The agriculture ministry has created a cell to modernize farm logistics and supply value chains in line with the recent announcements of reforms in the sector by finance minister Nirmala Sitharaman. This includes making amendments to the six-decade-old Essential Commodities Act and pushing two ordinances — freeing up farm trade from all restrictions and guaranteeing a legal framework for pre-agreed prices to farmers — an official said, requesting anonymity.
The reforms cell will help coordinate efforts to streamline supply and transportation of farm produce, and also aid projects to add value to primary farm goods for better prices to the farmers, the official said.
The agriculture ministry is gearing up to new challenges and making all preparations in the wake of the government’s decision to free agricultural markets of middlemen, who often take a sizeable cut of value from the produce sold.
The reforms cell will additionally look after a national mission of “One District One Crop” to boost crop diversity. The reforms cell will play a key role, according to the official, in the aftermath of changes such as amendments to The Essential Commodities Act of 1955.
“Farmers have been unable to get better prices due to lack of investment in cold storage, processing and export as the entrepreneurial spirit gets dampened due to hanging sword of Essential Commodities Act,” a recent official statement had stated.
The government hopes that scaling back the ECA, 1955, will help drive up investment in cold storages and the food supply chain. Cold storages are refrigerated warehouses that can store perishables for up to six months. Refrigerated old stocks can cool food prices in times of scarcity.
The ECA was mainly used to curb inflation by empowering the Union and state governments to dictate quantities traders can store and also restrict the movement of any commodity deemed “essential”. Under the law, the government generally imposes stock limits to discourage hoarding of items such as pulses and vegetables.
The government last week promulgated ‘The Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020’. The ordinance, which is a law promulgated when Parliament is not in session, effectively brings down the curtains on the decades-old agricultural produce market committees regulations (APMC) system that regulates buying and selling of farm produce.
APMC regulations require farmers to only sell to licensed middlemen in notified markets, usually in the same area where farmers reside, rather than in an open market, scuttling price discovery. “The agriculture ministry will facilitate through new initiatives that will help farmers take full advantage of the recent reforms,” the official said.
Ushered in during the 1960s, APMC regulations were meant to protect farmers from distress selling. Over time, these have often turned into cartels and monopolies, evidence suggests.
In December 2010, when onion prices peaked, a probe by the country’s statutory anti-monopoly body, the Competition Commission of India, revealed that one firm accounted for nearly a fifth of the total onion trade for that month at Lasalgoan APMC, Asia’s largest onion market in Maharashtra’s Nashik.