The APMC act
is nearly 50 years old and almost every state has one for itself that seeks to regulate trade in agricultural commodities.
The idea behind the legislation was to protect the interest of farmers and ensure that trading becomes orderly. The act resulted in creation of regulated markets, also called mandis, of which there are 8,000 in the country today.
The average area served by a regulated market is nearly 450 sq km.
And the manner in which these mandis operate has a bearing on the retail prices of fruits, vegetables and other farm produce. The Modi government’s latest attempt to provide alternative selling options to farmers is not a new thing.
In fact, countless committees and panels had been recommending reforming the regulated markets even before 2003, when the first model APMC Act
was framed to achieve this end.
Several states have, during the past 15 years and more, brought a lot of items outside the APMCs, denotified fruits and vegetables from the mandis, allowed direct marketing, framed laws for contract farming and even promoted setting up of private markets and yards.
Experts said almost 80 per cent of states have introduced some sort of reforms to their APMCs
as advocated by the first model APMC act
But as the high powered panel on Doubling Farmers Income (DFI) set up by the Narendra Modi government said, despite best efforts many states carried out partial reforms only, on a pick-and-choose basis, defeating the objective of creating a uniform trade environment across the country.
“As a result, there was no noticeable progress at the ground level and all desired results were not forthcoming. Nevertheless, on the evolutionary chart, they did help to open the shut doors to alternative marketing channels in some progressive States. However, even thereafter, the necessary changes in the agricultural marketing system did not happen as was expected," the panel noted.
It said the reforms as adopted by the state governments have been largely ineffective and one of the reasons appears to be depriving private markets a level-playing field.
Studies also show experiments such as Kisan Mandi or Apni Mandi in Punjab, Uzhaver Sandhais in Tamil Nadu, Krushak Bazaars of Odisha or the Delhi Kisan Mandi promoted by Small Farmers Agribusiness Consortium (SFAC) or Rythu Bazaars in Andhra Pradesh, where farmers sell directly to consumers without intermediaries have been happening for quite some time.
In fact, more than 400 such farmer-consumer markets are operating across the country at present. But barring a few, none have managed to make a big mark in terms of volumes or impact on price.
A big reason for this is that footfalls in these markets are limited, crippling their future growth, while in many cases they suffer from the same problems of cartelisation and limited buyers, as seen in regular APMCs.
“Any production that is in surplus to the absorption capacity in the market region requires physical connectivity with demand that is further afield,” the government’s own Committee on Doubling Farmers Income found.
This is primarily the reason why, barring a few exceptions like Rythu Bazaars of Andhra Pradesh and Telangana, most others such experiments haven’t taken off in a big way in the country.
The other variant of direct marketing is direct sourcing by big processors and traders, which allows farmers to skip multiple layers of intermediaries.
Here too, not many states have framed clear rules and reports show that just over 200 direct procurement licenses have been issued by 11 states in the country, the maximum by Maharashtra.
Contract farming is the third option which many talk about as an alternative channel to boost farmers’ income but here too just over 15 companies are engaged in contract farming in the country, the maximum once again in Maharashtra and Haryana.
As far as setting up of private mandis are concerned of the private mandis, an analysis by the Committee on Doubling Farmers Income found that till few years back only 11 states have notified the rules thereunder to implement the provisions of private markets, while 82 private marketing licenses have been issued but in the absence of proper rules and regulations their growth remains muted.
Clearly, when it came to reforming mandis or APMCs, most states adopted a piecemeal approach since 2003 when the model acts were first promulgated.
How different are the Central Acts?
The central government for the first time attempted to frame a unified law to define and regulate all out-of-mandi transactions.
But it did not touch the framework of APMCs.
Instead, it said all the transactions outside the APMC will be free from any taxes or levies and anyone armed with just a PAN card can buy directly from farmers.
The Central government has drawn its powers to frame the Central Act as vested to it through the various entries in the Union List and Concurrent List, overriding the state’s powers, namely Article 42 of the Union List, Article 33 of the Concurrent List and Article 26 of the State List.
The previous UPA government had proposed a similar central legislation to allow free inter-state trade in agriculture products.
In 2012, the then Minister of State for Agriculture, Charandas Mahant, had told the Parliament that the agriculture ministry has formulated a draft ‘Agricultural Produce Inter-State Trade and Commerce (Development and Regulation) Bill, 2012 to promote, develop and regulate inter-state trade and commerce of agricultural produce and commodities to facilitate inter-state transfer of such produce for the benefit of both farmers and consumers by providing a common national level market to avoid multiple licensing requirements and minimize internal trade barriers.
The draft Bill was sent to the States for their views in the matter.
Officials said the present Trade Act draws a lot of its provisions and clauses from the same legislation which the UPA framed and sent to the states for their consideration.
The big difference, though, is that the current government hasn’t consulted the states in full before moving ahead with the legislation which should have been a prerequisite before taking such a big reform measure.
Table: Production, market arrivals of major crops (July 2016 to June 2017)
Mandi Arrivals Wrt To Production In %**
18.6 million tonnes
251.3 million tonnes
30.01 million tonnes
87.9 million tonnes
*Production is as per third advance estimate of 2016-17; **As per the data given in agmarket.gov.in; ***As per Second Advance Estimate of 2016-17. Vegetables include Onion, Potato and Tomato, while pulses include tur, urad, moong and chana. Source: Committee on Doubling Farmers Income