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Review APMC Act to check cartelisation: Basu panel

BS Reporter  |  New Delhi 

An inter-ministerial panel has proposed using the competition law and reviewing the Agriculture Produce Marketing Committee (APMC) Act to prevent cartelisation of wholesale agricultural markets and ensure smooth movement of produce by small traders.

Chaired by the government’s Chief Economic Advisor, Kaushik Basu, in the wake of an unexpected rise in inflation in February, it discussed ways to reduce volatility in the prices of primary (unprocessed) items.

“We have to review the APMC Act so that mandis are not held by a cartel,” an official said. The APMC Act provides for regulation of agricultural produce markets to ensure efficient system of buying and selling of agricultural commodities.

Basu told reporters that food inflation was on its way down and “we really want to nail it down further”.

He said the government aimed to keep inflation within a reasonable range.

Inflation had risen to 8.31 per cent in February from 8.23 per cent in the previous month, even as food inflation came down. This was due to a rise in manufacturing inflation (sans food products) to a two-year high of over 6 per cent.

This prompted the Reserve Bank of India (RBI) to raise its inflationary projections for the end of this financial year to eight per cent from the earlier seven per cent as well as to raise policy rates for the eighth time since early 2010.

Basu said the panel also discussed ways to narrow the gap between farm and retail prices.

An official said the panel would pay attention to marketing of products, especially agricultural and food products to reduce this gap. He said the Competition Act would be used to ensure that small traders freely bring their products from farm to retail outlets.

“We have to use our competition law very carefully and allow small traders to bring in their products,” he added.

The inter-ministerial group was set up in December after onion prices skyrocketed, pushing up food inflation to double digits. However, after a moderation in the prices of vegetables, including onions, and other items, food inflation declined to 9.42 per cent during the week ended March 5 from 9.52 per cent a week ago.

A finance ministry statement later said the meeting took up the issue of revising the APMC Act and encourage competition among traders and promote efficiency in retailing.

According to the statement, Basu stressed that there were certain natural rises and falls of price, which are the market’s way of signalling information to consumers.

As such, he said it was not a good idea to flatten out these natural price movements. “It is when a small shortfall in production results in a disproportionate rise in prices that we realise that there may be flaws in our marketing system,” the chief economic advisor said.

First Published: Tue, March 22 2011. 00:56 IST