Introduction :- 

For a long time, a traditional market system was existent in India. It was characterized by the village sales of agricultural commodities, post-harvest immediate sale by farmers etc. In 1928, the Royal commission has pointed out the problems of traditional marketing such as high marketing cost, unauthorized deductions, and prevalence of various malpractices. This led to the demand of having regulated markets in India.

India is an agrarian economy with 70% of its population dependent on agriculture. Over the years we have improved our agricultural production which has been a boon. But finding a market for the marketed surplus and getting fair prices have always been a major challenge. This clearly points out the need of agricultural marketing in the present times.

Maharashtra became 2nd state after Bihar to end the monopoly of Agricultural Produce Market Committee (APMC) and allow trade in farm commodities including livestock outside the wholesale markets (mandis).

APMCs :

• Presently, the marketing of agricultural commodities is governed by Agricultural Produce Market Committee (APMC) Act enacted by respective State Governments
• The notifies agricultural commodities as well as livestock covered under its ambit
• First sale of crops by farmers - after harvesting - can only take place in APMC authorized mandis (not at the farm gates) through auctions
• Around 6700 principal regulated primary agriculture markets function across the country, each one located at the gap of 462 sq km
• To remove discrepancies in agricultural markets, Central Government proposed Model APMC Act, 2003 and Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017.

Need for reforms :

• Market Segmentation: The monopoly of APMCs in agriculture market reduces buyer competition in comparison to integrated markets, as it limits the geographical range of the mandis, number of buyers and sector specialization of buyers. Thus, it limits the income accrued to the farmers
• High Spatial Price Dispersion: In India, the ratio of the highest price of a commodity to its lowest price - a measure of price dispersion (Economic Survey 2015-16) - is almost thrice that observed in the US. This indicates that markets are not well integrated and logistics cost is high
• Cartelization: Cartelization by traders prevents price discovery mechanisms from functioning in mandis.
• High Degree of Intermediation: According to Ashok Dalwai Committee, farmers’ share in consumer prices range from 15% to 40% (Ashok Dalwai Committee).
  Missing credit markets (farmers borrow from intermediaries, conditional to sale of harvest), lack of storage, high transportation & processing costs add to the retail-farmgate wedge. This prevents farmers from realizing higher prices and consumers from buying food at lower prices, lowering overall welfare
• High License fees + APMC Cess and Taxes: High commission levied on both farmers and buyers create artificial inflation. Final price to consumer high but benefit does not reach the farmer.
• Wastage (poor storage and transportation): APMCs do no value addition in terms of storage and transport facilities leading to high wastage. Tax money is not utilized properly in creating infrastructure (electronic weighing machines, drying yards, grading & assaying facilities, cold storage etc.) in the mandis.

Drawbacks of a regulated market :-

• Under this regulation, no exporter or processor could buy directly from farmers. It discouraged processing and exporting of agricultural products.
• Under the act, the state Government could only set up markets, thus preventing private players from setting up markets and investing in marketing infrastructure.
• Formation of cartels with links to caste and political networks resulting in price variations.
• An increased number of middlemen formed a virtual barrier between the farmer and the consumer.
• The licensing of commission agents in the state regulated markets has led to the monopoly of the licensed traders acting as a major entry barrier for new entrepreneurs.
• The fragmentation of markets within the State hinders the free flow of agro- commodities from one market area to another and multiple handling of agri-produce and multiple levels of mandi charges end up escalating the prices for the consumers without commensurate benefit to the farmer.

Changes Proposed :

• The amendment of the Maharashtra Agricultural Produce Marketing (Development and Regulation) Act, 1963 has deregulated the sale of agri-produce. Thus, first point of sale needn’t be an APMC-regulated mandi
• No cess or market fee can be charged on the trades outside the purview of the mandi
• It has also done away with the requirement of separate licenses to trade in different mandis, creating single market in the entire state. This would enable farmers and traders to buy and sell at any mandi without the requirement of the mandatory license.

Way Forward :

• Creating Market Infrastructure:  Physical integration: Railroad expansion changed the landscape of agricultural markets in US 
• Digital integration: e-NAM (National Agricultural Market). Instead of treating state as single market area, the entire country must be treated as unified market
• Changing the target market: Like Maharashtra & Bihar, other states must also modify laws that constrain farmers to sell in local mandis only, especially for perishables. Some complementary measures such as provision of land & financial incentives for private sector-promoted market yards is needed. Farmers can also realize maximum profits by selling the produce directly to food processing units (less rotting & regular supply)
• Transport and storage infrastructure for perishables: Currently, only 7000-8000 refrigerated trucks are plying in India, mostly transporting pharmaceuticals & dairy products. Transport of perishable commodities in Reefer trucks & freight subsidy would help in better supply and availability of the produce. At present, India’s cold storage capacity is nearly 3.5 cr tonnes, short by 30-40 lakh tonnes, and it needs to be increased
• Establishing Markets of National Importance (MNI): At present, Asia’s largest agricultural market at Azadpur, Delhi is the only Market of National Importance (MNI) in the country. More such markets need to be established to boost inter-state trade
• Setting up Farmer Producer Organizations and Cooperatives: It would provide better avenues at collective bargaining to small & marginal farmers. It could also act as a direct marketing channel to supply produce from ‘surplus’ regions to high demand states
• Restructure Essential Commodities Act: To incentivize corporate companies to invest in trading of agricultural commodities. The exemptions from stockholding limits must be given to exporters, food processors, multiple outlet retailers, large departmental retailers etc.
• Alternative marketing options: such as contract farming, direct marketing through FPOs/cooperatives etc, commodity trading through National Commodity and Derivatives Exchange, e-RaKAM (digital spot trading market), NSEL (where warehouse receipts of commodities are traded) etc.
• Nation-wide Price Dissemination Mechanism: Forward Market Commission (FMC) has set up e-portal AGMARKNET that displays real time wholesale price of agricultural commodities on e-portal connected with APMC markets, Kisan mandis, Kisan Vikas Kendras (KVKs), State Agricultural Boards etc.