Ordinance allowing direct buying from farmers approved

The Union Cabinet on Wednesday cleared an Ordinance enabling buyers — be it farmer-producer companies or big retailers — to purchase directly from farmers outside the regulated mandis without any licence and armed with just a permanent account number (PAN) card. It will not be subject to tax by the Centre or states — a step that could bring the Centre in direct conflict with several states.

The Cabinet also approved the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance, 2020. This will facilitate contract farming between farmers and processors, and traders.

It also decided to remove cereals, pulses, oilseeds, edible oils, onions, and potatoes from the list of Essential Commodities (EC) Act of 1955, but retained the power to impose it in case of war, famine or in the event of an extraordinary rise in prices. The installed capacity of value chain participants and exporters will remain exempted from the EC Act.

“These are welcome measures. The speed at which the government has moved is admirable. But I am worried about the imposition of the EC Act in case of extraordinary rise in prices. Who defines extraordinary rise? It needs to be deleted or the atmosphere of uncertainty that prevails will persist. There should be a third party to define extraordinary rise, not the government,” Ashok Gulati, Infosys chair professor for agriculture at the Indian Council for Research on International Economic Relations, told Business Standard.

Meanwhile, elaborating on the Ordinances, Agriculture Minister Narendra Singh Tomar said in case of the Farming Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, anyone with a PAN card can directly purchase from farmers. He will not require state or central licence. The fine print on the Ordinances will be out soon.

“In-principle, these Ordinances will unshackle the markets. But implementing them will be difficult. What happens when the produce passes through state borders? Will the state lose the right to tax it? Legal challenges could crop up,” Mahendra Dev, director, Indira Gandhi Institute of Development Research, told Business Standard.