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New law for contract farming

Centre to push through agri-marketing reforms as part of stimulus package

Making long-pending agricultural marketing reforms the centrepiece of the third tranche of the Atmanirbhar Bharat Abhiyan economic stimulus package, Union Finance Minister Nirmala Sitharaman on Friday announced plans to enact a central law to permit barrier-free inter-State trade of farm commodities and ensure a legal framework to facilitate contract farming.

The third tranche also included plans to invest Rs. 1.5 lakh crore to build farm-gate infrastructure and support logistics needs for fishworkers, livestock farmers, vegetable growers, beekeepers and related activities, although this includes some previously budgeted money and extensions of existing schemes. The Centre will deregulate the sale of six types of agricultural produce, including cereals, edible oils, oilseeds, pulses, onions and potatoes, by amending the Essential Commodities Act, 1955, Ms. Sitharaman said.

Several agricultural economists and farm activists welcomed the reform and investment announcements, but questioned the lack of immediate support to help farmers survive the current crisis.

The Essential Commodities Act was enacted at a time of food scarcity, and needs to reflect current concerns, the Finance Minister said. “Now what is happening is that farmers are producing. There is an abundance of crops, and this sometimes leads to issues because they would want to export, and we don’t permit that. Because of a flip-flop sometimes, farmers don’t get the benefit. Some other times, the consumers suffer. So there is a need to amend the Act,” she said.

No stock limit

Stock limits will not be imposed on these commodities except in case of national calamity or famine or an extraordinary surge in prices, the Minister said, adding that even these stock limits would not apply to processors and exporters. The Centre has been attempting to reform agricultural marketing through a model Act which it encourages States to adopt. However, it now intends to enact a central law to allow farmers to sell produce at attractive prices beyond the current mandi system, facilitating barrier-free inter-State trade and e-trading. Asked how the Centre could enact a law on agricultural marketing, which remains on the State list, the Minister pointed out that inter-State trade falls in the central list.

She added that plans were underway to bring in a facilitative legal framework to oversee contract farming, which would provide farmers with assured sale prices and quantities even before the crop is sown and also allow private players to invest in inputs and technology in the agricultural sector.

Agricultural economist and ICRIER professor Ashok Gulati, who has been advocating these reforms for many years, was elated by the announcement. “These are big, bold steps in the right direction which will benefit both farmers and consumers. This is long overdue and should have been done in Modi’s first term, but certainly the government deserves compliments for converting a crisis into an opportunity,” he said, noting that some of these reforms have been under discussion for two decades.

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