On Friday, the central government announced two decisions aimed at liberalising interstate trade in agricultural products and promoting contract farming between producers and processors.

However, both decrees give unlimited power to lower levels of bureaucracy in disputes between farmers and buyers, which in the case of a contract can also be companies.

In some of these provisions, decision-making powers have been delegated to the District Magistrates (DMAs). This can lead to implementation problems.

The first regulation, the Farmers’ Trade and Commerce (Stimulation and Facilitation) Ordinance 2020, allows any trader to exchange planned agricultural products between and within countries with a farmer or other trader in the trading area.

A commercial area is defined as any area outside the scope of CMPA and existing private mandates. No transaction in this area is subject to public market taxes, orders or fees.

All transactions in this area must be paid within three days and receipts for these transactions must be paid immediately.

The decision authorises anyone to trade in agricultural products armed only with a PAN card or any other document specified by the central government.

The decree also authorises any person to open an e-commerce platform, for which the Centre may lay down rules. In the event of a dispute concerning these transactions, the parties, in this case the farmer and the trader who bought the goods from him outside Mandi, can turn to the MDS, which will then set up a mediation committee consisting of a chairman and at least two members.

In the case of the Regulation on agricultural contracts, also announced by the President on Friday, known as the Agreement on the insurance of agricultural prices and services (Powers and Protection) for 2020, any holding or processor, or French Polynesia or a cooperative, may conclude an agricultural contract for at least one harvest cycle or for one production cycle in the case of livestock. The maximum duration of such an agreement is five years.

The price to be paid to a farmer on such a contractual holding shall be determined by mutual agreement or, in the case of volatility, the minimum price at which the holding must pay the premium.

In the event of a dispute, if the farmer defaults, the purchaser may return the means of production and the advance paid by the farmer.

No laws or governmental regulations shall apply to agricultural products grown under this Agreement.

The Regulation prohibits any contractual relationship relating to agricultural land.

If the buyer does not pay on time, he has to pay a fine of 1.5 times the value. It may inspect the products in production or have them assessed by a third party. The form of the agreement will be in accordance with the design right for contract farming previously formulated by NITI Aayog.

The State will have the power to draw up rules in accordance with the judgment, while the main body for settling disputes will be the CBMs.

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