Agri Business

APMCs are still vital for price discovery of farm produce

Vishwanath Kulkarni Rutam Vora Bengaluru | Updated on May 20, 2020

Super markets and big retail chains too source their produce from APMC mandis   -  -

‘Mandis ensure price transparency and middlemen offer credit to farmers’

The APMC mandis would continue to remain the place for price discovery of farm produce, despite farmers being given an option to sell outside the market yards in Gujarat and Karnataka.

Private buyers — large processors or super market chains — would continue to price their purchases using the mandi price as reference.

Large buyers and experts feel that majority of the farmers and buyers would continue to depend on mandis to sell their produce due to transparency in pricing, convenient payment terms and price discovery through auctions, among others.

Prof Sukhpal Singh, Chairperson, Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad, says price discovery will continue to take place from APMCs as farmers will still depend on local mandis. The government will buy from these mandis, while the private buyers will not find small farmers attractive, especially for mainstream crops.

“Whatever reforms the government may plan, most farmers will still depend on local APMCs because they are well established and entertain any kind, quality and type of produce. Farmers have interlocking relations with traders and commission agents for credit and produce. They borrow from there and go to sell there. Also, the APMCs are considered as government markets,” Singh said.

Even now, buyers such as large super markets and retail chains, which source from farmers directly through collection centres in various States, rely on the APMC prices for price discovery. “It is incorrect to say that farmers do not have the choice to sell to others,” Singh added.

Large processors of commodities such as oilseeds and pulses may prefer to continue buying from mandis.

Adani Wilmar Ltd, which has a licence for direct purchase of agricultural produce, prefers APMCs for procuring oilseeds, grains and other staples primarily because of transparent price discovery.

“Trading through APMCs is a preferred route for farmers and other players in the system. Price discovery at APMCs is easy and transparent. This transparency of pricing is important for us as well as for farmers. We would continue to prefer APMCs for our procurement,” Angshu Mallick, Deputy CEO, Adani Wilmar Ltd, told BusinessLine in a recent video conference.

Mallick said that even if a farmer is paid more than the prevailing price, there is a possibility that he may feel cheated if he discovers a price discrepancy between two different buyers.

Reference price

It is feared that the APMC amendment will eventually encourage more number of aggregators for farmers and corporate buyers. Farmers may end up having even smaller say in such a model as against the current one with commission agents being the middlemen.

“The APMC price will be a reference for off-market transactions. Farmers will look at the APMC price before agreeing to any deal,” said a pulse processor in Kalaburgi.

Officials at an APMC in Gujarat claimed that farmers may not entirely switch over to the new model of agriculture trade, merely because they are given an option to sell outside the market yards.

“They need be sure about the authenticity of the price offered to them and the payments. This act exposes them to a greater risk of exploitation and cheating,” said an office bearer of one of the APMCs in Gujarat.

“In the direct dealing with farmers, they may ask for advance payments or may want entire amount in cash. Which is not possible for the bulk buyers and processors. In the APMC model, the commission agent is the link who takes care of such payment mechanisms and provides confidence to buyers as well as farmers,” said Sameer Shah, President, Saurashtra Oil Mills Association.

Shah, a processor himself, stated that there is no incentive to buy directly from the farmers.

Published on May 20, 2020

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