Centre's draft farm policy looks to restore state autonomy in agri-markets

Following the repeal of the 2021 farm laws, a new policy looks to pass the baton of enacting wide-ranging agricultural reforms to states, a position that they held earlier

After backing down in the face of farmers’ protests over the now-repealed farm acts, the Centre’s new draft policy framework on agriculture marketing is looking to put the onus of freeing agriculture markets back onto states. It has also called for a more collaborative approach between the Centre and states in reforming farm markets. 

 

The draft, released a few days back for public comments, also talks of setting up a GST-like body for building consensus with states on various outstanding issues vis-a-vis farm marketing, including a unified national market for agricultural produce with single licensing and single fees, a holy grail of sorts for years. 

 

This time, the Central government has taken cognisance of the pivotal role that states play in agriculture marketing upfront, experts said. 

 

The draft policy acknowledges in the third chapter that ‘being agricultural marketing a State subject under Entry 28 of List-II (State List) of the VII Schedule under article 246 of the Constitution, central and state governments and their agencies together with other stakeholders will have to work in coordination and tandem with the missionary zeal (sic).’ 

 

It also calls upon states to frame and notify their own state policy framework for agriculture marketing on the lines of the national policy. 

 

Dr S Mahendra Dev, former chairman of Commission for Agriculture Costs and Prices (CACP) said that the draft policy provides an overview of markets and needed policies. “I have said earlier that agriculture is a state subject and states should be consulted or persuaded in a diverse country like India. This draft is better than the imposed farm laws earlier,” he told Business Standard. 

 

"The draft is better because it doesn’t give diktat to the states. It looks more persuasive. It talks about APMCs, development of private markets, infrastructure, value chains etc. Political economy plays an important role at state level. States will do agriculture marketing reforms based on political economy,” Dev added. 

 

It needs to be kept in mind that before 2020, when the Centre passed the three controversial farm acts, agriculture marketing was always part of a state’s domain. In fact, one the major criticisms of the farm laws was that they infringed upon states’ sovereign right to frame legislation on agriculture marketing. 

 

The new draft policy seeks to correct those mistakes by building on two previous so-called ‘model acts’: the State Agricultural Produce Marketing (Development and Regulation) Act, 2003 and the 'Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017’, besides "holding workshops, meetings and seminars, etc”.  

 

Many of the provisions and objectives in the new draft policy were also objectives of the now repealed acts, particularly the one on deregulating mandi trade, or the ‘Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020’. 

 

Based on the learnings from the two model laws and other deliberations over the years, the Centre has now drawn up a list of 12 areas of reforms that it wants to take up with the states. This will allow it to enact enabling provisions in laws concerning agricultural produce marketing committees (APMC), with the objective of making markets more accessible to farmers and ensure competition and transparency. 

 

The union government has also identified areas that states need to work on, such as allowing setting up of private wholesale markets and framing rules under the acts in states where such legislations do exist. It has also urged states to make enabling provisions in their APMC acts to facilitate direct purchase by processors, exporters, organised retailers, bulk buyers from farm-to-gate at scale. 

 

The draft policy says most states have such provisions but that purchases are not happening at scale to make any material difference to the farmers’ income. It also talks of working with states to declare warehouses or silos or cold storages as deemed market-yard; allowing establishment and operation of private e-trading platforms; single-time levy of market fees across the state; and a single unified trading licence valid across the state. 

 

It also wants states to act upon rationalisation of market fees; rationalisation of commission charges, and recognition of trading licences of other states, with a reciprocity condition. 

 

The draft policy also calls for deregulation of trading in perishables outside the market, which it acknowledges has been done but in a very uneven manner. 

 

"In the new policy, most provisions are good but I personally do not find any merit in asking states to keep perishables outside the APMC regulation as some sort of regulation is needed in their trading as well to protect farmer interest," Sukhpal Singh, former chairperson of the Centre for Management in Agriculture at IIM-Ahmedabad, told Business Standard.  

 

Throwback to 2020 

 

Four years ago, when the Centre passed the three farm acts in Parliament, one of the major points of contention for several states, including some ruled by the Bharatiya Janata Party (BJP), was that they infringed upon the sovereign right of states to frame laws on agriculture marketing. Of the three, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act-2020 was the one most debated and opposed by the states. 

 

The act sought to provide an ecosystem for farmers and traders to sell and buy outside designated mandis, without disturbing the existing mandi structure and without any tax or levies on them. This was proposed to be done by categorizing the entire area outside the mandi anywhere in the country as a trade area. 

 

The act was seen by many states, led by the non-BJP ruled Punjab, as an affront to the federal principles enshrined in the Constitution. In fact, Punjab was among the few states which not only vocally opposed the farm laws but also passed three legislations in the state assembly that sought to limit the role and functioning of the Central Agriculture Acts.  

 

Of the three  bills passed by Punjab in response to the Central legislations, the first one was called ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) (Special Provisions and Punjab Amendment Bill) -2020’, the second one was ‘The Farmers’ (Empowerment and Protection) agreement on price assurance and farm services (Special Provisions and Punjab Amendment) Bill-2020’, and the third one was called ‘The Essential Commodities (Special Provisions and Punjab Amendment) Bill 2020. A fourth legislation was also passed that prohibited any recovery of land up to 2.5 acres. Incidentally, the names of the first three Punjab Laws are identical to the Central legislations, but are distinguished by the insertion of the words ‘Special Provisions’ and ‘Punjab Amendment’. 

 

While Punjab didn’t outrightly reject the central laws, it passed bills that amended specific clauses of those, and added new provisions to them. Two other Congress-ruled states – Chhattisgarh and Rajasthan – had planned to enact similar legislation nullifying the Central acts. 

 

"This (draft policy) to me is a welcome change from the previous laws and the way they were roughshod, and a realisation within the system that both Centre and states have to work together to bring about a change in the agricultural marketing system in the country," Singh of IIM- A said.  

 

Not only this, the draft policy also talks of Centre working with the states to redefine the need for market density on a state-wise basis considering the geographical area, production pattern, marketable surplus, transport facility, and other logistics. 

 

The draft also calls upon states that while doing so (redefining market density) they should ensure that there should be one private market in every revenue division of the state to start with, which should subsequently be scaled up to be at least one in each district. 

 

Contract farming: Is the time ripe?  

 

However, some experts say that one big letdown from the 2020 legislation in terms of content in the draft policy is the apparent side-stepping of central oversight on contract farming. 

 

One of three now repealed Farm Acts, one called, ‘Farmers (Empowerment and Protection) Agreement On Price Assurance and Farm Services Act 2020’, also known as the Contract Farming Act, provided a framework for such agreements between farmers and buyers. 

 

The new policy draft now refers to the model contract farming act of 2018 promulgated by the Centre to say that this is the right time to promote it as a market and price risk mitigating tool, as a large number of produce cluster specific FPOs have come up in the country. 

 

It adds that promotion of contract farming may be beneficial specifically for price volatility-prone perishable crops as well as for processable and exportable crops. 

 

"This to me is a slight let-down because contract farming needs regulation as standard in export markets can not be attended without it. For this, a legislation at some level is needed more so when price assurance is one of the stated objectives of the new policy," Singh said. 

 

GST-like body 

 

Another important objective which the draft talks about is the setting up of an empowered agricultural marketing reform committee of state agricultural marketing ministers, along the same lines as the empowered committee of state finance ministers on GST. 

 

The objective is to push states to adopt the reform provisions in the state APMC Acts, notify the rules, and build consensus among themselves to move towards a unified national market for agriculture produce through single licensing or registration system and single fee, the draft said. 

 

“The suggestion of ‘Empowered Agricultural Marketing reforms committee of State Agriculture Ministers on the lines of GST committee is in the right direction. But here again, states have to come together for a unified market,” says CACP’s Dev.