States key to success of common agri markets

By April 14, the central government hopes to integrate 360 mandis or wholesale markets spread across 16 states under a common electronic platform to be called the National Agriculture Market (NAM). In the first phase, a pilot will be launched in 20 mandis across eight states. Experts believe this will usher in a new era in agriculture marketing and could be a permanent solution to the dreaded Agriculture Produce Marketing Committee (APMC) Act, the legislation through which state governments exercise control over wholesale markets.

The APMCs were established to provide an organised market place to farmers and to ensure that they are not exploited at the hands of unscrupulous buyers. Ironically, in the last 15-20 years, they have played a role, which is opposite to their stated objective. The 2,400-odd recognised APMCs have become a den of political interference, nepotism, exploitation and corruption.

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THE NAM TIMELINE
The schedule for implementation

• 14 April 2016: Launch of NAM platform on pilot basis
• 200 No. of regulated markets to be integrated by September 2016
• 200 No. of regulated markets to be integrated by March 2017
• 185 No. of regulated markets to be integrated by March 2018

As the levies collected by APMCs do not go to the state exchequer, and also any spending does not require legislature approval, their operations often do not come under scrutiny.

The 2014-15 Economic Survey points out that the commission charged by licensed agents (those authorised to act as middlemen between buyers and sellers) is exorbitant because unlike direct taxes, which are levied on net income, the commission is usually charged on the entire value of the produce sold.

To overcome these ills, the Centre in 2003 framed a model APMC Act. But since agriculture is a state subject, its role was limited to framing the Act.

The Act is based on seven pillars - (a) allowing direct sale of farm produce to contract farming; (b) setting up of special markets; (c) allowing private persons, farmers and consumers to establish new markets outside the established APMCs; (d) single levy of market fee on sale of any produce within the notified area; (e) to replace licence with registrations; (f) facilitate direct sale of farm produce; and (g) creation of market infrastructure from revenue earned by the APMC.

However, no state adopted the Act in totality. The contentious and politically volatile issues like single levy or market fee were left untouched by most states. The initiative, therefore, remained a half-hearted effort.

The NAM hopes to break this nexus and move towards a uniform integrated market for farm produce. Under this, only those states that have undertaken three major reforms in agriculture marketing - namely have a single licence for wholesale, allow direct purchase from farmers, and have modernised the warehouse receipt system - would be eligible for the central grant of Rs 30 lakh to set up the online infrastructure.

As of March 2016, the Centre said, proposals had been received from Gujarat, Maharashtra, Telangana, Jharkhand, Chhattisgarh, Madhya Pradesh, Rajasthan, UT of Chandigarh, Haryana, Himachal Pradesh, Uttar Pradesh and Andhra Pradesh for integration of 365 mandis with NAM and initial funds have also been disbursed in some cases. The Budget for FY 2016-17 has provided Rs 200 crore to set up this platform.

"The concept is fine, but unless there is a prior requisite of standardisation, gradation and assessment of the farm produce, it would be difficult to find buyers. In agriculture, it is very difficult to ascertain the quality," says Gokul Patnaik, chairman of Global AgriSystem Private Limited. Before launching the platform, the Centre should have established a proper system of standardisation and gradation, he adds.

Experts say the model APMC Act too needs to be amended to make it more relevant to the changing pattern of marketplaces where online and e-commerce is becoming more important. Arghya Sengupta, founder and research director, Vidhi Center for Legal Policy, says the ideal manner to implement a technology-based national market is with full cooperation of state governments. "The Centre must respect the fact that agriculture is a state subject in the Constitution and for NAM to be successful, amendments to APMC Acts in states might be required," he says.

However, there are provisions in the Constitution - through Concurrent List Entry 33 and Entry 42 of Union List - to create a national common market for agriculture commodities. Experts say that this could involve walking on a thin line fraught with legal difficulty. "It is preferable that NAM becomes a live example of cooperative federalism in action with the Centre and states collaborating to make it a reality," says Sengupta.

Arpita Mukherjee, a professor at ICRIER, points out that unless direct sourcing is allowed and all types of mandi taxes are done away with for the goods sold through the platform, it would be very difficult to attract corporate and big buyers. "The corporate sector does not like to work with multiple farmers," Mukherjee added. The success of the project would depend on states adopting this system wholeheartedly, and making appropriate amendments to the APMC Act.