By Arunav Goel for NeemTee Agro Solutions
An Agricultural Produce Market Committee (APMC) is a marketing board established by a state government in India, with the aim to provide the farmers with a platform to sell their produce and protect them from possible exploitation by large retailers and ensure that the “farm to retail price spread” does not reach to unreasonably high levels. They are engaged in the development of market yards for the benefit of agriculturists and the consumers.
The APMC also organizes farmers markets which helps the farmers sell their produce directly to the consumers. But the problems of farming is not as much in production as it is in the marketing system, the marketing system is suffocating and choking the farmers and taking away undue share in the inter mediation process.
Problems with the APMC Act:-
The APMC markets are monopolistic, rent-seeking, and they charge high rates of commission.
● The APMCs have been vested with so much power that they can regulate both the creation of agricultural markets as well as the entities that can participate in such markets and such an extent of the exercise of powers by APMCs has resulted in collusive behavior in the supply chain of agricultural marketing.
● Further, since these APMCs markets are often in districts, some farmers cannot afford to take their produce to faraway APMC markets both in terms of time as well as the cost of transport.
● State APMC Market Committees have members who are elected or nominated by Government, but in several Indian States, regular elections of APMCs are not held, and the APMC board is administrated by bureaucrats.
● In every Mandi, every transaction is subjected to market tax + market cess and to avoid tax/cess, the traders don’t give sale slips to farmers, which later makes it difficult for the farmer to prove their ‘income’ to get loans from banks. Even after receiving the fruit/veggies/grains, they delay payment to farmers for weeks and months.
● The mandis are usually managed/controlled by a few traders, who often collude and form cartels, and thereby prevent the farmer from selling to the best buyer.
● The middle-men and traders who make their money from exploiting farmers and consumers often fund the ruling parties in the states, which is why some of the states haven’t amended their APMC Act.
Therefore, it is required that the monopoly of the APMC markets need to face competition from others. Now, the government has come up with these new reforms that are creating alternative channels for farmers to sell their produce. So, that they can have more choices and not just the APMC mandis as their only option. If the new reforms are adopted by states, it will liberalize the agri-market.The purpose of reforming the APMC Act is to create a single agri-market where with a single license one can trade agri-produce as well as livestock. Most analysts and policymakers favor modernizing distribution networks and shortening
supply chains to make it easier for retailers and food processors to buy directly from farmers, which would potentially improve the returns to investment made by the farmer.
Another possible solution to this problem is building a modern electronic market that can replace the APMC. This will enable a more efficient trading and enable better price discovery without adding too many layers of middlemen.