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Institutional Issues
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- Licensing Barriers: The compulsory requirement of owning a shop/godown for getting license as commission agents/traders has led to the monopoly of certain licensed traders. This acts as a major entry barrier in existing APMCs for new entrepreneurs, thus creating cartelization and preventing competition.
- High Incidence of Market Charges: APMCs are authorized to collect market fee ranging between 0.5% to 2.0% of the sale value of the produce. Further, other charges, such as, purchase tax, weighment charges etc. are also required to be paid. In some States, this works out to total charges as large as 15 %.
- Absence of standardized grading mechanism of agricultural produce before it is sold. It hinders farmers from fetching the prices commensurate with the quality of their produce.
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Infrastructural Issues
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- Poor Infrastructure in Agricultural Markets: Studies indicate that covered and open auction platforms exist only in two-thirds of the regulated markets, while only one-fourth of the markets have common drying yards. Cold storage units exist in less than one tenth of the markets and grading facilities in less than one-third of the markets.
- Poor economic viability of project : Agriculture marketing infrastructure projects have a long gestation period. The seasonality and aggregation of small surpluses of agricultural produce further affects the economic viability of the projects, which deters investments.
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Market information system issues
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- Lag in demand signals: Absence of efficient real-time informational channels create a lag in demand signals. This has resulted in farmers following price trends as indicators to supply. Presently, price is a measure that is post-circumstantial and these circumstances may not repeat next season.
- Limited information channels and content: The current information dissemination systems, (like local newspapers and APMC display boards) provide information only on prices of major commodities, are far away from farmer’s location and generally not available in local languages.
- Poor awareness about new channels of information: Only a small fraction of farmers use the more accessible SMS based advisories or Voice interactive systems.
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Other issues
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- Absence of a National Integrated Market: Although, there exists a national level physical market in the form of APMCs, there is no national level regulation for the same and the existing regulations do not provide for a barrier free market in the country.
- Limited public investment: Public expenditure on agricultural marketing sub-sector ranges 4-5% of the total public expenses on agriculture, while expenditure on marketing infrastructure development has been less than 1 %.
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