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Understanding the concept of trade areas in farm laws

Topics Covered: Issues related to direct and indirect farm subsidies and minimum support prices; Public Distribution System objectives, functioning, limitations, revamping; issues of buffer stocks and food security; Technology missions; economics of animal-rearing.

Understanding the concept of trade areas in farm laws:


The idea of alternate markets, or “trade areas” has been described in the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.

  • These are not new to India. The first and perhaps the most advanced experiments of these were in Maharashtra in 2005-06.
  • The government had then sanctioned the setting of private markets and collection centers through the issuance of Direct Marketing License (DML)s.

What were they?

The private markets were wholesale mandis set up by private entrepreneurs, while the collection centres were for aggregators like BigBasket and Reliance Fresh who procured directly from farmers at the farm gate.

What were the reforms in Maharashtra and why were they brought in the state?

Private markets were for the facilitation of trade in agri-commodities.

  • The state government’s director of marketing issues licenses for setting up these markets.
  • Minimum of five acres of land would be required for setting up of these markets along with infrastructure like auction halls, sheds, waiting halls, motorable roads, etc.
  • Barring the land cost, the initial investment towards such markets is around Rs 4-5 crore.

Later on, a more intense intervention was the introduction of direct market licenses (DMLs) which allowed aggregators like Big Basket, Reliance Fresh, ADM Agro Industries to buy directly from the farmers.

Is MSP mandatory for these markets?

  • One of the license clauses is that not a single trade would be carried out below the government notified MSP by these license holders.
  • In the case of complaints, the licenses can be revoked. Many DML holders suspend their procurement when market prices fall below the government declared MSP. This is mainly to avoid action from the authority.

How have the reforms played out on the ground?

  • Since they were introduced, estimates say around 22 per cent of the total business of mandis have been diverted towards these ‘trade area’.
  • APMCs continue to report annual turnover of over Rs 48,000 crore while these markets on the other hand report business of around Rs 11,000-13,000 crore.


Prelims Link:

  1. Composition of CCEA.
  2. What is CACP?
  3. How many crops are covered under MSP scheme?
  4. Who announces MSP?
  5. Difference between Kharif and Rabi crops.

Sources: Indian Express.