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Breaking the Agri Barriers

The Farmers’ Produce Trade and Commerce Ordinance, 2020

The Farmers Produce Trade and Commerce (Promotion and Facilitation) Ordinance, promulgated on 5th June 2020, aims to break the barriers to free agri-trade within the country.

This is a key ecosystem change and opens up opportunities within Indian agri, laying the ground for a new generation of agri-startups

Here is a quick summary of the Ordinance

  • It removes intra-state and inter-state barriers by opening up sale of ‘Farmers’ Produce’ outside State APMCs or limited private market yards/ collection centres. The Ordinance will prevail over State APMC Acts.
  • Now trade can be done at any place of production, collection and aggregation including farm gates, factories, silos, warehouses, and cold storages.
  • Trade of Farmer’s Produce is permitted for all end use including wholesale, retail, processing, export or final consumption
  • Permits Electronic trading of farmers’ produce to facilitate direct online buying and selling of farmers for physical delivery. 
  • Eligibility: Farmers (anyone engaged in the production by self or hired labour), registered Farmer Producer Organisation (FPO) or Agricultural Cooperative Society and anyone having a PAN.
  • Product Basket: Farmers’ produce above includes cereals like wheat, rice and other agri produce like oilseeds, oils, vegetables, fruits, spice, sugarcane, raw cotton, jute, cattle fodder and allied agri products like poultry, piggery, goatery, fishery, dairy
  • Guidance on Payments to farmers: Buyers are required to make payments to the farmer on the same day, or within three working days (in certain conditions) 
  • No fees to be levied by states: The Ordinance prohibits states from levying any market fee/cess or levy on farmers, traders, and electronic trading platforms.

What’s Next…

With the restrictions on movement and end-use gone, there is bound to be some inter-mediation de-layering. The traditional commission agents need to think about relevance and viability of their existing business.

The encouragement to electronic trading enables farmer to directly reach all levels of value chain- retail or wholesale.

Both, Retail Consumer Marketplaces and B2B models present a big opportunity through increased aggregation, say through consolidations done through FPOs. The eNam platform may itself evolve from linking APMCs to a wider wholesale marketplace

But to fully benefit from this, the next step is to provide required capital support in building these agri platforms and significantly increase and encourage investment in farmgate infra. Financing these investments presents a big lending opportunity for banks.

By:

Amit Balooni

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