The Union Cabinet on Wednesday cleared an Ordinance enabling any buyer be it Farmer-producer companies, big retailer or companies to purchase directly from farmers outside the regulated mandis without any license armed with just a permanent account number (PAN) card.
It will not be subjected to tax by Centre or state - a step that could bring it in direct confrontation with several states.
The Cabinet also approved the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020, which will facilitate contract farming between farmers and processors, and traders.
It also decided to remove cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of Essential Commodities (EC) Act, but retained the power to impose it in case of war, famine or in the event of an extraordinary rise in prices.
"These are welcome steps and the speed at which government has moved is admirable, but I'am worried about this imposition of EC Act in case of extraordinary rise in prices...I mean who defines what is extraordinary rise. It needs to be deleted or the atmosphere of uncertainty that now prevails won't go. There should be some third party to define what it extraordinary rise, not government," Ashok Gulati, Infosys Chair professor for agriculture at ICRIER told Business Standard.
Meanwhile, elaborating on the Ordinances - decisions on which were announced as part of the Atmanirbhar Bharat package last month - Agriculture Minister Narendra Singh Tomar said in case of the Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, anyone with a PAN card can directly purchase from farmers. He will not require state or central licence, he clarified. Fine print of the Ordinances will be out soon.
The price the buyer will pay to the farmer will have to be mutually decided upon and payable within three days. The buyer will immediately give him a receipt of the trade.
In case of any dispute in such a form trade, the farmer will approach the Sub-Divisional Magistrate (SDM). If he is still not satisfied with the decision, he can always approach the District Collector. Both have to decide on the same within 30 days.
"In all such trades happening outside the precincts of the mandis, the buyer has to mandatorily make the payment within three days of the transaction and immediately issue a receipt, so that the farmer isn't duped," said Tomar.
He said the Ordinance also allows the setting up of e-trading platforms outside Agricultural Produce Market Committees, rules for which will be decided by the central government in due course. These mandis will be regulated by the central government. In the event of any duping of farmers, such a platform will be immediately deregistered.
In case of the contract farming Ordinance, Tomar said no encumbrance can be made on the land of the farmer. In case of dispute between the buyer and seller, any decision which leads to confiscation of land of the seller (the farmer in this case) will be null and void.
He said the models of such agreements will be sent to all states for all commodities, including fruit, vegetables, milk, and eggs. The agreement will gurantee a minimum price to farmers; it will include a provision that states if the market price rises during harvest, farmers will get a share in the enhanced price as well.
"When farmers enter into contract farming agreements with big companies or processors, a minimum price is guaranteed to them in the event of a price fall, while they also get a share in the increased amount if the price rises more than the agreed-upon amount," said Tomar.
He said in case of any dispute, the SDM will be authorised to take any decision. But he cannot oblige the growers to pay anything more than what has been invested as inputs or advance by the buyer.
"I think in principle these Ordinances are good and will unshackle the markets, but implementing them on ground will be difficult. Also what happens when the produce passes through state borders? Will the state lose the right to tax the same? Legal challenges could crop up," Mahendra Dev, director, Indira Gandhi Institute of Development Research, told Business Standard.
In case of the third, which is amendments to the EC Act, the Cabinet said it would be applied only in case of exceptional situations such as war, famine, extraordinary price rise, and natural calamity.
The installed capacity of value chain participants and exporters will remain exempted from the EC Act.