The move by the Ministry of Food Processing Industries (MoFPI) to set up of a corpus of ₹2,000 crore with Nabard to promote Food Processing Units and related infrastructure by providing low interest loans for seven years is commendable.

However, the MoFPI’s plans to abolish the Agricultural Produce Marketing Committee (APMC) Act has brought the focus on amendment/abolition of the Agricultural Produce Market Regulation (APMR) Act. Many policymakers and academicians see the law as restricting creation of infrastructure by private players, development of alternative marketing channels for farmers and establishing of a competitive market.

The review of the APMR Act, however, should be seen in the light of the overall objective of regulating agricultural marketing by States.

Regulation of agri markets The APMR Act authorises States to set up and regulate marketing practices in wholesale markets. The objective was to ensure that farmers get fair price for their produce.

APMCs have served some key purposes: removal of malpractices and imperfections in agricultural markets, creation of orderly and transparent marketing conditions and ensuring a fairer deal for farmers selling their produce. However, the revenue generated was used for creation of market infrastructure on ad-hoc basis which did not streamline themarkets as intended.

The inter-ministerial task force on agricultural marketing reforms (2002) recommended the APMC Act be amended to allow for direct marketing and the establishment of agricultural markets by the private and co-operative sector to provide more efficient marketing and creating a regulatory and policy environment conducive to private investment.

In response, the Union Ministry of Agriculture proposed a model act on agricultural marketing in consultation with State governments for adoption by the States. The reforms were intended to promote investment in marketing infrastructure and motivate the corporate sector to undertake direct marketing and facilitate a national integrated market.

Contract farming, direct marketing and public-private partnership in management and development of agricultural markets were some of the other major instruments of change. A few State governments have already amended their respective APMC Acts; the rest are yet to do so.

Abolition of APMR Act According to a study by the UN’s Food and Agriculture Organisation, it is not possible to determine whether or not welfare will be improved by repealing market regulations without analysing the welfare implications of existing rules.

The shadow cost of repealing the APMR Act may be higher as the social benefits of the Act cannot be ignored by expecting the same to create a perfectly competitive market, which exists only in theory. This has been observed in Bihar where the Act was repealed in 2006.

The Act was repealed in the expectation of attracting investment from private players, and a fairer deal for farmers. However, the repeal exposed farmers to exploitation, as in the pre-regulation era.

Tool for development The regulation of markets and agricultural marketing was introduced by various States through implementation of a respective APMR Act to safeguard farmers’ interests and not primarily to ensure an ideal and perfectly competitive market.

The Act has been used by many States as a tool for development through proper implementation. This has been the case with States like Karnataka, Andhra Pradesh and Tamil Nadu, which have achieved remarkable success under the APMR Act regime.

In these States, APMCs not only serve to protect the interests of farmers by improving facilities at the yards, but also by allowing farmers to deal with alternatives markets such as Safal, Rythu Bazar and Ujhavar Sandi, etc.

The presence or absence of an APMR Act is just one of the conditions and not the only condition to attract private investment.

Removal of regulations in an environment where farmers are still at a disadvantage vis-à-vis strong traders may lead to their exploitation as in the pre-regulation era.

The current situation calls for gradual shift in the role of the State from being a watchdog to a facilitator.

The writers are associated with NIAM, Jaipur. Views are personal.