Setting up national agriculture market, a clear warning for APMCs

The Budget has proposed the setting up of a national agriculture market. Agriculture in the country is a State subject and thus all the States have set up Agricultural Produce Marketing Committees (APMC) to regulate the marketing of agricultural commodities.

Thus, APMCs have been considered an inhibiting factor for establishment of a national agriculture market.

The Economic Survey said that the Centre will make attempts to persuade State governments to introduce required amendments, it also clearly mentions: “If persuasion fails (and it has been tried for a long time since 2003), it may be necessary to see what the Centre can do, taking account of the allocation of subjects under the Constitution of India”.

The Survey acknowledges that the Constitution empowers the states to enact APMC Acts, but also says that if the States will not be co-operating then the Centre may take action in lieu of List III of the Seventh Schedule (Concurrent List) in the Constitution which empowers the Union to enact legislation for setting up a national common market for specified agricultural commodities, viz., Entry 33 which covers trade and commerce and production, supply and distribution of foodstuffs, including edible oilseeds and oils raw cotton, raw jute, etc. The other major hurdle in the form of legislative barriers to interstate trade has also been touched in the Survey. It states that “Entry 42 in the Union List, viz., ‘Interstate Trade and Commerce’ also allows a role for the union”.

Though Centre wants to establish national market in coordination with states, a harsh warning is clear with the closing paragraph of the chapter on national market.

“Once a law is passed by Parliament to regulate trading in the specified agricultural commodities, it will override the state APMC laws, paving the way for creating a national common market. But this approach could be seen as heavy-handed on the part of the Centre and contrary to the new spirit of cooperative federalism”.

So far, States where APMCs have been performing poorly took taking refuge under Model APMC Act and were introducing reform measures according to suggestions in a phased manner.

Not many States have been successful to demonstrate a better result even after introducing such reforms. The report has also targeted Model APMC Act.

The provision for empowering APMCs in imposing the mandi fee on buyers even if the trade is done outside of market without utilising any infrastructure of the committee is heavily criticised.

It would be, in fact, difficult for the owner of a private market to collect the market fee and pay to APMCs and that is why attracting private investment under such existing framework would be difficult.

Having a Model APMC Act developed a decade ago and not revising seems to be deterministic approach. Even model frameworks should also be of evolving in nature so that there is no instance of under exploitation of opportunities due to over protectionism.

Though APMCs are criticised for their restrictive approach, the entrepreneurial approach and the system of agricultural marketing adopted in Karnataka has been praised in the report. Like many other States, Karnataka has also introduced agricultural marketing reforms, but not directly from the Model APMC Act.

The State constituted a separate reform committee to recommend reform measures according to the need of the state and established Rashtriya e-market Services Ltd. (ReMS), a joint venture created by the State government and NCDEX Spot Exchange under the leadership of Manoj Rajan.

With the intention expressed in Economic Survey 2014-15, the Centre has expressed its strong desire to establish a national market for which it may go to extreme ends as well. Under such circumstances, APMCs will have to face a do or die situation where either they have to develop themselves as modern markets or they may have to svanish.

If the alternatives to the APMCs are created by the Centre, the monopoly of APMCs in many states will be compromised and if that attracts the private investment in infrastructure then it may slowly and gradually takeover the business of APMCs. However, looking over the already existing physical infrastructure, development of APMCs into modern markets is quite natural.

Either way, option remains with the APMCs only if they modernise their existing infrastructure as well as modernise their marketing system with latest development, and if it happens, the APMCs can play a leader’s role in a highly competitive marketing environment.

The writer is associated with NIAM, Jaipur. Views are personal.

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