Insights into Editorial: The need for unifying agricultural markets + MINDMAPS on IssuesArchives
25 November 2015
Persistent food inflation in India has forced the policymakers to think about unifying all agricultural markets in the country.
- When the food inflation is high in the country, the government resorts to practices like export bans or raids on hoarders to ease the situation. But they have little impact over the long run. Indian agriculture needs meaningful structural reforms.
- Thus, the creation of a unified agricultural market should be an important item on the reform agenda of the government.
- This idea has already been mentioned in the two budgets and economic surveys. The NITI Aayog too is working on a blueprint. It is expected to bring about much-needed uniformity in prices across agricultural markets in the country.
Why existing APMCs are not good?
- The existing Agricultural Produce Market Committee (APMC) Acts force farmers to sell their produce only to government-designated mandis.
- Agents in APMCs often harass farmers by deliberately restraining from higher bidding. Produce is bought at lower price and is sold at very higher price.
- Hefty license fees, taxes, commissions, marketing fees and rents also, sometimes, act as barriers to farmers.
- The economic freedom of farmers is restricted as they are captured by local political elites. Chairmen and the members of APMCs are usually elected by agents, who are least bothered about farmers.
- Inadequate infrastructure is also a cause for concern.
It was in this situation that the model APMC Acts were circulated to the states in 2003. But the model has remained a mere blueprint in many states. Even the states, who have implemented this act, have created entry barriers by prescribing either prohibitive license fees for setting up such markets, or the minimum distance between private markets and APMC markets. Thus, even this act has been partially successful.
In this respect, Karnataka stands out from the other states. Its Rashtriya e Market Services Pvt. Ltd (ReMS), a joint venture with NCDEX Spot Exchange Ltd, is a good working example of what the model APMC envisaged.
What has been done?
- To ensure ease of doing business, it integrated 51 of the 155 main market yards and 354 sub-yards into a single licensing system.
- For improving efficiency and transparency, it introduced automated auction and post-auction facilities (weighing, invoicing, market fee collection and accounting).
- To guarantee quality, assaying facilities were made available in the markets.
- In collaboration with NCDEX, it linked all APMCs in the state electronically, and enabled the discovery of a single state price for every commodity on a single platform.
How has this model helped?
- It gave the farmer the power to accept, reject and bid the prices for his commodity on the basis of a transparent system.
- It increased the revenues of APMCs.
- It helped in effective management of its funds and assets, and curbed corruption.
- It improved efficiency and transparency, and also ensued ease of doing business.
The Karnataka model can help resolve the issues of all the stakeholders. The other states need to learn from this model.
Recent initiatives by the centre in this regard:
In July 2015, the cabinet committee on economic affairs earmarked an amount of Rs.200 crore for the Central Sector Scheme for Promotion of National Agricultural Market through the Agri-Tech Infrastructure Fund.
- Under the scheme, the Small Farmers’ Agribusiness Consortium will be the lead agency responsible for the development of the national agricultural market under the ministry of agriculture.
- The scheme seeks to integrate 585 regulated markets in the country through a common e-platform. It will also allow access for private markets.
- For integration with the national e-platform and eligibility for assistance under the scheme for promotion of National Agricultural Market, the states and Union territories will need to undertake three reforms. These include a single licence valid across the state, a single-point levy of market fee, and provision for electronic auction as a mode for price discovery.
- The Scheme is applicable on All-India basis. There is no State wise allocation under the Scheme.
How this scheme would help?
- It provides farmers and traders access to opportunities for purchase/ sale of agri-commodities at optimal prices in a transparent manner across the country.
- Under the scheme, private markets will also be allowed access to the e-platform thereby enhancing its outreach.
- It promotes free flow of agri commodities across the country and hence will result in greater farmer satisfaction as prospects for marketing of his produce would be significantly enhanced.
- It also provide farmers improved access to market related information and better price discovery through a more efficient, transparent and competitive marketing platform, which gives them access to a greater number of buyers within the State and from outside, through transparent auction processes.
- It would also increase farmers’ access to markets through warehouse based sales and thus obviate the need to transport his produce to the mandi.
Agriculture is in the state list of the Constitution, and the unified agricultural market can be executed only in collaboration with the states. The states have already taken the lead in policy innovation, be it labour laws in Rajasthan, land acquisition reforms in Tamil Nadu or land pooling for urbanization in Andhra Pradesh. The Karnataka model of agricultural markets reforms should be seen as a similar case—a state innovation that can guide the whole country.
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