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India’s agrimarket is presently regulated by the Agricultural Produce Market Committee (APMC) Act enacted by the state governments. There are about 2,477 principal regulated agrimarkets and 4,843 sub-market yards regulated by the respective APMCs in India. Thus, India has not one, not 29 (number of states) but thousands of agricultural markets. This Act notifies agricultural commodities produced in the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish, etc., and provides that first sale in these commodities can be conducted only under the aegis of the APMC through the commission agents licensed by the APMCs set up under the Act.
The typical amenities available in or around the APMCs are: auction halls, weigh bridges, godowns, shops for retailers, canteens, roads, lights, drinking water, police station, post-office, bore-wells, warehouse, farmers amenity center, tanks, water treatment plant, soil-testing laboratory, toilet blocks, etc. Various taxes, fees/charges and cess levied on the trades conducted in the mandis are also notified under the Act.
As per the Economic Survey 2014–15, the APMCs of the states levy multiples fees of substantial magnitude which are non-transparent and hence work as a source of political power. The functioning of the APMCs have always been a matter of debate among experts and policymakers alike
—major issues being the following:
• They charge a market fee from buyers, and they also charge a licensing fee from the commissioning agents who mediate between buyers and farmers.
• They also charge small licensing fees from a whole range of functionaries
(warehousing agents, loading agents, etc.).
• In addition, commissioning agents charge commission fees on transactions between buyers and farmers.
• The levies and other market charges vary widely in the states. Statutory levies/mandi tax, VAT, etc., are a major source of market distortions.
• Such high taxes at the first level of trading have significant cascading effects on commodity prices, as the commodities passes through the
supply chain. For rice, these charges can be as high as 14.5 per cent in Andhra Pradesh (excluding the state VAT) and close to 10 per cent in Odisha and Punjab.
• Even the model APMC Act (described below) treats the APMC as an arm of the state, and, the market fee, as the tax levied by the state, rather than fee charged for providing services. This is a crucial provision which acts as a major impediment to creating national common market in agricultural commodities. Removal of this provision will pave the way for creating competition and a national common market for agricultural commodities.
• Moreover, though the market fee is collected just like a tax, the revenue earned by the APMCs does not go to the state exchequer and hence does not require the approval of the state legislature to utilise the funds thus collected. Thus, APMC operations are independent of scrutiny.
• The rate of commission charged by the licensed commission agents is exorbitant, because, unlike direct taxes, which are levied on net income, the commission is charged on the entire value of the produce sold. The license fee charged from various market licensed operators is nominal, but the small number of licences granted creates a premium, which is believed to be paid in cash.
• There is a perception that the positions in the market committee (at the state level) and the market board (which supervises the market committee) are occupied by politically influential persons. They enjoy a cosy relationship with the licensed commission agents who wield power by exercising monopoly power within the notified area, at times by forming cartels. The resistance to reforming APMCs is perceived to be emanating from these factors.
The scope of the Essential Commodities Act, 1955 (EC Act) is much broader than the APMC Act. It empowers the central and state governments concurrently to control production, supply and distribution of certain commodities, including pricing, stock-holding and the period for which the stocks can be kept and to impose duties. The APMC Act on the other hand, controls only the first sale of the agricultural produce. Apart from food-stuffs
which are covered under the APMC Act, the commodities covered under the EC Act generally are: drugs, fertilisers, textiles and coal.
Since the State APMC Acts created fragment markets for agricultural commodities and curtailed the freedom of farmers to sell their produce other than through the commission agents and other functionaries licensed by the APMCs, the Ministry of Agriculture (GoI) developed a Model APMC Act, 2003 and has been pursuing the state governments to modify their respective Acts along its line. The Model APMC Act provides the following new things:
(i) Direct sale of farm produce by the farmer to contract farming sponsors;
(ii) Setting up ‘special markets’ for
‘specified agricultural commodities’—mostly perishables;
(iii) Permits private persons, farmers and consumers to establish new markets for agricultural produce in any area;
(iv) A single levy of market fee on the sale of notified agricultural commodities in any market area;
(v) Replaces licensing with registrations of market functionaries, which would allow them to operate in one or more different market areas;
(vi) Establishment of consumers’ and farmers’ markets to facilitate direct sale of agricultural produce to consumers;
(vii) Creation of marketing infrastructure from the revenue earned by the APMCs;
(viii) Provides some freedom to the farmers to sell their produce directly to the contract-sponsors or in the market set up by private individuals, consumers or producers;
(ix) Increases the competitiveness of the market of agri-produce by allowing common registration of market intermediaries.
Many of the states have partially adopted the provisions of the model APMC Act and amended their respective APMC Acts. Some of the states have not framed rules to implement the amended provisions, which indicate hesitancy on the part of the state governments to liberalise the statutory
compulsion on farmers to sell their produce through the APMCs. Some states (such as Karnataka)32 have however adopted changes to create greater competition within the state—popularly known as the Karnataka Model .
The central government is closely working with state governments to re- orient states’ APMC Acts in order to provide for establishment of private market yards/private markets. As per the Union Budget 2017–18 and Economic Survey 2016-17 some of the recent initiatives taken in this regard are as follows:
(i) A comprehensive advisory issued to the states to go beyond the provisions of the Model Act and declare the entire state a single market with one licence valid across the entire state and removing all restrictions on movement of agricultural produce within the state.
(ii) The NAM (National Agriculture Market) through an Agri-Tech Infrastructure Fund (ATIF) has been established by Government of India in July 2015, which will be implemented up to 2017–18. NAM will provide a common e-market platform of regulated wholesale markets in states/UTs (those states /UTs that are desirous to joint he platform). The SFAC (Small Farmers Agribusiness Consortium) will implement this e- platform and will cover 250, 200 and 135 mandis during 2015–16, 2016017 and 2017–18 respectively.
The DAC & FW (Department of Agriculture, Cooperation Farmers Welfare) will meet expenses on software and its customisation for the regulated mandis of the states/UTs free of cost. To Integrate with the NAM, the APMCs of the states/UTs will need to meet certain pre- requisites, which are given below:
(a) a single license to be valid across the states,
(b) single point levy of market fee, and
(c) provision for elec tronic auction as a mode for pr ice discovery.
Majority of the states and all of the UTs have shown their interest to j oin the e-platform.
(iii) On the request of the central government, a number of state governments have exempted the marketing of fruits and vegetables from the purview of the APMC Act. The NCT of Delhi has put fruits and
vegetables outside its APMC. The Small Farmers Agribusiness Consortium (SFAC) has taken the initiative for developing a Kisan Mandi in Delhi with a view to providing a platform to FPOs for direct sale of their produce to prospective buyers, totally obviating or reducing unnecessary layers of intermediation in the process. The SFAC plan to scale its activities in other states based on the outcome of the experience of the Delhi kisan mandi.