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Dealing directly with farmers is still barred

Sanjeeb Mukherjee  |  New Delhi 

States reluctant to adopt model APMC law, as existing structure of controls gives them a lot of revenue, but growers and consumers lose heavily.

The has assured industry of building a broad consensus on allowing foreign direct investment in multi-brand retail and it may be sincere. However, even if the sector was so opened, the existing bar on procurement of agricultural produce directly from farmers would nullify much of the potential.

A common market for agricultural produce remains a dream in India. Even after eight years of existence of the model Agricultural Produce Market Committee (APMC) Act, states have not embraced it, fearing loss of revenue if the current structure was dismantled.

The model Act, framed in 2003, permits private and corporate bodies to set up marketing networks and to end the entrenched network of wholesalers and arthiyas (middlemen). The need for such an Act was felt since the market committees, instead of serving the interest of farmers and promoting modern marketing practices, turned into revenue generating institutions for state governments. In the process, the transparency as envisaged in marketing committees’ legal obligations is missing.

Data shows that from 2007-08 to 2009-10, the income of the market committees from market fees, license charges, etc, on only fruits and vegetables rose 787 per cent from Rs 3.6 crore to Rs 32 crore in Andhra Pradesh. In Haryana, the same income grew 35 per cent from Rs 17.5 crore to Rs 23.6 crore. In Karnataka, the earnings rose from Rs 8.6 crore per annum to Rs 21.9 crore, a rise of 150 per cent, and in Punjab, revenue rose from Rs 29.9 crore to Rs 35.6 crore between 2007-08 and 2009-10.

In sum, APMCs have been a cash cow, which no state government wants to stop milking (see chart).

Other hurdles
A recent report by a committee of state ministers in charge of agricultural marketing showed the reluctance to prevent farm goods from being exposed to cascading market fees, cess and taxes. This is one single big reform in which hasn’t taken off. Among the other provisions of the model APMC Act, the report showed that of the 35 states and Union territories, just 16 now have a provision for private market yards. Only, the rules and bylaws haven’t been framed by all, in the absence of which the reform becomes meaningless.

While 17 states have granted licenses to processors, exporters, graders and packers to purchase agricultural produce directly from farmers, a high license fee (in excess of Rs 50,000 in some states like Andhra Pradesh) and a limited number of commodities is a big deterrent in having a pan-India marketing system.

State-wise total income of market committees in Rs crore


2007-2008   2008-2009 2009-2010
Fruit & 
Fruit & 
Fruit &
Andhra Pradesh 364.06 3.61 400.09 2.68 306.99 32.00
Gujarat 134.52 21.12 163.31 18.48 180.87 22.78
Haryana 228.27 17.49 300.34 19.64 371.01 23.58
Madhya Pradesh 466.36

478.23 15.12 571.52 24.26
Karnataka 198.87 8.60 246.58 17.45 294.15 21.93
Orissa 57.11 5.71 104.87 10.49 105.59 10.56
Uttarakhand 20.91 4.55 23.63 4.61 30.26 5.53
Punjab 351.41 29.87 531.84 31.32 624.37 35.55
Maharashtra 193.07

375.99 48.5 287.84

Income from market fees and other marketing charges which include commission charges, development fees etc for APMCs. Bihar does not figure as the state repealed its APMC Act in 2006. Source: Report of Committee of State Ministers on Marketing Reforms.

The model Act’s provision of allowing contract farming has been incorporated by 18 of the 35 states and UTs, but many have not exempted commodities so produced from market fees. “This makes the whole exercise of allowing contract farming in a certain commodity useless, as the grower has to pay the same fee which he would have paid even in the existing framework,” a senior government official said.

Also, not all commodities are allowed by states for contract farming, another deterrent for private traders.

Besides, the big bottleneck in marketing reforms has been the reluctance of states in allowing any person or agency to carry on wholesale marketing activities without obtaining a licence outside a designated market or yard, which renders the whole exercise of a modern, competitive marketing structure redundant.

“The partial reform to the APMC Act is a big deterrent on entry of private traders in agricultural marketing. This distorts the entire supply chain and does not give value to consumers or growers,” said Rajesh Srivastava, chairman and managing director at Rabo Equity Advisors. Rabo was instrumental in setting up one of India’s most modern non-government agriculture markets, near Bangalore.

“Our experience shows that initially there has been some resistance from the established cartel of wholesalers and traders, but once they realise the benefits of good storage and modern marketing facilities, even the old-timers start coming to the new facility,” Srivastava said.

The UPA government had held back the Cabinet decision to allow up to 51 per cent in multi-brand retail after its own coalition allies, like the Trinamool Congress, protested against the move, besides opposition parties. However, commerce & industry minister Anand Sharma had recently assured India Inc that the government was working towards building a consensus on the move.

First Published: Mon, January 02 2012. 01:19 IST