Agricultural Marketing in India – Agriculture Produce Market Committee (APMC) Act

What is  Agriculture Produce Market Committee [APMC] Act?

Agriculture being a subject in the State List, the power to make laws on the subject rests with State Legislatures.  But Centre brings in Model Acts on those subjects with necessary provisions that are required for the economic growth and for ensuring food security in the country. States are free to adopt these model laws with necessary modification. Till date only few States in India have adopted the Model APMC Act 2003.

Agriculture Produce Market Committee [APMC] Act is an Act enacted by State governments for regulating markets selling agricultural products. This Act notifies agricultural commodities produced in the region such as cereals, pulses, edible oilseeds, fruits and vegetables and even chicken, goat, sheep  etc and provides that the first sale in these commodities can be conducted only under the aegis of the APMC through commission agents licensed under the APMC Act set up under the Act.

What are the objectives of APMC Act?

The objective of APMC Act is to provide for development of efficient marketing system, promotion of agri-processing and agricultural exports and to lay down procedures and systems for putting in place an effective infrastructure for the marketing of agricultural produce.

What are the salient features of Agriculture Produce Market Committee [ APMC ]Act 2003?

The salient features of APMC Act are the following.

• Legal persons, growers and local authorities permitted to establish new markets in any area.
• No compulsion on growers to sell their produce through existing regulated markets.
• Single, registration/license for trade transaction in more than one market.
• Establishment of direct purchase centre, consumer/farmer markets for direct sale.
• Promotion of public private partnership in management and development of agricultural markets.
• Separate  markets for commodities like onions, fruits, vegetables and flowers that are perishable in nature.
• A separate chapter to regulate and promote contract farming arrangement:   Contract farming  is an agreement by which buyer agrees to buy produce from farmer at predetermined price, usually provides inputs like seeds, fertilizers, pesticides, technology and production practice so that the final produce is of desired quality. This provision is incorporated by States like Andhra Pradesh, Maharashtra etc.
• Prohibition of commission agencies [middlemen] in any transactions.
• State marketing boards to promote standardisation, grading, quality certification, market led extension and training of farmers.
• Constitution of State Marketing Standards Bureau for promotion of grading, standardisation and quality certification of agricultural produce.
• A committee called Agricultural Produce Marketing Committee to be constituted to ensure complete transparency in pricing systems and transactions, to ensure payment to farmers for agricultural produce sold by them on the same day, to promote agri-processing and value addition, to publish data and price regarding agricultural produce sold in the markets and promote PPP in Mandi/market management.

What are the issues in Agricultural Marketing in India?

Multiple levies by the APMCs : They charge market fee on buyers, licensing fee on commissioning agents who mediate between buyers and farmers. They also levy small fees on each and every functionaries in the market like warehousing agents, loading agents etc. In addition commissioning agents charge their fees too. These fees and levies vary from states to states. These lead to market distortion and cascading effects on the prices of commodities.

Even in the APMCs formed under Model APMC Act, the only difference is that APMC is treated as an arm of State government and the market fee is a tax rather than a fees for services provided.  The revenue earned by APMCs are not accounted in State exchequer thus the usage of funds remains hidden. Further  the hard fact is that while some of the States have only partially adopted the provisions of 2003 APMC Model Act, they have not framed any rules to implement the amended provisions.

As per Economic Survey 2015, the  major drawback of the existing Model APMC Act, 2003 is that it do not go far enough to create a national or even state level common market for agricultural commodities. The reason is that each farmer has to pay the APMC charges even if they sold the products directly to the contract sponsors or in a private market. A model example cited in the Economic Survey is the case of Karnataka.

Karnataka has made significant reforms in the agri-marketing sector to create greater competition within the state, thus help to bring down prices of agricultural products. They have integrated most of their markets into a single licensing system under Rastriya e-market services Ltd.

What are the possible way outs to the issues faced in agri-marketing sector?

• Setting up of a National market
• Bringing in private markets/ farmers markets enabling farmers to sell their produce directly.
• Take out perishable commodities like fruits and vegetables outside the purview of State APMCs.
• Build effective supply chain management structures like scientific storage facilities, grading and standardizing facilities etc.

Recent government initiatives

The central government plans to integrate 585 wholesale markets (mandis) into an electronic National Agriculture Market (e-NAM) by December 2017. Conceptually, e-NAM should lead to a common market for all farm commodities.

The aim is to provide farmers a pan-India electronic portal for sale and purchase of agricultural produce, in an efficient and transparent manner.However, in the absence of free inter-state and intra-state movement, the platform is being used to transform physical trade into electronic transactions.

In April, Prime Minister Narendra Modi had launched the e-NAM with 22 mandis in eight states.  The Centre provides each mandi a one-time grant of Rs 30 lakh to set up the e-NAM infrastructure. Also, free software and an information technology expert for a year to each mandi. So far, 10 states and 250 mandis have decided to join e-NAM.

A new APMC Act on cards

The Centre is planning to bring a fresh model Agricultural Produce Market Committee Act, after consulting with states, to remove contract farming from its ambit. It will also lay down a mechanism to compensate states for revenue loss suffered due to delisting of a farm commodity.

The new Act, expected by 2017, will also have a provision for setting up private marketing yards within a designated area of a market to increase competition.

The new APMC Act will also have provision for promoting online or spot (e-national agriculture market) agriculture market platforms and ensure that all these measures are revenue neutral for states.

What UPSC says ?

In general studies paper 3,under the subtopic :  “Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints”,  the issue of agri-marketing is a possible topic of question for Mains 2017.

Previous Year UPSC Questions

1. In the view of the declining average size of land holdings in India which has made agriculture non – viable for a majority of farmers should contract farming and land leasing be promoted in agriculture? Critically evaluate the pros and cons. [2015 Mains]
2. There is also a point of view that agriculture produce market committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine. [2014 Mains]

Sources

1. Business Standard
2. The Hindu
3. http://agricoop.nic.in/
4. Economic Survey 2015