What is Agriculture Produce Market Committee (APMC)?

 

What is Agriculture Produce Market Committee (APMC)?

  • Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.
  • APMCs are intended to be responsible for:
    • Ensuring transparency in pricing system and transactions taking place in market area
    • Providing market-led extension services to farmers
    • Ensuring payment for agricultural produce sold by farmers on the same day
    • Promoting agricultural processing including activities for value addition in agricultural produce
    • Publicizing data on arrivals and rates of agricultural produce brought into the market area for sale
    • Setup and promote public private partnership in the management of agricultural markets

 

Issues with the current APMC system

  • Monopoly of APMC: It deprives farmers from better customers, and consumers from original suppliers.
  • Conflict of Interest: APMC play dual role of regulator and Market. Consequently its role as regulator is undermined by vested interest in lucrative trade. They despite of inefficiency won’t let go any control. Generally, member and chairman are nominated/elected out of the agents operating in that market.
  • Entry Barriers: License fee in these markets are highly prohibitive. In many markets farmers were not allowed to operate. Further, over and above license fee, rent/value for shops is quite high which keeps away competition. At most places only a group of village/urban elite operates in APMC.
  • Cartelization: It is quite often seen that agents in an APMC get together to form a cartel and deliberately restraint from higher bidding. Produce is procured at manipulatively discovered price and sold at higher price. Spoils are then shared by participants, leaving farmers in lurch.
  • High commission, taxes and levies: Farmers have to pay commission, marketing fee, APMC cess which pushes up costs. Apart from this many states impose Value Added Tax.
  • Other Manipulations: Agents have tendency to block a part of payment for unexplained or fictitious reasons. Farmer is sometimes refused payment slip (which acknowledges sale and payment) which is essential for him to get loan.

 

Background

  • Bihar, in 2006, scrapped its APMC Act and now Maharashtra has not done the same, but the ordinance amending its Act makes APMCs powerless beyond their market yards.
  • The APMCs can continue to levy a cess/market fee on the produce brought and traded in their mandis.
  • But these levies – ranging from 0.8 per cent to 1 per cent of the value of purchase – cannot be charged on trades outside the mandi.
  • The Maharashtra government had earlier, in August 2016, “de-listed” fruits and vegetables from the APMC purview.
  • It expanded the universe of buyers for horticultural produce beyond traders or commission agents licenced to operate in the area under a particular APMC.
  • But now, that freedom for trading of farm produce has been extended to all crops and livestock.

 

Key Highlights

  • An ordinance by the Maharashtra government on October 25 has amended the Maharashtra Agriculture Produce Marketing (Development and Regulation) Act, 1963.
  • This Act had made it mandatory for farmers to sell all their crops after harvest in mandis within a geographically delineated market area under the particular APMC’s jurisdiction.
  • But the amendment now curtails the supervisory powers of APMCs only within its own “principal market yard, sub-market yard and market sub-yard”.
  • The APMC shall henceforth “not regulate marketing of agricultural produce and livestock in its delineated market area,” the amendment has stated.
  • What this practically does is to allow traders or processors to deal directly with farmers. Neither they nor farmers will have to go to mandis to buy and sell produce.
  • The buyers can strike deals with farmers right at the farmgate and the point of first sale does not have to be an APMC-regulated mandi.

 

What will the latest reform do?

  • It will enable solvent extraction and oil expeller units, dal millers, ginners, animal feed makers, and other big processors and traders to deal directly with farmers.
    • Since no APMC cess/market fee will be levied on their purchases, they could be incentivised to make such direct purchases or even pass on some of the savings to farmers.
    • Farmers, too, would be spared the burden of transporting their produce to the mandi, apart from incurring expenses towards loading, unloading and weighing.
  • The APMC mandis will be forced to invest in infrastructure and improve their quality of services to attract farmers and buyers.
    • The farmer till now had no choice but to bring his produce to the mandi or sell it at throwaway prices to a village-level aggregator.
    • What the ordinance does is to introduce competition. The farmer, at the end of the day, may still choose to sell at the mandi, if he gets a better price there than from selling at the farm gate.

 

Way ahead

  • Marketplaces have inherent advantages from many buyers and sellers coming together at a single point. What will happen now is competition, which will force the APMC mandis to get their act together and provide better infrastructure and facilities in their yards.
Section : Economics

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