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Economic Survey: Move beyond 'persuasion' for creating national agriculture market

Survey criticises operations of APMCs by saying their revenues were hidden from scrutiny

BS Reporter  |  New Delhi 

Control over agricultural markets might be a domain of state governments but the Economic Survey has called for bold actions that move further from mere “persuasion” to using constitutional provisions for enacting legislation to set up a national common market for specified agricultural commodities. It would mean the Union government make use of entries in the Union List and the Concurrent List of the Seventh Schedule to change law rather than wait for the states to do it.

Severely criticising the operations of agricultural produce market committees (APMC), the Survey said their revenues were not just hidden from scrutiny but also positions in the market committee at the state level and market board, which supervised the market committees, were occupied by politically influential persons. “They enjoy a cosy relationship with the licensed commission agents who wield power by exercising monopoly power within the notified area, at times by forming cartels. The resistance to reforming APMCs is perceived to be emanating from these factors,” it said..

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Though the need for setting up a national market was emphasised in the last and the Centre had taken steps to encourage states to develop farmer markets in towns to enable farmers to sell their produce directly, the Survey said, “More steps may have to be taken and incremental moves may need to be considered to get the states on board.”

Markets in the agricultural products are regulated under the Agriculture Produce Market Committee Act enacted by state governments. There are 2,477 principal regulated markets based on geography, called agriculture produce market committee and 4,843 sub-market yards regulated by the respective APMCs in India.

“Effectively, India has not one, not 29 but thousands of agriculture markets,” the survey pointed out, while highlighting that multiplicity of fees and tax had a cascading impact on the prices of a commodity when it passes through the supply chain. For instance, these charges could be as high as 14.5 per cent in Andhra Pradesh, excluding state value-added tax and close to 10 per cent in Odisha and Punjab.

The model APMC has attempted at creating greater competition by giving farmers some freedom to sell their produce directly to the contract-sponsors or in the market set up by private individuals, consumers or producers. The survey is, however, critical of the model Act in that it treats APMC as an arm of the state and the market fee as the tax levied by the state, rather than fee charged for providing services. “This acts as a major impediment to creating national common market in agriculture commodities. Removal of this provision will pave a way for creating competition and a national common market for agriculture commodities.”

Besides, section 42 in the model Act provides for market fee to be levied on the buyer. The incidence of this fee falls on the selling farmer since the buyer discounts their bids to the extent of the fee or commission charged by the APMC and the commission agents even though the legislation bars such a fee on the sellers.

The Survey said the principal objective of food management was to ensure food security through timely and efficient procurement and distribution of foodgrain, besides affordable and stable prices. The pricing instruments used are minimum support price and central issue price. But price support “effectively operates primarily in wheat and rice and that, too, in selected states” creating incentive structures highly skewed in favour of the two grains.

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First Published: Sat, February 28 2015. 00:18 IST