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Not yet one market

Agricultural marketing reform should first take states on board

Business Standard Editorial Comment  |  New Delhi 

The Cabinet Committee on Economic Affairs (CCEA) has announced plans for a "national agricultural market" which would involve the integration of 585 major regulated mandis through electronic platforms over three years. Several problems in the current farm marketing system, governed by the monopolistic agricultural produce marketing committees (APMCs), might be addressed if this works: the multiplicity of mandi fees and licences for trading in different markets, for example. The low use of technology for transparent price discovery means prices vary widely across the country. There is also a wide gap between the prices received by the farmers and those paid by the end-users of farm commodities to the detriment of both producers and consumers. The idea is that an electronic, open price discovery, with a minimal role for the APMCs and other intermediaries, would help fix that. This market would, moreover, have simplified procedures for issuing single trading licence valid across a state and a single-point levy of market fee. The Small Farmers Agribusiness Consortium (SFAC) will set up this seamless market through the Agri-Tech Infrastructure Fund and government grants. Significantly, big private markets will also be allowed to access the e-platforms for price discovery though they will not be eligible for any government funding.

This is a big step forward. But it retains the problems that previous attempts to reform agricultural marketing have faced. For one, agricultural marketing being a state subject, the success of the move hinges crucially on cooperation from the state governments which have not been readily forthcoming in the past. No state politician wants to forgo mandi revenue and the political clout associated with controlling agricultural marketing. The Centre's failure to get states to amend their APMC Acts, the first-best solution, ran into this problem. After much persuasion many states have altered their marketing laws - but the changes rarely conform to the model APMC Act circulated by the Centre. And some states have not even framed the rules to allow enforcement of the amended laws. Even the Centre's request to delist perishables like vegetables and fruits from the items that have to be mandatorily traded through the APMC mandis has not been conceded by many states.

This apart, the APMCs, dominated by politicians usually belonging to the ruling class, may not let the state governments undermine their positions by agreeing to join the national common market. The middlemen, who are bound to lose much of their relevance in the new system of trading, may also try to sabotage this vital marketing reform. Though the new system moots guaranteed delivery of physical stocks of the stated quality from the designated warehouses, but this is easier said than done when the volumes involved are large and varied in nature. Remember, failure on this count was among the significant reasons for the collapse of the National Spot Exchange Limited (NSEL). If the SFAC is to begin to reform agriculture, these long-standing issues will have to be tackled head-on.

First Published: Tue, July 07 2015. 21:38 IST