Markets for farmers

Poor regulation of rural markets benefits only intermediaries

While New Delhi’s Krishi Bhawan has good reason for urging states that do not have an agricultural produce market committee (APMC) Act to put in place a proper regulatory mechanism for agricultural markets, the fact also is that the APMC laws where they exist have not always been helpful instruments of market regulation. The concept of legally mandated regulation of agricultural markets, aimed at encouraging the orderly growth of farm marketing infrastructure and ensuring fair trade practices, has not worked as intended. It has not enabled the growth of an efficient marketing infrastructure, nor has it prevented unfair trade practices. In fact, the fence has been eating the field and market committees have been abetting unfair trade practices, hurting both producers and consumers. The beneficiary is the intermediary.

Farmers are being denied the right to sell their produce outside mandis and directly to consumers, retailers or food processors. Apart from the APMC Act, other outmoded laws and rules, including the retrograde Essential Commodities Act, allow various kinds of controls such as movement restrictions, stock limits and bans or caps on the export and import of agro-goods. Many of these interventions lead to market distortions if not failure.

It was the consciousness of these deficiencies that prompted the central government some years ago to circulate a draft model APMC law, as a guide for states to follow. This provided for setting up agricultural markets in the private and/or cooperative sectors, allowing direct marketing and contract marketing, and waiving the market fee for perishable horticultural commodities, something that does not prevent reasonable user charges being levied for availing market facilities. Though the majority of states have amended their APMC legislation, many of the altered statutes do not conform to the spirit of the model APMC law. For instance, they still do not offer freedom to farmers and food processors or retailers to enter into direct deals, in or outside the mandis. This is essential if transactions costs are to be lowered.