What is APMC ?
The wholesaling of agricultural produce is regulated by the Agricultural Produce Marketing Acts of various State Governments. Agricultural Produce Marketing Committee (APMC) Act authorizes the concerned State Governments to notify the commodities, designate markets and market areas where regulated trade takes place and provides for the establishment of APMCs that are accountable for the functioning of the markets. An entire state is divided and declared as a market area, where markets are governed by the Market Committees that are constituted by the State Governments
The objectives of APMC are mentioned below:
- Developing an efficient marketing system.
- Promotion of agri-processing and agricultural exports.
- Specify procedures and systems to establish an effective infrastructure for the marketing of agricultural produce.
Shortcomings in Current APMC system
- Monopoly of APMC – Monopoly of any trade (barring few exceptions) is bad, whether it is by some MNC corporation by government or by any APMC. It deprives farmers from better customers, and consumers from original suppliers.
- Cartelization – It is quite often seen that agents in an APMC get together to form a cartel and deliberately restraint from higher bidding. Produce is procured at manipulatively discovered price and sold at higher price. Spoils are then shared by participants, leaving farmers in lurch.
- Entry Barriers – License fee in these markets are highly prohibitive. In many markets farmers were not allowed to operate. Further, over and above license fee, rent/value for shops is quite high which keeps away competition. At most places only a group of village/urban elite operates in APMC.
- Conflict of Interest – APMC plays a dual role of regulator and Market. Consequently its role as regulator is undermined by vested interest in lucrative trade. They, despite inefficiency, won’t let go of any control. Generally, members and chairman are nominated/elected out of the agents operating in that market.
- High commission, taxes and levies: Farmers have to pay commission, marketing fee, APMC cess which pushes up costs.
APMC model act
Taking these concerns into cognizance, Central Government appointed a working group which recommended a Model APMC act. Salient features are –
- As per the act, the State is divided into several market areas, each of which is administered by a separate Agricultural Produce Market Committee (APMC) which imposes its own marketing regulation (including fees).
- Apart from that, legal persons, growers, and local authorities are permitted to apply for the establishment of new markets for agricultural produce in any area.
- There will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC).
- Separate provision is made for notification of ‘Special Markets’ in any market area for specified agricultural commodities.
- Provision for Contract Farming, allowing direct sale of farm produce to contract farming sponsors from farmer’s field.
- Single point levy of market fee on the sale of notified agricultural commodities in any market area.
- Provision made for resolving disputes arising between private market/ consumer market and Market.
- Provides for the creation of marketing infrastructure from the revenue earned by the APMC.
Alternate Marketing Channels
a) Direct Marketing
APMC model act promotes direct marketing. As farmer is allowed to sell his goods outside APMC, he can now, under APMC model act, directly sell to consumer. This completely eliminates the middleman and narrows the gap between farmer’s sale price and price paid by consumer. There are numerous successful examples all over India such as Apni Mandi in Punjab, Rythu Bazar in Andhra Pradesh, Uzhavar Sandhai in TN, Shetkari Bazaar in Maharashtra, Hadapsar Vegetable Market in Pune, Krushak Bazaar in Odisha and Kisan Mandi in Rajasthan.
Central government sponsors ‘Agricultural marketing Infrastructure, Grading & standardization Scheme’ for development of infrastructure for direct marketing .
b) Contract Farming
Under contract farming inputs material may be provided by purchasing party for a particular crop and there is a crop buyback agreement in advance Quality is specified in advance. This is mainly entered into by big corporates who are in business of food processing. So far there has been mixed results. It removes uncertainty of Income for the farmer and he can fetch good prices.
c) Future contracts and ‘negotiable warehouse receipts’ in agriculture
A futures contract is a contract between two parties where both parties agree to buy and sell a particular asset of specific quantity and at a predetermined price, at a specified date in future. Hence, these contracts are instruments for Risk management, price discovery and trading. This trading attracts intense scrutiny of market analysts for prediction of future trends of demand and supply, which in turn yield much useful data for manufacturers and producers. This has much utility for the farmers as they can decode future trends and plan their production accordingly. Farmer can similarly sell his production in advance in futures market and buyers can buy in futures market.
In 2003 futures trading in all agricultural commodities was allowed and in 2007 The Warehousing (development and Regulation) Act, 2007 was passed. This created ‘Warehousing Development and Regulating Authority’ (WDRA).
WDRA introduced a concept of ‘Negotiable Warehouse Receipt’. There are WDRA certified warehouses all over India, in which farmers can deposit there produce and they will get a receipt (Negotiable Warehouse Receipt) acknowledging quantity, type, category etc. of crop.
This receipt can be used by farmers to get loans, to make payments or to settle any other type of claim. This receipt will be accepted by any ‘certified warehouse’ in India and possessor of this receipt can get quantity mentioned in it. The Negotiable Warehouse Receipts (NWR) system aimed at not only helping the farmers to avail better credit facilities and avoid distress sale but will also to safeguard financial institutions by mitigating risks inherent in credit extension to farmers.