School of Economics | APMC act: problems and remedies
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APMC act: problems and remedies

Introduction (Origin)

  • In the post independent India, despite the abolition of zamindari, the farmers were not ‘liberated’ from exploitation. Because the goons of local bainyaa or moneylender would (often forcibly) take away the produce to recover their dues without adequate compensation to the farmer.
  • To address this nuisance, state governments began enacting laws to provide that “first sale of agriculture produce can occur only at the government notified market yards only”.
  • Such laws are known as “APMC Acts”.
  • Under these acts, agricultural produce market committees (APMC) are formed, who are responsible for the operation of the local mandis / market yards. [APMC: कृषिगत उत्पाद विपणन समिति]

APMC Problems?

  • APMC office bearers are politically influential persons. They enjoy a cozy relationship with the licensed commission agents. These agents then form cartel, manipulate prices and deprive farmers of remunerative prices.
  • APMC office bearers lack corporate skill for vertical integration with food processing industries. [because their only skill is ‘politics.’]
  • While these Mandis charge multiple entry, exit and other fees. But money is siphoned off hence they’ve poor infrastructure, lack of cold-storageand transport facilities esp. for fruits and vegetables. This leads to substantial waste of the produce despite bumper harvests during good monsoon years.
  • Thus, APMC’s cartelization and poor infrastructure leads to artificial or real shortage of food supply in the retail market, thereby driving up the food inflation.

APMC Reforms?

Since agriculture is a state subject, ultimately state governments have to reform their archaic laws. Union Government already circulated a model APMC Act, but most states have implemented it only half-heartedly. Hence, Both Niti3YR & ES16 have recommended following:

  1. Replace the APMC ‘licensed’ intermediary system with open registration backed by bank guarantees. So that entrepreneurs without political clout, can also enter this game.
  2. Such Non-APMC registered buyers should have right to
    • Setup alternate marketplace.
    • Buy produce directly from the farmer.
  3. This will create competition and pave the way for the farmer to receive lucrative prices.
  4. For small farmers it is neither feasible nor profitable to take their produce to markets, so governments should allow for “aggregators” who would collect produce from farmers for sale in competitive marketplaces.
  5. Exempt perishables from the APMC acts.
  6. Promote farmer cooperatives for direct retailing to customers.
  7. Encourage contract farming.
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