States should change their Agriculture Produce Marketing Committee (APMC) Act on the lines of new model law suggested by the Union Agriculture ministry, the panel said, adding that there should not be any market fee on products sold outside the APMC mandie facilities.
An expert panel set up by the Centre to boost farmers income today suggested entrusting the regulation of spot exchanges for commodity trading with a single watchdog like Sebi, removing restriction on farmers to sell their produce through recognised APMC mandies and other reforms. The committee, headed by Niti Aayog member Ramesh Chand, also said the government should refrain from imposing sudden ban on derivative trading of agri commodities. States should change their Agriculture Produce Marketing Committee (APMC) Act on the lines of new model law suggested by the Union Agriculture ministry, the panel said, adding that there should not be any market fee on products sold outside the APMC mandie facilities.
It also emphasised the need to promote cooperatives and farmer producer organisations so that farmers can get better prices through collective bargaining power. “The committee is of a strong view that a number of fundamental reforms are required to be introduced in the spot markets as well as the derivatives markets for commodities to enable them to serve better various stakeholders, like producers, consumers and other market participants,” the panel said in its report. Farmers should be provided multiple modes for selling of farm produce and restrictions on farmers to sell their produce only through recognised APMCs should be waived, said the ‘Report of Expert Committee on Integration of Commodity Spot and Derivatives Markets’ released by the Finance Ministry today. “Under the existing APMC regulations, in case the facilities of APMCs are not used, ie if sale is done outside the APMC premises, such as sale on a regulated electronic platform, or regulated private markets etc., APMCs can still levy and collect applicable market fee on sale of such products. “Such levy of fees on goods sold outside the facilities of APMCs should be removed, because these are in the form of a statutory levy and not a service, for which a service levy is required,” the report said.
Further, the panel said pan-India electronic spot exchanges need to be well- regulated under appropriate regulations as is being done in case of commodity derivatives exchanges. According to the report, dissenting from the opinion of committee members to vest it with the powers to regulate the spot exchanges, Sebi suggested that regulation of commodity spot exchanges should be vested with a separate sectoral regulator. “However, the committee members are of the view that regulation of such pan-India electronic spot exchanges, which involves attendant risk management, clearing and settlement etc, may be entrusted to a single regulator like Sebi,” it noted. The existing institutional infrastructure of commodity exchanges should also be utilised to create a spot exchange for commodities. For increased participation, it is required that more hedger centric products be launched in the derivatives markets. At the same time, the “cost of trading in derivatives markets should also be rationalised,” the panel said. On frequent bans imposed by the government on future trading of agri-commodities, the panel said that “there should not be sudden discontinuation or disruption in derivatives trading in agricultural commodities due to reasons (such as production shortage/glut, volatilty in spot prices, imposition of stock control limits etc) which are beyond the control of the derivatives market.”
These issues need to be addressed separately to take the necessary policy decisions, it added. For the purposes of price stabilisation in agri commodities, the central and state agricultural marketing institutions should consider derivatives markets (especially option trading) as one of the avenues for price stabilisation and forward guidance of spot market prices. The panel recommended a sound institutional mechanism to collect, collate and disseminate the data of spot market transactions, both primary and secondary markets, on a regular basis. In the Budget for 2017-18 fiscal, Finance Minister Arun Jaitley had announced that an expert panel would be constituted to study and promote creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading. e-NAM would be an integral part of such framework. “The commodities markets require further reforms for the benefits of farmers. An expert committee will be constituted,” he had said. The mandate of the committee was to examine the legal, technical and operational aspects of the commodity spot and derivatives markets with a view to eliminate the gaps and overlaps that exist between these two markets and recommend measures for achieving the desired integration between the commodity spot and derivatives markets in India. The panel said that a dedicated controlling ministry for base metals could be created. “Ministry of Steel, in this regard, could be entrusted the task of overseeing the markets for all ferrous and non-ferrous base metals.” For the growth of domestic metals industry, it is required that Free Trade Agreements, should be reviewed wherever possible.