Ram Nath Kovind, Indian President promulgated two ordinances to help farmers & to boost the rural economy. The two Ordinances has launched with the aim of giving a boost to rural India for farmers engaged in agriculture and allied services.

This development came after the FM Nirmalasitharaman announced the third tranche of the economic package under ‘AtmanirbharBharat Abhiyan’ to boost the income of farmers.

These two ordinances are:

  1. The Farmers’ Produce Trade and Commerce (Promotion & Facilitation) Ordinance 2020
  2. The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020

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

This ordinance moved by the govt will help in the creation of an ecosystem where the farmers and traders enjoy the freedom of choice relating to sale and purchase of farmers’ produce which facilitates remunerative prices through competitive alternative trading channels.

This ordinance defines A trade area as any area, which is outside the APMC acts and existing private mandis. So, the trades outside notified mandis have been exempted from any levies

The important point you must remember here, No transactions done within this zone will be subject to any state market fee, cess, or levy.

The ordinance will promote efficient, transparent and barrier-free inter-State and intra-State trade and commerce of farmers’ produce.

It will also not bind farmers to sell their crops only to licensed traders in the APMC (Agricultural Produce Market Committee) mandis of their respective talukas or districts (barrier-free trade).

It will provide a facilitative framework for electronic trading and matters connected therewith.

No trader will be allowed to trade in any scheduled farmers’ produce without a permanent account number (PAN) or other notified documents except the farmer producer organisations (FPOs) or agri-cooperatives,

Every single trader who transacts with farmers should make the payment on the same day or within the maximum of three working days.

A person violates this provision will be liable to pay a penalty of a minimum Rs 25,000 and a maximum of Rs 5 lakh. If the violation continues, Rs 5,000 per each day penalty will be imposed.

The Ordinance also provides for dispute resolution mechanisms before the sub-divisional magistrate and district collector. The govt has kept disputes outside the jurisdiction of civil courts under the ordinance.

It also has a provision for suspension of an e-trading platform for breach of fair trade practices by central or state government officers.

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Ordinance 2020

The ordinance is going to provide for a national framework on farming agreements that protects and empowers farmers to engage 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 in a fair and transparent manner.

As per the ordinance, a farmer can enter into a written farming agreement for the supply of farm produce at a pre-agreed price.

It also allows any company, or processors, or FPO, or Cooperative Society to enter into a contract farming arrangement for a minimum of one crop cycle in case of crops, or one production cycle, in case of livestock. The maximum period for such an arrangement will be five years.

According to the ordinance, the price to paid to the farmer in such a contract farming arrangement shall be mutually decided, or in case of volatility, a minimum price has to be paid on top of which a premium also need to paid by the company.

The central government will issue guidelines along with model farming agreements for the purpose of facilitating farmers to enter into written farming agreements.

These agreements should clearly specify the price to be paid for the purchase of a farming produce and to clear reference for any additional amount over and above the guaranteed price.

Under the agreement, the delivery of the farm produce should be taken by the sponsor at the farm gate and within the agreed time.

The sponsor will have to inspect the quality or any other feature of such products as specified in the farming agreement.

An important point in the ordinance is, No farming agreement will be allowed to enter for transfer, including sale, lease and mortgage of the farmland and for making modification or construction in the land.

The agreement may be linked with the insurance or credit instrument under any scheme of the central or state government.

The farming agreement can be altered or terminated on mutual consent.

The Ordinance provides for a conciliation board for dispute settlement. But no action for recovery of any amount will be initiated against the farm land of the farmer.


The farming agreement has been kept outside the jurisdiction of civil courts.

No state act, or law, will be applicable to agriculture produce grown through this arrangement.

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Why govt brought these ordinances?

There was need for the development and growth of the agriculture sector in the new reformed environment.

When the whole ecosystem of agriculture and its allied activities was tested during the COVID-19 crises, it reconfirmed the necessity for the Central Government to speed up the reform process and to come up with a national legal facilitative ecosystem to improve intra-state and interstate trade of agriculture produce.

The Centre also recognized the need for the farmer to sell agriculture produce at a place of his choice at a better price by increasing the number of prospective buyers

Source: Business standard, The Statesman, The Week

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