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A thread on APMCs that brought “licence raj” in the agricultural sector and the three “controversial” bills introduced in the parliament that are all set to end this monopoly-
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What are APMCs? After Independence to overcome the vicious cycle of debt and exploitation of farmers at the hands of moneylenders/traders who controlled all the supply & distribution of the agri produce, Agricultural Produce Market Committees (APMCs) were introduced by states.
These APMCs are managed by Market Committees (constituted by the state governments).
A Market committee comprises of 15-20 members who were either elected/nominated by the govt (elections were very rare).
{Read about which political party dominates APMCs in Maharashtra}
A Market committee comprises of 15-20 members who were either elected/nominated by the govt (elections were very rare).
{Read about which political party dominates APMCs in Maharashtra}
The entire state is divided into market areas, and each area is under a market committee.
Once this is done, NO person or agency is allowed to freely carry out the wholesale marketing activities in the agriculture produce.
Once this is done, NO person or agency is allowed to freely carry out the wholesale marketing activities in the agriculture produce.
Licensing : Market committees authorise commission agents/ traders to carry out procurement & distribution activities through Mandis.
Thus, even after the abolishment of License Raj in 1991, it is still prevalent in the agricultural sector.
Thus, even after the abolishment of License Raj in 1991, it is still prevalent in the agricultural sector.
Not only this, APMCs charge license fee from warehousing agents, loading agents commission agents, etc.
Fee is also charged from both the seller (farmer who comes to sell) and the buyer (wholesaler).
Fee is also charged from both the seller (farmer who comes to sell) and the buyer (wholesaler).
Some hidden charges also include legal fee, Mandi Tax, etc.
Let’s say a farmer sells his produce like - potatoes to the APMCs for ₹10/Kg, he will first pay plethora of taxes to the agents, who in turn are going to charge similar set of taxes even from the wholesaler.
Let’s say a farmer sells his produce like - potatoes to the APMCs for ₹10/Kg, he will first pay plethora of taxes to the agents, who in turn are going to charge similar set of taxes even from the wholesaler.
Thus, in the end, a common man pays ₹60/kg for potatoes, whereas the farmer takes home only a meagre sum, based on say, ₹5 per kilo (after taxes). Only the middleman is at profit.
The middleman here refers to agents of APMCs.
The middleman here refers to agents of APMCs.
Also, when a farmer sells his produce to the APMC Mandis, there is NO immediate payment. Rather, he has to wait for a couple of days before the amount gets credited to his account.
This means - a lag in payment and liquidity.
This means - a lag in payment and liquidity.
APMCs play a dual role of “regulator” and a “controlled market”.
Most of the states even impose restrictions on the interstate selling and procurement of agricultural produce. Hence, barring market integration.
Most of the states even impose restrictions on the interstate selling and procurement of agricultural produce. Hence, barring market integration.
The three bills introduced that are all set to bring a sea change in this sector are -
1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020- The act ends the monopoly of APMCs to exclusively procure from the farmers.
1) The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020- The act ends the monopoly of APMCs to exclusively procure from the farmers.
It however has NOT ENDED THE FARMER’s choice to keep selling to APMCs if he gets good return.
Farmers will now have a CHOICE to sell in the open market or keep selling to APMCs.
This act provides a level playing field to all sellers, hence paving way for a free market.
Farmers will now have a CHOICE to sell in the open market or keep selling to APMCs.
This act provides a level playing field to all sellers, hence paving way for a free market.
2) The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020-
To ensure a fair treatment to farmers outside APMCs, this bill provides for price assurance & trade agreement during sale/ purchase of farm produce through a written agreement.
To ensure a fair treatment to farmers outside APMCs, this bill provides for price assurance & trade agreement during sale/ purchase of farm produce through a written agreement.
3) The Essential Commodities (Amendment) Bill, 2020-
To ensure free market mechanism, this act will remove cereals, pulses, oilseeds, edible oils, onions, and potatoes from the list of essential commodities to prevent regulation in production, distribution & movement.
To ensure free market mechanism, this act will remove cereals, pulses, oilseeds, edible oils, onions, and potatoes from the list of essential commodities to prevent regulation in production, distribution & movement.
However, the government is still authorised to regulate the supply & distribution of these commodities during emergencies.
APMCs in major states have only served few political goons for decades. Introduction of free market in agriculture is definitely going to produce some friction, but it is beneficial in the long run.
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