The ordinances are to give effect to the amendments proposed to the Essential Commodities Act and bring in two new Central laws on inter-state trading and contract farming.

The Cabinet on Wednesday decided to promulgate three separate Ordinances to usher in the reforms in agriculture marketing and commodities trade it had announced earlier, as part of the economic package to counter Covid-19 pandemic. The ordinances are to give effect to the amendments proposed to the Essential Commodities Act and bring in two new Central laws on inter-state trading and contract farming.

The three laws will together go a long way in unshackling the entire agriculture-to-food-processing-to-retailing value-chain and giving farmers the choice to sell their produce in any market across the country, analysts said.

The Cabinet cleared a proposal to promulgate an ordinance to suspend insolvency proceedings against fresh defaulters for up to one year from March 25, in a breather to firms hit hard by the pandemic, sources told FE. However, no official communication on this issue was immediately released.

Agriculture minister Narendra Singh Tomar said two of the three Ordinances – The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 and The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 – have been kept out of the judicial process.

“In case of any dispute between farmer and a buyer, the matter will be first raised at the level of sub-divisional magistrate, who will try for a reconciliation as first option before taking a decision. The appeal against the SDM’s decision can be filed with the district magistrate,” Tomar said. State governments will have no power to levy any fees or taxes on agriculture produce to be governed under both the Central laws on free inter-state trading and contract farming,” he said.

In case market prices of any agri produce go up substantially, the farmers will have some share (which will be defined in Rules) above the contracted price while they will also have a minimum guaranteed price if open market/mandi rates fall drastically, the minister said, detailing the provisions of the contract farming law. The recovery of amount from farmers will not exceed what the farmer has received as an advance from the processor/FPO/trader with whom the contract was signed while his land rights will be protected at any cost, Tomar said. Contract farming could also help the government’s crop diversification programme since farmers will be assured of sales and prices, Tomar added.

The changes to the Essential Commodities Act will remove cereals, edible oil, oil seeds, pulses, onions and potato from its purview. The Central law shall ease inter-state farm trade, effectively overriding the APMC mandis that have shown imperviousness to change. The proposed freeing inter-state trade will complement whatever limited APMC reforms that some states have undertaken in recent months.

The reforms will help evacuate the surpluses from production zones to demand zones seamlessly, to the advantage of farmer-producers and players across the agriculture value chain, who have also been promised solid support by way of schemes and outlays to build infrastructure and logistical chains from farm-gate to the retail trade, and even exports.

“This new Central law on farm trade not only makes inter-state trade barrier-free, but also the intra-state trading of agri produce will no more be regulated by any state. The law will allow anyone having a PAN card to buy directly from farmers without taking any licence from any government,” agriculture secretary Sanjay Agarwal told FE. The Ordinance will be promulgated ‘very soon’ (in a day or two), he said.

The government could also allow trading through the e-NAM platform without going through the mandatory registration process as an extension of the current reforms done.

In 2002-03, the government had delisted some agri commodities from the EC Act through a government order. But, in 2006 this order was revoked and those commodities were again brought in the ambit of the EC Act. Similarly, the Centre had pushed market reforms and contract farming by asking states to adopt a model APMC Act, first in 2003 and again in 2017.

Once the insolvency Ordinance comes into force, sections 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC) will remain suspended. These sections deal with the initiation of the insolvency proceedings by financial and operational creditors and corporate debtors. However, insolvency applications filed before March 25 will be entertained. The cut-off date from March 25 also comes as a relief for the lenders who had filed applications against stressed firms in sync with the central bank’s June 7, 2019, circular, under which a default case will have to be referred to the NCLT if no other resolution plan is firmed up within six months.