iv. Regulation of Agricultural Marketing

UPSC Sample Notes [English]

iv. Regulation of Agricultural Marketing

Agriculture falls under the State List of the Constitution. Agriculture marketing in most states is regulated by APMCs established by state governments under the respective APMC Acts. The APMC, also referred to as mandi, is the physical market infrastructure which is found in all states in India (except Jammu and Kashmir, Bihar, Kerala and Manipur). They serve as physical entities which regulate market practices such as weighing, methods of sale, methods of grading and methods of payment. To date, there are 7,246 functioning mandis in India.

Agricultural Produce Marketing 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. Major Issues Involved in functioning of APMCs Under the APMC Regulation, no exporter or processor could buy directly from the farmers, thereby discouraging processing and export of agri-products. This creates a monopsony (a market situation where there is only one buyer who then exercises control over the price at which he buys) situation. Due to above situation of monopsony produce is procured at manipulatively discovered price and sold at higher price, defeating the very purpose of APMCs. Markets are overly-regulated leading to lot of corruption and exploitation of farmers. Fragmented markets, multiple levy of license fees, limited licenses, late payment for the purchase, unavailability of amenities and services such as facility for grading, storage etc. actually act as an impediment to the cause of farmers rather than benefitting them. Only State Govt. could set up markets, thereby preventing the private sector from setting up markets and investing in marketing infrastructure. APMCs play dual role of regulator and Market. Consequently, their role as regulator is Student Notes: undermined by vested interest in lucrative trade. Generally, member and chairman are nominated/elected out of the agents operating in that market.
Model APMC Act, 2003	Due to the above inefficiencies in APMCs functioning, Ministry of Agriculture formulated a model law on agricultural marketing – State Agricultural Produce Marketing (Development and Regulation) Act, 2003 and requested the state governments to suitably amend their respective APMC Acts for deregulation of the marketing system in India, to promote investment in marketing infrastructure, thereby motivating the corporate sector to undertake direct marketing and to facilitate a national market. Criticisms of Model APMC Act The Model APMC Act does not go far enough to create a national or even state level common market for agriculture commodities. The Act retains the mandatory requirement of the buyers having to pay APMC charges even when the produce is sold directly outside the APMC area. Though the Model Act provides for setting up of markets by private sector, this is not adequate to create competition even within the state since the owner will have to collect fees/taxes on behalf of the APMC in addition to their own charges.
Model Agricultural Produce and Livestock Marketing (Promotion & Facilitation) Act, 2017	The Government of India brought in a new draft model law, Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act (APLM), 2017 to replace the Agriculture Produce Markets Committee Act, 2003.
Model Contract Farming Act 2017	Under Contract Farming, agricultural production (including livestock and poultry) can be carried out based on a preharvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations). Benefit: The producer can reduce the risk of fluctuating market price and demand while buyer can reduce the risk of non-availability of quality produce. Issues: Present laws on contract farming only include one or two farm commodities and are limited to marketing only. Thus, The Government has brought Model Contract Farming Act in 2017.

Key Features of Contract Farming Act

Challenges with Contract Farming

State reluctance: States have been reluctant to carry forward reform for the fear of loss of revenue.

Stockholdings limits on contracted produce under Essential Commodities Act, 1955 are restrictive and discourage buyers to enter into contracts.
Lack of uniformity or homogeneity among states law regarding kinds of produce, conditions etc. which is needed for allowing contract farming.
Promote Regional Inequality: Currently it is practiced in agriculturally developed states (Punjab, TN etc.) while States with highest concentration of small and marginal farmers are not able to reap its benefit.
Supply side issue: Buyers have no incentive for contract farming with a large number of small and marginal farmers (average size of landholdings in India was 1.15 hectare (Agriculture Census 2010-11)) due to high transactions and marketing costs, creating socio-economic distortions and preference for large farmers
It is a capital-intensive and less sustainable pattern of cultivation as it promotes increasing use of fertilizers and pesticides which have detrimental impact on natural resources, environment, humans and animals.
Encourages Monoculture Farming: This will not only impact soil health but also possesses risk of food security and import of food grains
It increases dependency of farmers on corporate for inputs, making them vulnerable
Predetermined prices can deny farmers the benefits of higher prices prevailing in market for the produce.