Farm Bills 2020 Explained

 The government heralding a new set of reforms in Agriculture by passing three ordinances in Parliament to support small farmers, promote agribusiness and agriculture marketing.

Essential Commodities (Amendment) Ordinance

Amending the Essential commodities act 1955 which regulates the stock of foodgrains, fertilizer, and petroleum products.  Now it is extended to cereals, pulses, potatoes, onions, edible oil seeds, and oils only under extraordinary circumstances like war, famine, Hyperinflation, and natural calamity.  Removing agricultural produce from the list of essential commodities will lead to improvements in the modern food storage system.

The Farmers(Empowerment and Protection) Agreement on Price Assurance and Farm Service bill, 2020

Farming agreement between the farmers and buyer prior to the production of agriculture produce for the period of 1 to 5 years.  The process of price determination must be mentioned in the agreement.  In case disputes arise between farmers and buyers, there is an institutional dispute settlement mechanism through the Conciliation board.  The settlement of disputes disposed of within the period of thirty days.

The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020

Farmers' produce sold to licensed traders at APMC mandi.  According to the Parliament Standing Committee, limited traders involved in selling agricultural products which lead to monopolization and restrict competition.  This affects the farmers to sell the product for the price fixed by the limited traders.  Here the farmers are restricted to sell their produce for better remunerative prices.  So the ordinances brought the clause to allow farmers to sell the product to the different arena like Farm gates, Factory Premises, Cold Storage, even individual, companies and cooperatives in and outside their states.  The bill also restricts the states to levy any market fee, cess or any tax on farmers, traders, and electronic platforms.


The major objective of the ordinances is to allow different players to buy agricultural produce from the farmers.  An increase in Competition among the traders will result in better price discovery for the agricultural produce.  Multiple ways of marketing through buyers, private markets, corporates, retail consumers, and e-commerce sites help the farmer to sell their products in a feasible manner.

Why States like Punjab, Haryana opposed the Ordinances?

Overriding the state laws - Agriculture is a state subject, but the central government is involving in many aspects.  The state government will lose income from the levy collected from the Agriculture Produce Marketing Committees controlled trading.  The state government will lose control over the operation of mandis since the trade can happen anywhere.

Privatization of agricultural trading system - Big corporates will eat the income of small traders involved in selling the agricultural produce to the consumers.

The absence of a Price Stabilisation fund incases price fluctuations and the absence of a Rural development fund through a levy on the sale/purchase of notified private market yard.

No provision of taking the settlement disputes between farmer and trader to the court.  The matter can be resolved through mutual compromise, then can be solved through SDM or Deputy Commissioner.

There is a fear that the Minimum support price will wither away, it paved the way for a new zamindari system through big corporates.

Real Reforms:

  • To protect the interest of the farmers and effective implementation of the ordinances.  
  • Introduce Minimum Reserve price for agricultural produce by farmers which could be the starting point for auctions on sale.
  • In order to compete in the pan India market, farmers need to be equipped with a feasible digital system to find a better market and price discovery for their produce.
  • A better storage system will allow farmers to store or sell their produce in order to avoid selling goods at prices and rotting of perishable goods.
  • Linking the APMC market with e National Agriculture market, an unified market in India
  • Improve infrastructural development in the agricultural market in rural areas