Govt promulgates ordinances on inter-state agri trade, contract farming

However, both of Ordinances give unbridled power to the lower bureaucracy in times of dispute between farmers and buyers that can be companies in case of the Contract agreement.

The central government on Friday promulgated two ordinances that seek to free inter-state trade in agricultural commodities and facilitate contract farming between growers and processors.

However, both ordinances give unbridled power to the lower bureaucracy in times of dispute between farmers and buyers that can also be companies in case of the contract agreement.

The sub-divisional magistrates (SDM), in some of the provisions, have been vested with powers to adjudicate. This might lead to problems in implementation.

The first ordinance called The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance 2020 allows any trader to engage in inter-state and intra-state trade of scheduled agriculturual produce with a farmer or another trader in a trade area.

A trade area is defined as the any area, which is outside the APMC acts and existing private mandis. No transactions done within this zone will be subject to any state market fee, cess or levy.

Any transaction in this area needs to be paid for within three days, while the receipt for such transactions has to be paid immediately.

The ordinance empowers anyone to trade in agricultural commodities armed with just a PAN Card or any other document as specified by the Central government.

The ordinance also empowers anyone to open an e-trading platform for which the Centre can specify rules. In the event of any dispute in such transactions, the parties, in this case the farmer and trader, who has bought from him outside the mandi might approach the SDM, who will then set up a reconciliation board comprising a chairman and at least two members.

In case of the contract farming ordinance, also promulgated on Friday by the President, and called the The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020, allows any company, or processors, or FPO, or Cooperative Society to enter into a contract farming arrangement for a minimum of one crop cycle in case of crops, or one production cycle, in case of livestock. The maximum period for such an arrangement will be five years.

The price to paid to the farmer in such a contract farming arrangement shall be mutually decided, or in case of volatility, a minimum price has to be paid on top of which a premium also need to paid by the company.

In case of any dispute if the farmer is at a fault, the buyer can recover the inputs contributed by him and the advance made by him.

No state act, or law, will be applicable to agriculture produce grown through this arrangement.

The ordinance strictly prohibits any contractual arrangement which has an encumbrance on the farmer's land.

If the buyer fails to make payment on time, he will have to pay a penalty of 1.5 times the value. He can inspect the produce during production or get is assessed through a third party. The agreement format would be in line with the Model Contract Farming Act, framed  earlier by the NITI Aayog.

The state will have powers to frame rules under the ordinance, while the SDM will be the primary dispute resolution authority. 

(Click on pictures to read full ordinances)