Farms Act 2020

Introduction

Indian agriculture acts of 2020, often referred to as the Farm Bills, are three acts initiated by the Parliament of India in September 2020. The Lok Sabha approved the bills on 17 September 2020 and the Rajya Sabha on 20 September 2020. The President of India, Ram Nath Kovind gave his assent on 27 September 2020.



The Farm acts

The Three farm acts include:

  1. The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.

  2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

  3. Essential Commodities (Amendment) Act, 2020


The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.


Highlights of the Ordinance

  • The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 allows intra-state and inter-state trade of farmers’ produce beyond the physical premises of APMC markets.  State governments are prohibited from levying any market fee, cess or levy outside APMC areas. 

  • The Farmers Agreement Ordinance creates a framework for contract farming through an agreement between a farmer and a buyer prior to the production or rearing of any farm produce.  It provides for a three-level dispute settlement mechanism: the conciliation board, Sub-Divisional Magistrate and Appellate Authority.

  • The Essential Commodities (Amendment) Ordinance, 2020 allows the central government to regulate the supply of certain food items only under extraordinary circumstances (such as war and famine).  Stock limits may be imposed on agricultural produce only if there is a steep price rise. 

  • Prior to the 2020 legislation, agricultural trade in India could only be conducted in APMC market yards (mandis). This Act, however, allows trading in "outside trade areas"—such as farm gates, factory premises, warehouses, silos, and cold storages—and prohibits state governments from levying any market fee or cess on farmers, traders, and electronic-trading platforms for trading the produce of farmers in such areas.

  • The Act seeks to facilitate lucrative prices for farmers through competitive alternative trading channels to promote barrier-free inter-state and intra-state trade of agriculture goods.[7] It also permits the electronic trading of farmers' produce in the specified trade area, facilitating direct and online buying & selling of such products through electronic devices and internet.

Main Provisions

1. Freedom to conduct trade and commerce in a trade area.

Subject to the provisions of this Act, any farmer or trader or electronic trading and transaction platform shall have the freedom to carry on the inter-State or intra-State trade and commerce in farmers’ produce in a trade area.


2. Trade and commerce of scheduled farmers’ produce.

(1) Any trader may engage in the inter-State trade or intra-State trade of scheduled farmers’ produce with a farmer or another trader in a trade area:

Provided that no trader, except the farmer producer organizations or agricultural co- operative society, shall trade in any scheduled farmers’ produce unless such a trader has a permanent account number allotted under the Income-tax Act, 1961 or such other document as may be notified by the Central Government.

(2) The Central Government may, if it is of the opinion that it is necessary and expedient in the public interest so to do, prescribe a system for electronic registration for a trader, modalities of trade transaction and mode of payment of the scheduled farmers’ produce in a trade area.

(3) Every trader who transacts with farmers shall make payment for the traded scheduled farmers’ produce on the same day or within the maximum three working days if procedurally so required subject to the condition that the receipt of delivery mentioning the due payment amount shall be given to the farmer on the same day:

Provided that the Central Government may prescribe a different procedure of payment by farmer produce organization or agriculture co-operative society, by whatever name called, linked with the receipt of payment from the buyers.


3. Electronic trading and transaction platform.

(1) Any person (other than individual), having a permanent account number allotted under the Income-tax Act, 1961or such other document as may be notified by the Central Government or any farmer producer organization or agricultural co-operative society may establish and operate an electronic trading and transaction platform for facilitating inter-State or intra-State trade and commerce of scheduled farmers’ produce in a trade area:

Provided that the person establishing and operating an electronic trading and transaction platform shall prepare and implement the guidelines for fair trade practices such as mode of trading, fees, technical parameters including inter-operability with other platforms, logistics arrangements, quality assessment, timely payment, dissemination of guidelines in local language of the place of operation of the platform and such other matters.


(2) If the Central Government is of the opinion that it is necessary and expedient in public interest so to do, it may, for electronic trading platforms, by rules––

(a) Specify the procedure, norms, manner of registration; and

(b) Specify the code of conduct, technical parameters including inter-operability with other platform and modalities of trade transaction including logistics arrangements and quality assessment of scheduled farmers’ produce and mode of payment, for facilitating fair inter-State and intra-State trade and commerce of scheduled farmers’ produce in a trade area.


4. Market fee under State APMC Act, etc., in trade area.

No market fee or cess or levy, by whatever name called, under any State APMC Act or any other State law, shall be levied on any farmer or trader or electronic trading and transaction platform for trade and commerce in scheduled farmers’ produce in a trade area.


5. Price Information and Market Intelligence System.

(1) The Central Government may, through any Central Government Organization, develop a Price Information and Market Intelligence System for farmers’ produce and a framework for dissemination of information relating thereto.

(2) The Central Government may require any person owning and operating an electronic trading and transaction platform to provide information regarding such transactions as may be prescribed.

Explanation.––For the purposes of this section, the expression “Central Government Organization” includes any subordinate or attached office, Government owned or promoted company or society.


Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020


Highlights of the Ordinance

  • The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020 was promulgated on June 5, 2020.  It provides a framework for the protection and empowerment of farmers with reference to the sale and purchase of farm products. The provisions of the Ordinance will override all state APMC laws.


  • Farming agreement: The Ordinance provides for a farming agreement between a farmer and a buyer prior to the production or rearing of any farm produce.  The minimum period of an agreement will be one crop season, or one production cycle of livestock.  The maximum period is five years, unless the production cycle is more than five years.


  • Pricing of farming produce:  The price of farming produce should be mentioned in the agreement.  For prices subjected to variation, a guaranteed price for the produce and a clear reference for any additional amount above the guaranteed price must be specified in the agreement.  Further, the process of price determination must be mentioned in the agreement.


  • Dispute Settlement:  A farming agreement must provide for a conciliation board as well as a conciliation process for settlement of disputes. The Board should have a fair and balanced representation of parties to the agreement. At first, all disputes must be referred to the board for resolution. If the dispute remains unresolved by the Board after thirty days, parties may approach the Sub-divisional Magistrate for resolution. Parties will have a right to appeal to an Appellate Authority (presided by collector or additional collector) against decisions of the Magistrate. Both the Magistrate and Appellate Authority will be required to dispose of a dispute within thirty days from the receipt of application. The Magistrate or the Appellate Authority may impose certain penalties on the party contravening the agreement. However, no action can be taken against the agricultural land of farmer for recovery of any dues.



Main Provisions


Section 3- Farming agreement and its period

(1) A farmer may enter into a written farming agreement in respect of any farming produce and such agreement may provide for-

(a) the terms and conditions for supply of such produce, including the time of

supply, quality, grade, standards, price and such other matters; and

(b) The terms related to supply of farm services:

Provided that the responsibility for compliance of any legal requirement for providing such farm services shall be with the Sponsor or the farm service provider, as the case may be.

(2) No farming agreement shall be entered into by a farmer under this section in derogation of any rights of a share cropper.

Explanation-For the purposes of this sub-section, the term "share cropper" means a tiller or occupier of a farm land who formally or informally agrees to give fixed share of crop or to pay fixed amount to the land owner for growing or rearing of farming produce.

(3) The minimum period of the farming agreement shall be for one crop season or one production cycle of livestock, as the case may be, and the maximum period shall be five years:

Provided that where the production cycle of any farming produce is longer and may go beyond five years, in such case, the maximum period of farming agreement may be mutually decided by the farmer and the Sponsor and explicitly mentioned in the farming agreement.

(4) For the purposes of facilitating farmers to enter into written farming agreements, the Central Government may issue necessary guidelines along with model farming agreements, in such manner, as it deems fit.


Section 4- Quality, grade and standards of farming produce

(1) The parties entering into a farming agreement may identify and require as a condition for the performance of such agreement compliance with mutually acceptable quality, grade and standards of a farming produce.

(2) For the purposes of sub-section (1), the parties may adopt the quality, grade and standards-

(a) Which are compatible with agronomic practices, agro-climate and such other factors; or

(b) Formulated by any agency of the Central Government or the State Government, or any agency authorized by such Government for this purpose, and explicitly mention such quality, grade and standards in the farming agreement.

(3) The quality, grade and standards for pesticide residue, food safety standards, good farming practices and labour and social development standards may also be adopted in the farming agreement.

(4) The parties entering into a farming agreement may require as a condition that such mutually acceptable quality, grade and standards shall be monitored and certified during the process of cultivation or rearing, or at the time of delivery, by third party qualified assayers to ensure impartiality and fairness.

 

Section 5. Pricing of farming produce

The price to be paid for the purchase of a farming produce may be determined and mentioned in the farming agreement itself, and in case, such price is subject to variation, then, such agreement shall explicitly provide for-

(a) A guaranteed price to be paid for such produce;

(b) A clear price reference for any additional amount over and above the guaranteed price, including bonus or premium, to ensure best value to the farmer and such price reference may be linked to the prevailing prices in specified APMC yard or electronic trading and transaction platform or any other suitable benchmark prices:


Provided that the method of determining such price or guaranteed price or additional amount shall be annexed to the farming agreement.

 

Section 6- Sale or purchase of farming produce

(1) Where, under a farming agreement, the delivery of any farming produce is to be-

(a) Taken by the Sponsor at the farm gate, he shall take such delivery within the agreed time;

(b) Effected by the farmer, it shall be the responsibility of the Sponsor to ensure that all preparations for the timely acceptance of such delivery have been made.

(2) The Sponsor may, before accepting the delivery of any farming produce, inspect the quality or any other feature of such produce as specified in the farming agreement, otherwise, he shall be deemed to have inspected the produce and shall have no right to retract from acceptance of such produce at the time of its delivery or thereafter.

(3) The Sponsor shall,-

(a) where the farming agreement relates to seed production, make payment of not less than two-third of agreed amount at the time of delivery and the remaining amount after due certification, but not later than thirty days of delivery;

(b) In other cases, make payment of agreed amount at the time of accepting the delivery of farming produce and issue a receipt slip with details of the sale proceeds.

(4) The State Government may prescribe the mode and manner in which payment shall be made to the farmer under sub-section (3).

 

Section 7 Exemptions with respect to farming produce

(1) Where a farming agreement has been entered into in respect of any farming produce under this Act, such produce shall be exempt from the application of any State Act, by whatever name called, established for the purpose of regulation of sale and purchase of such farming produce.

(2) Notwithstanding anything contained in the Essential Commodities Act, 1955 or in any control order issued thereunder or in any other law for the time being in force, any obligation related to stock limit shall not be applicable to such quantities of farming produce as are purchased under a farming agreement entered into in accordance with the provisions of this Act.

 

Section 8 Sponsor prohibited from acquiring ownership rights or making permanent modifications on farmer’s land or premises

No farming agreement shall be entered into for the purpose of-

(a) Any transfer, including sale, lease and mortgage of the land or premises of

the farmer; or

(b) Raising any permanent structure or making any modification on the land or premises of the farmer, unless the Sponsor agrees to remove such structure or to restore the land to its original condition, at his cost, on the conclusion of the agreement or expiry of the agreement period, as the case may be:

Provided that where such structure is not removed as agreed by the Sponsor, the ownership of such structure shall vest with the farmer after conclusion of the agreement or expiry of the agreement period, as the case may be.


Section 9 Other parties to farming agreement

Save as otherwise provided in this Act, an aggregator or farm service provider may become a party to the farming agreement and in such case, the role and services of such aggregator or farm service provider shall be explicitly mentioned in such farming agreement.

Explanation.-For the purposes of this section,-

(i) "aggregator" means any person, including a Farmer Producer Organization,

who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor;

(ii) "Farm service provider" means any person who provides farm services.

 

Section 10 Alteration or termination of farming agreement

Save as otherwise provided in this Act, an aggregator or farm service provider may become a party to the farming agreement and in such case, the role and services of such aggregator or farm service provider shall be explicitly mentioned in such farming agreement.

Explanation.-For the purposes of this section,-

(i) "aggregator" means any person, including a Farmer Producer Organization,

who acts as an intermediary between a farmer or a group of farmers and a Sponsor and provides aggregation related services to both farmers and Sponsor;

(ii) "Farm service provider" means any person who provides farm services

 

Section 11 Alteration or termination of farming agreement

At any time after entering into a farming agreement, the parties to such agreement may, with mutual consent, alter or terminate such agreement for any reasonable cause.

 

Section 12 Establishment of Registration Authority

(1) A State Government may notify a Registration Authority to provide for electronic registry for that State that provides facilitative framework for registration of farming agreements.

(2) The constitution, composition, powers and functions of the Registration Authority and the procedure for registration shall be such as may be prescribed by the State Government.

The Essential Commodities (Amendment) Ordinance, 2020

Highlights of the Ordinance

It removes cereals, pulses, oilseeds, edible oils, onions and potatoes from the list of essential commodities. It will deregulate the production, storage, movement and distribution of these food commodities.

The Essential Commodities (Amendment) Ordinance, 2020 was promulgated on June 5, 2020. It amends the Essential Commodities Act, 1955. The Act empowers the central government to control the production, supply, distribution, trade, and commerce in certain commodities.

Regulation of food items: The Essential Commodities Act, 1955 empowers the central government to designate certain commodities (such as food items, fertilizers, and petroleum products) as essential commodities.  The central government may regulate or prohibit the production, supply, distribution, trade, and commerce of such essential commodities.  

The Ordinance provides that the central government may regulate the supply of certain food items including cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances.  

These include: (i) war, (ii) famine, (iii) extraordinary price rise and (iv) natural calamity of grave nature.

Stock limit: The Ordinance requires that imposition of any stock limit on agricultural produce must be based on price rise.  A stock limit may be imposed only if there is:

A 100% increase in retail price of horticultural produce; and

A 50% increase in the retail price of non-perishable agricultural food items. The increase will be calculated over the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.



Conclusion

The acts have established a crucial milestone in providing relief to the consumers as well as the farmers of India. Though the Act has neglected several legal and administrative measures required for its efficient implementation; it did acknowledge the Economic Survey and the Court’s Opinions.

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