New farm laws are rosy when looked through the digital lens

The devastating second wave of the Covid-19 pandemic has pushed lives and livelihoods to the brink. But this presents an opportune time to revisit the political economy of India’s agriculture considering three Farm Acts passed last year.

Despite the numerous articles and comment in the media, we are yet to see a comprehensive yet critical assessment of these laws in the era of digitalisation. Excluding the Essential Commodities (Amendment) Act, 2020, the other two laws — the Farmers Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 and the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 — have implications for agricultural input and output correlations, cost distribution, information governance, and data ownership and transparency.

Inclusive agribusiness

The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 includes the important elements of Agricultural Produce Livestock Marketing (Promotion and Facilitation) (APLM) Act, 2017 that can create an enabling yet competitive business environment to promote the adoption of electronic traceability system for food labelling, certification, and complying with food safety standards.

Second, the Act is inclusive in ‘trade area’ definition that farm gates, factory premises, warehouses, silos, cold storages, principal, and sub-market yards (APMCs) and private market yards can act as a medium of transaction for buyers and sellers. The Act does not repeal the elements of APLM Act, 2017 rather it converges with the former one.

Third, farmers’ waiting time for payment realisation can be reduced to three days from the date of transaction. To further reduce search or negotiation costs, farmer collectives can refer to the modal prices of commodities traded at the trade area and augment their decision-making.

Fourth, there is a clause in the Act on cancellation or suspension of the right to own, operate, and control the electronic trading and transaction platform. In case of a disputebetween the farmer and a trader under the Section 4, the parties can seek a mutually acceptable solution from the Conciliation Board to be appointed by the Sub-divisional magistrate of the notified revenue area. It will facilitate the binding settlement of the dispute for both the parties.

Fifth, electronic trading through electronic National Agriculture Market (eNAM) will gain traction with the introduction of AI-ML module. To enhance a broad-based participation of farmer collectives and buyers, the Agriculture Ministry added two trading modules to eNAM portal in May 2020.

The first module was warehouse-based trading software to facilitate electronic negotiable warehouse receipt-based trade in farm produce. The second module was farmer producer organisations-led trading module to promote their participation in electronic trading from collection centres or premises of farmer collectives. These modules can offer shared benefits to market participants by reducing their searching and transportation costs, waiting time for transaction and price realisations.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, which is an improvised form of the Agricultural Produce Livestock Contract Farming Services (Promotion and Facilitation) Act, 2018, enhances demand for high value commodities for better price realisation to farmers, crop diversification, and induce asset-specific investment, and technology adoption. In case of private oligopsony compelling small and marginal farmers accept poorer terms of their produce, the Act has stressed on a tripartite agreement between farmers, processors/ contract firm, and the state agency.

Second, farm produce entered in a farming agreement for production and sales shall be exempt from the application of any State Act, established for the purpose of regulation of sale and purchase of such farming produce.

Third, the Act empowers and protects farmers as regards to their engagement with agri-business firms, processors, wholesalers, exporters or large retailers for farm services and sale of future farming produce at a mutually agreed remunerative price framework. The modalities of production contract and marketing contract embedded in the farming agreement and terms of payment to farmers are elucidated in the Act.

Fourth, it is mentioned that “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 guaranteed price ..., 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 ...or electronic trading and transaction platform or any suitable benchmark prices.”

Fifth, there is potential scope of convergence as the contract agreement should be linked with the insurance or credit instrument under the scheme of Central Government or the State Government, or any financial service provider to ensuring risk mitigation for crop loss and flow of credit to the farmer or contract firm or both.

To sum up, domestic agri-value chains, which up until now are riddled with the informality, information asymmetry, poor credit access and market linkage, and non-retailer traders’ dominance in price setting will gradually be freed from inefficiency and be linked to global value chains. The power asymmetry between farmers and other stakeholders and the transaction uncertainty in agribusiness can be addressed with the execution of these laws. This augurs well for policymaking in the era of digitalisation.

The writer is Chairman, CFAM of IIM Lucknow. Views expressed are personal.

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