National Market for Agricultural

Commodities
Issues and the Way Forward
Introduction
! Presently, markets in agricultural products regulated under -
Agricultural Produce Market Committee (APMC) Act enacted by State
Governments.
! There are about 2477 principal regulated markets based on geography
(the APMCs) and 4843 sub-market yards regulated by the respective
APMCs
! This Act notifies agricultural commodities such as cereals, pulses,
edible oilseed, fruits and vegetables and even chicken, goat, sheep,
sugar, fish
! It provides that first sale in these commodities can be conducted only
under the aegis of the APMC through the commission agents licensed
by the APMCs set up under the Act.
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Price distortion
! Charge a market fee from buyers
! Licensing fee from the commissioning agents
! Small licensing fees from a whole range of functionaries
(warehousing agents, loading agents etc.)
! Agents charge commission fees on transactions
! Distortionary effect on supply chain -
Such high level of taxes at the first level of trading have significant
cascading effects on the prices
! Unlike direct taxes, which are levied on net income, the
commission is charged on the entire value of the produce sold
Essential commodities act, 1955 vs APMC
act
! The scope of the Essential Commodities Act is much broader
than the APMC Act
Model APMC Act
! Provides for direct sale of farm produce to contract farming sponsors;
! provides for setting up Special markets for specified agricultural
commodities mostly perishables
! Permits private persons, farmers and consumers to establish new markets
for agricultural produce in any area;
! Requires a single levy of market fee on the sale of notified agricultural
commodities in any market area
! Replaces licensing with registrations of market functionaries which would
allow them to operate in one or more different market areas
! Provides for the establishment of consumers and farmers markets to
facilitate direct sale of agricultural produce to consumers
! Provides for the creation of marketing infrastructure from the revenue
earned by the APMC.
Karnataka model
! Most states have been hesitant to adopt model APMC or adopted
partially
! In Karnataka, 51 of the 155 main market yards and 354 sub-yards have
been integrated into a single licensing system.
! Rashtriya e-market Servcies Ltd. (ReMS), a joint venture created by the
State government and NCDEX Spot Exchange, offers
automated auction and post auction facilities (weighting, invoicing, market fee
collection, accounting),
facilitate warehouse-based sale of produce,
facilitate commodity funding,
price dissemination by leveraging technology.
! The wider geographical scope afforded by breaking up fragmented
markets has enabled private sector investment in marketing infrastructure.
Inadequacies of model APMC Act
! Does not go far enough to create a national market
Retains mandatory requirement of the buyers having to pay APMC charges
even when the produce is sold directly outside the APMC area
Commission agents exist with the power to levy commission
! Unable to attract private players
Incremental approach
! First, states to drop fruits and vegetables from the APMC
schedule of regulated commodities. This could be followed by
cereals, pulse and oil seeds, and then all remaining commodities
! Level playing field to private sector -
persuaded to provide policy support for setting up infrastructure, making
available land etc.
! Liberalisation of FDI in retail could create the possibilities for
filling in the massive investment and infrastructure deficit
Last resort constitutional amendment
! Constitution of India empowers the States to enact APMC Acts under entries
in the List II of Seventh Schedule (State List)
Entry 14: Agriculture ,
Entry 26: Trade and Commerce within the State .
Entry 28: Markets and fairs.
! However, the Union can enact legislation for setting up a national common
market for specified agricultural commodities through
Entry 33 in concurrent list which covers trade and commerce and production, supply
and distribution of foodstuffs, including edible oilseeds and oils raw cotton, raw jute
etc.
Entry 42 in the Union List, viz., Interstate Trade and Commerce also allows a role for
the union.
! But contrary to the new spirit of cooperative federalism.