The Union Cabinet on Wednesday approved amendments to the Essential Commodities Act, 1955, that will now allow farmers to sell produce outside their own states.
Often blamed for indulging in unfair trading practices. farmers will no more need to sell crops only to state-run decades-old Agricultural Produce Market Committees (APMCs).
Agriculture Minister Narendra Singh Tomar said, "Today is a historic day for farmers. India got independence in 1947, but farmers got it today."
With few buyers in their local markets outside of which farmers were not allowed to sell their produce, the glut often forced them to dump products at throwaway prices to clear up a piling mount of harvests.
Farmers often find themselves at the mercy of a buyers’ group that dictate prices. While briefing the media, Union Minister Prakash Javadekar said, "Farmers have been freed from the constraints of the APMC."
Javadekar said that "landmark decision" to liberalise the regulatory environment for farmers will not only benefit them, but "transform the agriculture sector".
Later in the evening, Prime Minister Narendra Modi said the Cabinet's decisions on agrarian reforms will have very positive impact on rural India.
APMCs, over the years, had become barriers for farmers to get a fair price for their produce as they were forced to sell it through these committees. The committees’ regulations require farmers to only sell to licenced middlemen in notified markets, usually in the same area where farmers reside, rather than in an open market.
There is evidence to demonstrate that they behave in cartels. In December 2010, the Competition Commission found that nearly 20 per cent of that month’s total onion trading at the Lasalgoan APMC, Asia's largest onion market in Maharashtra's Nashik, was accounted for by one firm.
This resulted in a large "price spread", meaning many groups of middlemen pocketed their share before it reached the final consumer, leaving a yawning gap between the price the farmer received and the eventual retail price.
On May 15 this year, the government said a central law will be formulated that will enable farmers to sell their produce at attractive prices.
The new law will also remove barriers in inter-state trade, allowing farmers from UP, for instance, to sell to buyers and merchants in Gujarat through an e-trading framework.
The removal of restrictions, based on an expert panel recommendations, will enable merchants to directly purchase produce from farmers in large quantities. This can be particularly helpful in times of bumper harvests when farmers often dump produce in wholesale markets at throwaway prices.
The NITI Aayog, in a report titled, "Raising Agricultural Productivity and Making Farming Remunerative for Farmers", said there is "a need to have a relook at some of the provisions of the Essential Commodities Act which discourage large-scale private investments in agricultural markets, without diluting its basic premise of ensuring supplies of essential commodities to public and preventing exploitation by unscrupulous traders".
"India is moving towards one country, one market," added Javadekar.