Ordinances on interstate agricultural trade, contract farming outside the judicial process

by Jun 6, 2020Economy0 comments


State governments cannot tax agricultural trade under the new central interstate commerce law that virtually allows farmers to sell their products anywhere in the country without being prevented by APMC mandis, according to the Ordinance issued on Friday. Through another ordinance, farmers would obtain a share of the post-contract price increase, after signing contract farming agreements with private actors. In addition, they will be guaranteed minimum price coverage if open market/mandi rates drop dramatically.

While farmers under the new central law will now be free to sell their produce in any market, disputes with buyers could first be raised with a subdivisional magistrate, while appeals will go to the district magistrate. The two ordinances are kept out of the judicial process. No state levies will be imposed on trade outside the APMC mandis. Payment must be made to the farmer within three business days. Under the new law, anyone with a PAN card can trade under the new law, while the Center reserves the right to establish any new procedures, including mandatory prior registration.

Agricultural producer organizations and cooperatives can establish an electronic platform for trade, but cannot charge a fee for making services available to farmers. The two ordinances, along with one in the offing, to give effect to the proposed amendments to the Commodities Act to ease product stock restrictions until food processors in the value chain together help untangle all agriculture. Analysts consider that from the food processing value chain to retailing and giving farmers the option to sell their products in any market across the country.

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According to the law for contract agriculture, in case the market prices of any agricultural product increase substantially, the farmers will have participation (to be defined in the Rules) above the contracted price, while they will also have a minimum price guaranteed if the open market/mandi rates drop dramatically. The recovery of the quantity from the farmers will not exceed what the farmer has received as an advance from the processor / FPO / merchant with whom the contract was signed, while his land rights will be protected at any cost.

Contract farming could also help the government’s crop diversification program, as farmers will be sure of sales and prices. Changes to the Commodities Act will eliminate grains, edible oil, oilseeds, legumes, onions, and potatoes from their grasp. The reforms will help to evacuate surpluses from production areas to demand areas seamlessly, to the benefit of agricultural producers and actors across the agricultural value chain, who have also been promised strong support through of schemes and disbursements to build infrastructure and logistics chains from the gateway to retail trade, and even exports.

Agricultural producer organizations (FPO) and cooperatives have been allowed to establish their own trading platform, but are not allowed to charge any fees for this. The law also allows the Center to establish an organization to disseminate market prices to farmers and also collect market information.


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