Unaddressed issues in agri marketing

The reform of agricultural markets is a long pending policy issue in India. Like many other issues related to agriculture, which is a State subject, this one too is caught in a tussle between the Central and State governments.

The first attempt at reforms in agricultural markets was made by the Central government by designing a model Agricultural Produce Market Committee (APMC) Act in 2003, which provided for new market channels other than the APMC market — such as direct purchase, private wholesale markets, and contract farming for farmers and buyers alike. More agricultural market reforms are needed in the light of the changing global and local markets.

Conflict of interest

After more than 14 years of struggle by the Ministry of Agriculture and Farmers’ Welfare (MoAFW) to get the model APMC Act accepted at the State-level — only some States have adopted it fully (a few such as Uttar Pradesh are yet to look at it) — the MoAFW has come up with another model Act — the Agricultural Produce and Livestock Marketing (promotion and facilitation) Act, 2017 (APLMA, 2017).

This is supposed to be more in tune with the changing times. Contract farming has been taken out of the APMC domain, citing conflict of interest. Traders and commission agents oppose it due to their business getting adversely affected; the contracted produce does not have to come to the APMC mandi or pass through the mandi agents.

But, the other non-starter provision in the 2003 Act, private wholesale markets (other than the APMC market), remains in the draft model Act. Why this has not been taken out of the purview of the APMC Act is not clear; there is even bigger conflict of interest than in the case of contract farming. These private markets would compete directly with the APMC market for buyers and sellers.

Not many private markets could come up during the last 15 years as the local APMCs felt threatened by them and scuttled them, by not allocating land, placing other conditions and even charging a fee from them — despite many of them being granted licences. On the other hand, there is at least some amount of contract farming being practised in most States.

Passing the buck

The biggest change in the domain of APMC as per the model APLMA, 2017 is that it will regulate marketing of notified agricultural produce only in principal, sub-market and market sub-yards. The issue then is: Who would regulate direct purchase outside the market yard by buyers like food supermarkets or traders or exporters? This is also contradictory to section 4(1) of the Act, which declares the whole State as one unified market. If this unified market is still to be regulated for the benefit of the farmer and for fair play for all involved, who would do it?

The model APLMA, for the first time, mandates the APLMC to take measures to prevent sale/purchase of produce below Minimum Support Price (MSP) in the APLM market, if applicable. But this is not a fair provision as the MSP is promised by the government, and not the private trade. Therefore, forcing the private trade to buy produce at or above MSP or penalising them for not doing so, can kill the private markets for agricultural produce.

Maharashtra tried to bring this into its APLM Act but had to withdraw this provision due to a traders’ strike. What is needed for more effective MSP implementation is the effective provision of procurement by the State and its agencies with the involvement of local institutions like PACS (Primary Agricultural Credit Societies) and producer companies.

From regulation to facilitation

That the model Act reflects a major policy change is seen in the very title of the Act which is called APLM (promotion and facilitation) Act, 2017. The title seems to suggest that there is no need for regulation anymore and that farmers do not need protection in markets.

Further, other than in the name of the Act and in defining what livestock means, it does not deal with issues in this very important sector of the agribusiness economy, namely, quality, hygiene and food safety. By clubbing the farm produce and livestock into one legislation, it also fails to recognise that the dynamics of these markets are very different in terms of perishability, frequency and nature of transactions.

The Act also provides for payment to farmer-seller (in APLM market or direct purchase) on the same day. Otherwise, there could be seizure of the produce of the buyer. This is a new and welcome provision as delayed payments can cause a lot of trouble for farmer-sellers, whether under APLM or direct sale to buyers.

The buyer would have to make additional payment at one per cent of the total produce value per day up to five days for late payment for the bought produce, after which there could be cancellation of licence for one year. This positive provision is borrowed from the Rajasthan APMC Act.

There are also penalties for non-payment of fees/user charges, but they are only up to five times or a maximum of ₹10,000, which is not a very effective deterrent. The model Act asks the APLMC to ensure that traders do not hoard produce but no measures to prevent it are specified. This, therefore, is a half-hearted provision.

For the first time, the model Act provides for public-private partnership at the APLMC level. This is important as it provides for engagement of the elected body with private entities for local level infrastructure and facilities development and their management which can help professionalisation of APLMCs and their operations.

The Act imposes a ceiling on private market yard user charges by government, as excessive charges may act as a disincentive for investment in such markets. Further, the private wholesale markets would contribute to a revolving Marketing Development Fund (MDF, maintained by Director, Marketing) from user charges, for maintenance of infrastructure.

The old order continues

Most disappointingly, the Act ignores the vexed issue of the role of Arthiyas (commission agents or CAs) in the APMCs and maintains them as central agents in the system even though MP rightly got rid of them as early as 1985.

This is despite the fact that the issue of direct payments to farmers for their produce has been hanging fire for the last 15 years in Punjab.

This is a very regressive step in the Act and perhaps reflects the political economy of agricultural markets in India where the CAs have acquired a political clout and State governments are unwilling to protect the interests of farmers, the primary stakeholder of such markets.

Central agencies like FCI have been eager to pay directly to farmers but it is the State governments (Punjab, for instance) which do not want this to happen. This is because there is serious inter-locking of output and credit, and output and input markets where the CAs also engage in money lending to farmers informally and illegally.

The writer is Professor, IIM Ahmedabad.

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