Farm Bill, 2020: All you need to Know

Two farm reform bills passed by Lok Sabha, 2020

Author: Narayani Modi, Mewar Law Institute


Lok Sabha passed 2 reform farm bills on September seventeenth, 2020 amid protests from the opposition parties and a part of farm organizations. 

These 2 bills square measure namely: 

  •  Farmers’ produce Trade and Commerce (Promotion and Facilitation) Bill, 2020[1]
  •  Farmers (Empowerment and Protection) Agreement of worth Assurance and Farm Services Bill, 2020[2]

Agricultural markets in Asian country square measure principally regulated by state APMC laws. The APMCs were started to confirm a method of truthful trade between the consumers and sellers for effective worth discovery of a farmer’s turn out. APMCs can, (1) regulate farmer’s trade by providing licenses to the consumers, commission agents and personal markets, (2) levy market fees or the other charges on such trade, and (3) give a necessary infrastructure at intervals their markets for the acceleration of the trade.

The committee on Agriculture (2018-19) noted that availableness of a clear, simply accessible, and economical selling platform could be a pre-requisite to confirm remunerative costs for farmers.  Most of the farmers lack access to government procure facilities and APMC markets it had been noted that tiny rural markets will emerge as a viable various for agricultural selling if they’re given the correct infrastructure facilities.  

 As a result, The central government enforced 3 Ordinances on Gregorian calendar month five, 2020: (i) the Farmers’ turn out Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, (ii) the Farmers (Empowerment and Protection) Agreement on worth Assurance and Farm Services Ordinance, 2020, and (iii) the Essential Commodities (Amendment) Ordinance, 2020.

The Ordinances along look to (i) facilitate a barrier-free trade of the farmer’s turn out outside the markets that square measure notified beneath the varied state APMC laws, (ii) outline a framework for contract farming, and (iii) impose stock limits on agricultural turn out as long as there’s a pointy increase in retail costs. 

The 3 Ordinances jointly aim to extend opportunities for farmers to enter future sale contracts, increase the number of consumers, and permit consumers to buy farm turns out in bulk.

The bill and their highlights

  1. Farmers’ manufacture Trade and Commerce (Promotion and Facilitation) Bill, 2020: {to provide }supply}manufacture} associate scheme wherever traders associated farmers would get pleasure from their freedom of selection relating to sales and get of farmer’s produce that facilitates remunerative costs through competitive different trading; to market an economical, clear associated barrier-free bury and intra-State trade of farmer’s manufacture outside the physical premises of markets; to supply an increasing framework for electronic commercialism and for matters connected with that or incidental to it. 

 Key features:

  • Trade of farmers ‘manufacture: The Ordinance allowed intra-state and inter-state trade of farmer’s produce outside: (i) the physical premises of market assigned by market committees that square measure shaped underneath the state APMC[3] Acts and the other markets notified underneath the state APMC Acts. Such trade will be conducted in associate ‘outside trade area’, i.e., anywhere of production, collection, aggregation of farmer’s manufacture which has (i) farm gates, (ii) warehouses, (iii) manufacturing plant premises, (iv) silos, and (v) cold storages. 
  • Electronic commercialism: The Ordinance permits the electronic trading of scheduled farmers’ manufacture (agricultural manufacture regulated underneath any state APMC Act) within the nominative trade space. associate electronic commercialism and dealing platform could also be created to facilitate the direct and on-line shopping for and commerce of such merchandise through electronic devices and also the web. the subsequent entities could establish and operate such platforms: (i) corporations, partnership corporations, or registered societies, having permanent account variety underneath the taxation Act, 1961 or the other document notified by the central government, and (ii) a farmer producer organization or agricultural cooperative society. 
  • Market fee abolished: The Ordinance prohibits state governments from levying any market fee, or levy on farmers, traders, associated electronic commercialism platforms for the trade of farmer’s manufacture conducted in an ‘outside trade area’.
  • Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020: to {produce} associate system wherever traders associated farmers would get pleasure from their freedom of alternative concerning sales and buy of farmer’s produce that facilitates remunerative costs through competitive different trading; to push an economical, clear associated barrier-free put down and intra-State trade of farmer’s manufacture outside the physical premises of markets; to produce an increasing framework for electronic mercantilism and for matters connected thereupon or incidental to it.  

Key features:  

  • Farming agreement: The Ordinance provides for a farming agreement between a farmer and a customer before the assembly or rearing of any farm manufacture.  The minimum amount of associate agreement is going to be one crop season or one production cycle of eutherian. the utmost amount is 5 years unless the assembly cycle is quite 5 years.
  • Pricing of farming manufactures: the worth of farming produce ought to be mentioned within the agreement.  For costs subjected to variation, a warranted worth for the merchandise, and a transparent reference for any further quantity higher than the warranted worth should be per the agreement.  Further, the method of worth determination should be mentioned within the agreement.
  • Dispute Settlement: A farming agreement should give for a conciliation board likewise as a conciliation method for the settlement of disputes.  The Board ought to have a good and balanced illustration of parties to the agreement.  At first, all disputes should be mentioned the board for resolution.  If the dispute remains unresolved by the Board once thirty days, parties might approach the Sub-divisional official for resolution.  Parties can have a right to charm to associate legal proceeding Authority (presided by collector or further collector) against selections of the official. each the official and legal proceeding Authority are going to be needed to get rid of a dispute inside thirty days from the receipt of the appliance.  The official or the legal proceeding Authority might impose bound penalties on the party contravening the agreement.  However, no action may be taken against the agricultural land of the farmer for recovery of any dues.


The bill introduced is not adverse, but what makes it so are the flaws in it, them being:

The MSP4, the government provides MSP on 23 items but it doesn’t give the guarantee that they will buy all of it from everyone. They only buy things like rice and wheat, only states like Punjab and Haryana benefits from MSP, so farmers believe that if the trade outside the mandis5 the government will remove the MSP, which is the major cause of their protests.

The concept of MSP is false and flawed, only 6% of the farmers benefit from it. And traders do not buy anything at MSP, simultaneously there is no uniform method of price discovery for non-MSP crops, the farmers themselves don’t know the price of their crops which ends up being a major problem faced by them.

Next, When the farmers are allowed to trade outside the mandis, it is beneficial for them but, this can be a cause of a major loss of the commission agents of the mandis as they would lose commissions and mandi fees, by the competition and cost-cutting transport,  

The key provisions of the proposed legislations intend to assist small and marginal farmers, who have no proper means of either negotiating for a better price pf their produce or investing in technology to increase their farm productivity and make it more efficient, the Agri market bill allows the farmers to sell their produce to whomsoever they want to, outside “mandis”. Even at their farm gates, anyone could purchase their produce. So, farmers will benefit and get better prices through this law, which also includes contract farming.  

But their lies a loophole that farmers have a good possibility of being exploited by extensive trading companies, if the big and powerful company do not honor its own contract, as they won’t reach out to small farmers for negotiating, in this case, the farmers will fall out of help and won’t be able to do much for themselves. To come out of this problem, an intermediary body is required to protect the farmers from being exploited.

Then there is, the issue of storage and warehousing, the farmer’s produce is received by the traders but due to mismanagement, and lack of proper infrastructure, our country still is deprived of proper food, even though it is available, it still doesn’t reach the stomach of the hungry, and sometimes there is a huge increase in the price of a produce6

Traders and companies don’t invest in its creation so there need to be incentives to build proper infrastructure

To solve this, the farmers can use NCDEX7 and MCX8, to make the base and fix their own price with the help of it. 

Lastly, the division of farmers kills their bargaining power, if the government wants the well-being of the farmers, it should start finding ways to unite them, to become like NECC[4] the union of the farmers is important, together farmers can make their produce organization like FPO[5], where they can pool their produce and build it, the center and state government can provide the funding to keep it running

The success or failure of an idea depends on its way of implementation. The bill that’s made for farmers and their benefits, becomes their adversary itself, the bill would have no point.

If the loopholes in the bill are fixed, it will bring about revolutionary transformation and transparency in the agriculture sector, electronic trading will increase, there will be accelerated agricultural growth as a private investment will be attracted in building supply chains and agricultural infrastructure, new employment opportunities will be created and rural economy will get a boost, which will in turn help to strengthen the national economy.

References used:

[1] Bill no. 113 of 2020

[2] Bill no. 112 of 2020

[3] Agricultural produce market committee

[4] National Egg Coordination Committee is an association of poultry farmers in India with a membership of more than 25,000 farmers.

[5] Farmer produce organization