Where dismantling APMCs doesnt help farmers

Written by Sandip Das | Updated: Jun 5 2012, 07:16am hrs
Since the framing of the model Agricultural Produce Marketing Committee (APMC) Act in 2003 by the Centre, which allowed the setting up of a private market for the marketing of agricultural produce, many states have adopted the APMC law, aimed at realising better prices for farmers. The APMCs were established by the respective state governments for regulating the marketing of different kinds of agriculture produce.

Experts have said APMC markets monopolise the marketing of agricultural produce, as farmers are forced to sell fruits and vegetables only to the respective APMC markets.

But states such as Orissa, Bihar, West Bengal and Assam, which have increased their rice production significantly during the last five years or so, have been finding it difficult to invite private players even after dismantling the APMC Act. A case in point is Orissa, a key contributor to the central rice procurement drive and the second-biggest producer of vegetables in the country, which is yet to attract any big private investment in setting up a terminal market.

The Odisha Agricultural Produce Marketing (OAPM) Act, which was amended in June 2006, allows for the setting up of private markets and contract farming by any private individuals, company or cooperative society. At present, 65 Regulated Market Committees (RMCs) and 428 small markets under RMCs are used for paddy procurement and the marketing of fruits and vegetables. The Odisha State Agricultural Marketing Board officials say that most of the markets do not play any role in price discovery for farmers; and they provide only basic infrastructure to farmers for selling their produce.

In the absence of big investments in creating infrastructure, such as cold storage, connectivity and electronic auctioning, the existing markets are not in a position to help farmers achieve better price discovery. Most of the time, prices are discovered through negotiations with the traders.

The Orissa agricultural marketing board officials admit that while APMC markets in states such as Uttar Pradesh, Madhya Pradesh, Punjab, Haryana, etc, have lived their life cycle, leading to the creation of entry barriers for private players, these markets have created infrastructure to a certain level, which has helped the farmers to an extent.

But, in the eastern states, in the absence of even basic infrastructure such as auctioning and cold storage, farmers are still at the mercy of traders. The private sector has not been forthcoming in investing in market infrastructure in eastern states as a lack of aggregators at the ground level makes marketing economically unviable. Although Orissa has started to invest in creating specialised markets for cotton, maize and coconut, a lack of consolidation or segregation for vegetables at the farm level has resulted in the private sector being mostly absent at the ground level.

Because of small farm-holdings (the average farm-holding size for Orissa has been around 1.25 hectares) and with 85% farmers belonging to the small and marginal category, the state government needs to help in the creation of modern markets first, before the private sector steps in. Basic infrastructure like cold storage, transportation facilities, besides facilities for processing, would go a long way in inviting the private sector to participate in value addition, which would ensure better returns for the farmers.