Farm Bill, 2020- A Detailed Analysis.UPSC GS Paper: III

By Manish Singh|Updated : October 5th, 2020

Farm Bill, 2020- A Detailed Analysis.



This farm Bill originally named(The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020) was bought by the central government as an ordinance named Farmers(Empowerment and Protection) Agreement of Price Assurance and Farm Services ordinance, 2020. Now the government has passed this bill recently. Therefore to understand this article we have to go through the provisions of ordinance also apart from this we will understand the gains and losses concerned with the provisions of the bills.

Major points of the Ordinance being passed

  • This ordinance allows intra-state and inter-state trade of farmers’ produce beyond the physical boundations of APMC markets in states. State governments are also prohibited from levying any market fee, cess or levy outside given APMC mandi areas. 
  • The Farmers Agreement bill made a framework for contract farming through an agreement between a farmer and buyer before the production or rearing of any farm produce. It provides for a 3-level dispute settlement mechanism: The conciliation board, Sub-Divisional Magistrate and Appellate Authority which will work in channel.
  • The Essential Commodities (Amendment) Ordinance, 2020 empowers the central government to regulate the supply of given food goods only under extraordinary circumstances (such as war and famine and some predefined areas). Sometimes Stock limits may be imposed on agricultural produce only if there is a steep price rise being observed. 


 Major Issues related to the ordinance.

  • The major focus of the Ordinances is to increase the number of buyers for farmers’ produce, by allowing them to trade their produce freely without any license or any stock limit. This will lead to an increase in competition among them which will finally help farmers to achieve better prices for the farmers. This Ordinance focuses on Relaxed trade and increases the number of buyers in the market.
  • previously an Standing Committee on Agriculture also demanded of this type of system which ensures remunerative prices for farmers. Most farmers still did not have any access to government procurement facilities and APMC markets. It is also noted that small rural/ suburban markets can emerge as a good choice for agricultural marketing if they are equipped with adequate facilities.  
  • A Committee also recommended that the Gramin Agricultural Markets scheme should be made fully funded by the central scheme and scaled to ensure presence of a Haat in each panchayat of the country.


What are APMSs and the Problems with the APMCs

  • The Agricultural markets in India are mainly regulated by state Agriculture Produce Marketing Committee (APMC) laws. 
  • Basically The objective of setting up APMCs was to ensure fair trade practice between buyers and sellers for effective price of farmers’ produce.

APMCs work: 

  1. To regulate the trade of farmers’ produce by providing licenses to buyers, commission agents, and private markets, 
  2. Imposing levy market fees or any other charges on such trade. 
  3. To Provide required infrastructure within their markets to facilitate the trade within.

Problems related with APMCs 

  1. Most of the APMCs have a limited number of traders operating, which leads to cartelization and reduces competition.
  2. The number of unnecessary deductions like commission charges and market fees,Traders, commission agents, and other torts organise themselves into associations, which do not allow easy entry of new persons into market yards and makes the market difficult to compete.

How these Acts are restricting the the growth of agriculture marketing : 

  1. By restricting more buyers.
  2.  Restricting private markets. 
  3. stopping Direct sale to businesses and retail consumers.
  4.  Non promotion of online transactions
  5.  Lack of Competition in the system. 


Central government released the model APMC act, with contract farming Acts to Promote:

  1. free trade of farmers’ produce, 
  2. promote competition through multiple marketing channels, 
  3. to promote farming under pre-agreed contracts.

But The government observed that states have not implemented several reforms of the suggested model Acts. This time the central government set up a Committee of Agriculture Ministers of all states to find a solution to a good agricultural marketing system. the suo moto was: 

  1. Adoption and implementation of model Acts by states timely, 
  2. Changes in the Essential Commodities Act, 1955 (which provides for control of production, supply, and trade of essential commodities) for attracting private capital in agricultural marketing and infrastructure.


For this: The central government promulgated three Ordinances

  1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020.
  2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020.
  3. Essential Commodities (Amendment) Ordinance, 2020.

The major aim of these ordinances was: 

  1. Facilitate hurdle -free trade of farmers’ produce outside the markets notified under the various state APMC laws, 
  2. Define a framework for contract farming, and 
  3. implementing stock limits on agricultural produce only if there is a sharp increase in retail prices. All three Ordinances unitedly aim to increase opportunities for farmers to enter long term sale contracts, increase availability of buyers, and permit buyers to purchase farm produce in bulk.


Key Features of these different Ordinances:

Farmers Produce Trade and Commerce(Promotion and Facilitation)Ordinance- 2020:

provisions related to Trade of farmers’ produce: 

  • This Ordinance allows intra-state and inter-state trade of farmers’ produce outside: 
  • The physical premises of market yards which were run by market committees formed under the state APMC Acts.
  • Other markets which are notified under the state APMC Acts. That can be any place of production, collection, and aggregation of farmers’ produce can include the following: 
  1. farm gates,
  2. factory premises,
  3. warehouses, 
  4.  silos, 
  5. cold storages.


Electronic trading: 

  • This Ordinance permits the electronic trading of farmers’ produce (agricultural produce regulated under any state APMC Act) which were in the specified trade area.  
  • An electronic trading and transaction platform to be set up to provide a system for the direct /online buying/selling of such produce through electronic devices through the internet.  
  • The following entities which are going to be establish and operate such platforms:
  1. companies, 
  2. partnership firms, 
  3. registered societies, 
  • they should having permanent account number under the Income Tax Act, 1961 or any other document notified by the central government,
  • Farmer producer organisations or agricultural cooperative society can also do this .


Market fee has been abolished: 

  • This Ordinance stops state governments from imposing any market fee, cess or levy like extra taxes on any Farmer/traders/electronic trading platforms for any trade of farmers’ product conducted in an ‘outside trade area’ far from mandi.


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

  • Farming agreement of the ordinance: 
  1. It consists of a farming agreement between a farmer and a buyer prior to the production or rearing of crops. Minimum period of agreement will be one crop season, or it can be one production cycle of livestock.  
  2. The maximum period is defined for five years, unless the production cycle is not more than five years.
  • Pricing of farming produce: 
  1. The pricing of the agriculture produce should be mentioned in the agreement.  
  2. For prices subject to variation, 
  3. Guaranteed price for the produce must be defined for any reference additional amount above the guaranteed price must be clearly defined in the agreement.  
  4. The rest process of price determination must be also mentioned in the agreement.
  5. The Dispute Settlement mechanism which is also defined must be followed: 


What is Essential Commodities (Amendment) Ordinance, 2020 Regulation of food items and changes made: 

  • This Essential Commodities Act, 1955 empowers the central government to enlist certain commodities Like: food items, fertilizers, and petroleum products any other product which suddenly becomes of mass use as essential Commodity.  
  • The central government if it wants to ensure smooth supply of aforementioned goods can regulate or prohibit the production, supply, distribution, trade, and commerce of pre-described essential commodities whenever it wants.  
  • This Ordinance bought by the central government empowers it to regulate the supply of given food items which includes cereals, pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances. These include: 
  1. War
  2. Famine
  3. Extraordinary price rise
  4. Natural calamity of extreme state.


Stock limit scenario: 

  • The Ordinance says that implementation of any storage limit on agricultural products must be based on the situation of price rise. A storage limit may be imposed in the condition when:
  1. There is a 100% increase seen in the retail price of horticultural(Perishable) produce.
  2. A 50% increment in the retail price of non-perishable agricultural food goods.   
  3. This increment will be calculated over the existing price immediately exceeding 12 months, or the average retail price of the last 5years, whichever is lower.

 Also Read: Three Farm Bills and Issues


The Gainers and Losers from These farm Bills/ Ordinance

Now the question after making these ordinances as acts is that Will States and their APMCs be impacted and What does it mean for government procurement does it make any change at all?

What Is the Minimum Support Price and its related challenge?

  • The farmers wanted to Protect MSPs, or minimum support prices, which according to them can be damaged by the new laws. Actually MSP are the pre-defined prices at which the Central government purchases the extra produce from farmers.
  • These prices may differ from market rates, and are declared for 23 crops at the beginning of each sowing season. 
  • The Centre government only purchases paddy, wheat and selected pulses in large quantities, statistically only 6% of farmers in the country actually sell their produce at MSP Rates.
  • According to Shanta Kumar Committee’s report, 2015 that was published using NSSO data, reveals that No law can directly cross check upon the MSP system. 
  • However, most of the government procurement centres in States are located within the notified APMC mandis that itself is an issue. 
  • Farmers always fear that by promoting tax-free private trade of agri-produce outside the APMC mandis will make these mandies of no use, which could lead to a reduction in government procurement itself in future. Farmers are also demanding that MSPs should be made universal, within mandis and outside, so that all buyers either government or private will have to use these rates as a floor price below which sales cannot be made.
  • Some States have already invested a lot in the APMC system, with a strong mandi network, a well-oiled system of arthiyas or commission agents facilitating procurement, and link roads connecting most villages to the notified markets and allowing farmers to easily bring their produce for procurement.


Some other Related Issues?

  • One other major concern is that Agriculture is the subject of the State list, so it is questionable that the Centre should not make legislation on this subject at all, it will also impact the federal fabric. 
  • The states are also concerned about the loss of revenue from mandi taxes and fees which in some states lead to huge loss to exchequer.
  • Some economists and activists say both Punjab and Rajasthan are considering legal measures to expand the bounds of their APMC mandi yards to ensure that they can continue collecting taxes on all agricultural trade within their State’s borders. 
  • Some newborn States have set up all new infra for APMC mandies, which all will go in vain after the implementation of this decentralised procurement system.

Also Read: Three Farm Bills and Issues


  • The majority of agricultural marketing already happens outside the mandi network, with only 7,000 APMC markets operating across the country. Bihar, Kerala and Manipur do not follow the APMC system at all. However, most private buyers are currently small traders at local mandis. 
  • The removal of stock limits and facilitation of bulk purchase and storage through the amendment to the Essential Commodities Act could bring large corporate players into the agriculture space. Although they will bring much-needed investment, they could also skew the playing field, with small farmers unlikely to match them in bargaining power.


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Aakshi Bansal
Thank u so much for this. Plz prodive a productive analysis of Labour code bill also.

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