The Short Explanation of Farm Bill 2020

The short explanation of Farm Bill 2020. A clear view in layman’s terms.

The new agriculture bill is passed by the parliament of India on 27th September 2020 and the three acts are collectively known as Farm Bill 2020 or Farmers Bill 2020.

1. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020

After the enforcement of this bill, unlike in the past, a farmer can sell his crop anywhere in the country without any restrictions.

In what sense?

For better understanding, we must look into the past.

In the past, farmers used to sell their crops only in their local APMC’s

(APMC) – Agricultural Produce Market Committee is a place or market yard where a farmer can go and sell the crop to retailer at certain price or at (MSP)minimum support price. All districts of all states in our country have set up their own APMC’s which are functioned by the respective state governments only.

(MSP) minimum support price is a norm set by the Indian government to safeguard farmers.

How MSP protects the farmers? – when the demand for a crop goes down, the price also goes down. In this case, farmer will not get a good price which he deserves and besides that he had already put his hard work, time, and money to develop the crop & bring it to the market.

When retailers and open markets do not offer a good price for any peculiar reasons or in extraordinary situations, government will pay MSP to the farmer and buy crop from him directly. So, farmer gets a minimum profit for his agriculture produce.

Retailers are like middlemen between farmers and consumers who purchase crops directly from the farmers in APMC’s and distribute to other places like wholesale markets and other vegetable vendors. Retailers must hold a licence from the state government to do these activities in APMC’s.


Now according to the new bill, a farmer can sell his crop not only in local APMC but also in other APMC’S which are available across the country i.e., interstate and Intra state. The new bill also allows farmers to sell their agricultural produce outside the market yards like Warehouses, factory premises, cold storages etc. without having to pay market fee or cess.

They can also trade directly with corporate industries without any involvement of APMC’s and Middleman. This is a full stop for Brokerage and corruption.

And facilitating electronic trading system so farmers can buy and sell the agricultural produce through electronic devices and internet. 

This results in…

a) Scalability – Allowing farmers to go an extra mile b) Prohibition of unnecessary market fee and cess, c) No corruption through middleman d) Setting up new e commerce platforms.                                                                                                        

2. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

This bill is also known as ‘Contract Farming Bill’ emphasizing contract farming, first of its kind.

The new model is about setting up a legal framework between farmer and buyer.

Any corporate company or wholesale dealer can directly approach the farmer and make a deal without the involvement of retailers or middleman.  

Example: This bill enables marketplaces like DMart, Bigbazar, Ratnadeep stores and otherCorporate vendors reach out to the farmers directly and buy crops from them.

Since there is no middleman, brokerage and corruption involved, a farmer will have multiple options in the market. He can sell wherever he wants and demand the good price.

Upon mutual understanding, farmer and buyer will make an agreement in terms of crop quantity, quality, rate, and timeframe etc. The agreement is made prior to the production of the crop.

Therefore, contract farming will be game changer for farmer, making the room for going beyond the boundaries.

3. Essential Commodities (Amendment) Act, 2020

The ECA (Essential commodities Act) is introduced in 1955 and is just modified now by removing certain items from essential commodities list.

From the name itself, we can understand that Govt of India accumulated a few commodities under this category which are essential. This includes foodstuff, drugs, fuel (petroleum products) etc.

Govt can anytime remove existing items from the list and add new items depending upon the situations. The idea is to regulate the production, supply, distribution of these items in order to make them available to consumers at affordable price.

Since it is agriculture bill, union govt has removed food crops such as cereals, pulses, potato, onions, edible oilseeds and oils, from the list of essential commodities.

Indeed, these commodities are essential in our daily life. But by removing these foodstuffs from essential commodities leads to high demand, less supply.

Simple math, when demand is greater than the supply, there will be a shortage and price go higher.  

so, there will be a price spike in the market for such commodities. This is to boost the income of farmers who produce these commodities.  

As we discussed earlier, this is not a permanent amendment. Govt can anytime add them again to essential commodities list OR revise the act in extra ordinary situations like war, famine, and natural calamities to bring down the cost and make them available for everyone.

 Example: On 14th March 2020 Union government added face masks and hand sanitizers to essential commodities list to make sure these products are available at fair price and right quality during the pandemic. By July 1st, 2020 govt has removed masks and sanitizers from essential commodity list.

Purpose of the farm bill is to safeguard and protect the farmers, by empowering them with new methodologies and creating opportunities to boost their income.  

That is all for the 2020 Indian Agriculture Reform.

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