To ease supply-side constraints on food articles, Finance Minister Arun Jaitley has proposed several measures to help improve marketing and storage of produce.
Taking cues from the Bhartiya Janata Party's election manifesto, he has proposed integrating markets across the country, with the Centre to work closely with states to reorient the latter's respective Agricultural Produce Marketing Committee (APMC) Acts, to provide for establishment of private market yards and markets. States will also be encouraged to develop farmers' markets in town areas.
There are around 7,500 wholesale markets, with differing prices, all governed by APMCs, with geographical boundaries; trade is not allowed outside these mandis. If a corporate buyer wishes to offer a higher price for a commodity to farmers, the trade has to be routed through the APMC. Intermediaries make a killing by keeping high margins, resulting in high prices for ultimate consumers. By opening the markets for farmers, this should change.
In another important move, the minister proposed allocation of Rs 5,000 crore in 2014-15 for increasing of warehousing capacity, for increasing the shelf life of perishable produce. Another Rs 5,000 crore has been added to the corpus of the Rural Infrastructure Development Fund.
Vijay Sardana, convener of the Food Security and Sustainable Agriculture Foundation, said: "The proposal to have a national market is very good but now the focus should be to develop or strengthen a price discovery mechanism for farmers."
The FM said all warehouses should be online to give information to farmers and small industries, to know which warehouse has the required space in which area.
Exporters say as agriculture is a state subject, making a success of private mandis will not be easy. States need convincing to exempt the licensing requirement. Jaitley has also proposed a Price Stabilisation Fund and provided Rs 500 crore for one; experts say the amount is too small for market intervention. China has such a fund but with much more resources. However, it is seen as a good beginning. The minister has not cut the commodity transaction tax (CTT) as he was expected to. Nor has he said anything on amending the forward contract law. On the other hand, he said nothing about banning of futures contracts in essential commodities, which was feared.
Regarding tax treatment of commodity derivative transactions, he has disallowed setting off profit and loss arising out of agriculture commodities on which CTT is not applicable against other business profit/loss. The law is to be amended to specify setoff of gains and losses only from CTT-enabled commodities against normal business gains and losses.