A 'Jai Kisan' stimulus: FM Sitharaman pushes long-sought agri reforms

The changes included amending the archaic Essential Commodities Act, bringing in a law to dismantle inter-state barriers on movements of agricultural produce.
The government has turned the pandemic crisis to good account by pushing through long-sought legislative changes aimed at more remunerative prices for farmers, but at the risk of antagonising the states.

The changes included amending the archaic Essential Commodities Act, bringing in a law to dismantle inter-state barriers on movements of agricultural produce, and creating a legal framework for a kind of contract farming.

The Centre will have to wait for Parliament’s monsoon session or bring in Ordinances on these. The Centre, perhaps for the first time, has decided to frame legislation that will enable direct purchase from farmers outside the designated agricultural produce marketing committees (APMCs), limiting the state’s role in such types of trades.

For this purpose, it used its powers in the Constitution to regulate inter-state trade and intra-state trade in specified commodities under Entry 42 of the Union List and Entry 33 of the Concurrent List.

The legislation, announced as part of the Atmanirbhar Bharat package by Union Finance Minister Nirmala Sitharaman, will enable traders to buy farm produce from farmers directly anywhere in the country, even outside the regulated market yards.

This would usher in barrier-free inter-state trade and give a big boost to the government’s Electronic-National Agriculture Market (e-NaM) programme.

e-NaM wasn’t having the desired impact because free inter-state trade wasn’t being allowed for commodities traded on the platform due to many pieces of legislation by states.

The Central legislation, in conjunction with the recent APMC amendments by the BJP-ruled states of Madhya Pradesh, Uttar Pradesh, Gujarat, and Karnataka, provides a framework for big retailers and companies to purchase from farmers without going through the network of intermediaries. The recent changes by the states allow setting up private mandis, direct procurement by processors, and a single licence to trade anywhere in the state.

However, critics say bypassing states by invoking hitherto unheard provisions of the Constitution could create problems for the federal structure of the country because this will limit the states’ powers just to the mandi within their boundaries.   

“Currently APMC-notified mandis have to necessarily sell specified products on their premises or within designated areas. What the Centre has done is that it has tapped the Constitution to define any business happening outside the APMCs as trade which can be legislated upon centrally,” Sukhpal Singh, professor and chairperson, Centre for Management of Agriculture, IIM-Ahmedabad, told Business Standard.

He said reforms were good if they led to better prices for farmers, but taking away the states’ role in trading outside the designated APMCs could create legal hassles.

“If such big changes are being thought of, where is the need for keeping agriculture a state subject,” Singh asked.

A senior government official said mandis would continue to operate as they did, but the new legislation would enable direct procurement by entities outside mandis. The second important piece of reform Sitharaman announced was to amend the Essential Commodities Act (ECA), 1954, to bring out items such as cereals, edible oils, oilseeds, pulses, onions, and potatoes out of its purview.

“Measures such as stock limits will be allowed to be imposed only in exceptional circumstances like national calamities and famines with a surge in prices,” the minister said in her presentation.

Though in operation for years, the Act has been whittled down and very few items remain within its ambit. After this announcement, even those will go.

The third reform is a sort of Central law for contract farming enforceable in states. There is a model Act on contract farming but very few states have implemented it in full.

“A need was felt to frame Central legislation for contract farming because states weren’t implementing the model Act in the right spirit,” a senior official said.

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