In a major pre-election reform move, Congress vice-president Rahul Gandhi announced that all Congress states will remove fruits and vegetables from the purview of the Agricultural Produce Marketing Committee (APMC) Act, by the middle of January 2014. Since the largest mandis in the country (see graphic) are in Congress-ruled states till the elections, Delhi was also Congress-ruled this effectively means big buyers, like organised retailers, can directly procure from farmers. Given wholesale-to-retail mark-ups are two to three times, the scope for inflation control is large, which is what the move was aimed at runaway inflation played a big role in the Congress partys humiliating 4:1 defeat in the recent round of assembly elections.

All Congress-ruled states will by January 15 delist fruits and vegetables from their respective APMC Acts so that the farmers have a choice of where to sell their produce and consumers will get the benefit of lower prices, AICC communications department chief Ajay Maken told newspersons. These amendments to include or exclude items from the list needs an executive order and the governments will not have to go the state legislators, Congress party sources said.

The move to partially deregulate the distribution system is expected to both bring down prices of fruit and vegetables as also ensure a better price for the farmer. With wholesale buyers getting direct access to the farm gate, a big chunk of the cost to the end consumer, in the form of commissions earned by the agents or artiyas typically 2-5% of the retail prices as also mandi tax can be eliminated. The mandi tax, octroi, VAT or sales tax and inter-state movement charges (if allowed) account for an estimated 10-12% of the final retail price.

Large organised retailers, companies that run cash and carry operations and also smaller vendors of fruit and vegetables can now source their requirements directly from the farmer.

The four biggest wholesale markets or mandis in India are located in Vashi in Maharashtra, Azadpur in New Delhi, Bangalore in Karnataka and Hyderabad in Andhra Pradesh.

The largest fruit-growing states in the country are Himachal Pradesh, Jammu and Kashmir and Maharashtra; among the states that produce the largest quantities of vegetables are West Bengal, Maharashtra, Uttarakhand and Gujarat. Experts, however, point out that accessing the farm gate will not be easy without the requisite infrastructure and that it could a while before there is a meaningful impact on prices. India produces approximately 250 million tonnes of fruit and vegetables annually.

The APMC, a marketing board under the aegis of the state governments, is controlled by artiyas or commission agents and farmers typically sell their produce at the mandis; while the artiyas are immediate buyers for farm produce, farmers end up receiving barely a fourth of the final retail price. The APMC Model Act prohibits the presence of a commission agency in any transaction of agricultural commodities with the producers.