative prices by selling their produce anywhere in the country
3. passing a contract farming law to legalise agreements between producers and end-users of farm products

What is the long pending reform with APMCs?

• Agricultural Produce Marketing Committee (APMC) is a marketing board established by a state government to regulate prices and protect farmers' interests.
• Agricultural marketing is basically a state subject.
• So, efforts have for long been afoot to push reforms with the cooperation of states.
• But the response from states has been poor.
• Most states have amended their marketing laws.
• But they were not as strict as suggested in the model APMC law circulated by the Centre.

Why are States not cooperating in this?

• States, obviously, do not wish to give up control over agricultural markets.
• Notably, agricultural markets are a key source of revenue.
• Moreover, the market committees that run the APMC mandis enjoy considerable political status.
• They can therefore influence the rural vote bank, which is valued by political parties in the states.
• So, most states have only trimmed the monopoly of the APMCs over agricultural trade but without erasing it completely.
• Nor did they allow adequate privatisation of farm mandis.
• But, notably, this is vital in expanding the marketing infrastructure that has failed to keep pace with growth in agricultural output.
• Even the setting up of the electronic National Agriculture Market (e-NAM) could not serve the desired purpose in the initial years.
• This was because the business had to be transacted through the APMCs.

What is the Centre's move now?

• Given the above reality, the only option left for the Centre to carry out the unfinished reforms agenda is to go in for Central legislation.
• This would override the state statutes.
• It would, hopefully, help realise the longstanding goal of having a barrier-free single national market for the agricultural produce.

What is the case with contract farming?

• Similar hurdles have been impeding legalisation on contract farming too.
• These reforms are deemed essential to link farmers directly with the processors, exporters, retailers, and consumers of agricultural products.
• Such a network allows the farmers to produce the products conforming to the quality standards required by the end-users.
• Only some states have imparted legal sanctity to the pre-production contracts between seller and buyer under their amended APMC laws.
• This allows any party to retract from honouring the contract if the prices at the time of delivery do not suit them.
• Most other states are reluctant in bringing this reform.
• The NITI Aayog has already drafted a model contract farming legislation, but without much progress thereafter.
• All that the Centre needs to do now is to turn it into a Central statute.

What is the rationale for ECA amendment?

• The ECA is a Central law that has outlived its utility.
• It was enacted when shortages of essential goods were rampant and black-marketing and profiteering was usual.
• But the situation has since changed.
• The supplies of most commodities now exceed demand.
• The ECA’s draconian provisions, which are no longer required, include  -
  1. preventive detention
  2. confiscating vehicles
  3. attaching properties on suspicion of hoarding and black-marketing
• The government's moves are thus largely the reforms that were much needed.

Source: Business Standard