Unshackling agri markets

After removing wholesale trade in fruit, vegetables and spices from the purview of the Agriculture Produce Market Committee (APMC) framework in 2016, Maharashtra now plans to extend this to all agriculture produce. All farm items can then be sold in bulk either by way of contract farming, direct selling or in private wholesale markets — with the monopoly of APMC yards being broken. Maharashtra will be the second State after Bihar to do so (Bihar went ahead in 2006), if it manages to translate its intent into law. Predictably, the ordinance introduced to this effect in end-October, sparked off some traders’ protests, since this would threaten not just their dominance but also snatch away their power to levy a one per cent fee on virtually all wholesale trade in farm produce, even on trades that take place outside their defined areas. Efforts to create an alternative to APMCs have been underway since 2003, when the model APMC Act was formulated, but vested political interests in the States have tried hard to maintain the status quo. This is not to deny some major steps forward; 14 States, including Maharashtra, have removed fruit and vegetables from ambit of APMCs. Last week, traders went on strike in Bengaluru, protesting the emergence of alternative arrangements. Such competition could help pare intermediation costs, offering a choice and better price to farmers who are short-changed by commission agents or arthiyas. By acting as moneylenders as well as buyers, arthiyas extract a high price from farmers. Meanwhile, the APMCs have done little to improve their infrastructure, except perhaps in Madhya Pradesh where the introduction of private wholesale markets (such ITC’s e-choupal) helped to lift the efficiency of APMCs and enabled farmers realise better values.

The experience of M.P. and Bihar is instructive in different ways. The former saw a movement in the mid-80s that dislodged the arthiyas. This was replaced by an enhanced role of cooperative banks in providing credit and inputs. Meanwhile, the State initiated a procurement initiative under Shivraj Singh Chouhan that bolstered the output of wheat, supported by State-level procurement agencies. While that procurement mechanism seems to have come unstuck of late, M.P. remains an example of what marketing reforms can achieve. In contrast, in Bihar the APMC’s role was whittled down, without private wholesale markets taking their place. Farmers fork out high fees to roadside wholesalers, or transport their produce to Punjab. Maharashtra should go the M.P. rather than the Bihar way.

On the whole, private wholesale markets have barely come into existence. With the country looking to produce larger quantities of all commodities, many more market yards (above 40,000) than the present 7,700 APMCs are required, so that farmers can access markets within close range. Private players should create new infrastructure, and not merely step into existing yards. Agri-marketing reforms are about creating multiple avenues for farmers and reducing intermediation costs.

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