APMC market yards are, however, important players in states like Punjab and Haryana where the marketable surplus is huge.
I found the following data (somewhat outdated) from the National Sample Survey (see table).
Notwithstanding the Agriculture Produce Market Committees (APMC) Acts of various states operating for a few decades, most farmers sold their produce to local private traders. In the cases of paddy and wheat, nearly 60 % of the farmers fell in this category. Official data show that only 1.24 crore paddy farmers (in 2019-20) and 43.35 lakh wheat farmers (in 2020-21) availed of MSP.
APMC: Merits and demerits
The reasons are obvious. 85 % of farmers have small holdings — less than one hectare — and have little surplus to sell. Distant APMC market yards are not an economically viable option: the cost of bagging, loading, transporting and unloading the few bags of grain, waiting at the APMC, paying the fees, and collecting the price in two days are beyond the means of small farmers. The local trader is a dependable partner to buy the produce at the farm gate and pay at once, even if the price is lower than the MSP.
APMC market yards are, however, important players in states like Punjab and Haryana where the marketable surplus is huge. Of the two states’ production of paddy and wheat, 75 % is procured by government agencies. In other states, it has been argued by some scholars that the market yards are inadequate in number and too distant for the farmers. For example, in Tamil Nadu, there are 283 market yards in 36 districts, an average of 8 per district, and the total turnover in 2019-20 was just Rs 129.76 crore. There are 326 market yards in Maharashtra and, on average, the farmer must travel 25 kilometres.
Undoubtedly, the APMC Acts restrict free trade in agricultural produce, but the market yards serve as safety nets. In Punjab and Haryana, the fees collected at the market yards contribute significantly to the state’s revenues which are applied to develop agricultural and rural infrastructure. Nevertheless, I hold the view that the APMC Acts must, in course of time, yield in favour of free trade enabled by multiple, easily accessible markets.
Congress manifesto vs BJP bills
That is what the Congress Manifesto promised in 2019. It promised to “promote Farmer Producer Companies/Organizations to enable farmers to access inputs, technology and markets” and to “establish farmers’ markets with adequate infrastructure and support in large villages and small towns to enable the farmer to bring his/her produce and freely market the same.” The soul of the Congress’ promise was the establishment of thousands of markets in the country. Such markets may be established by the state government, the local panchayat, a cooperative society or a private licensed operator. They will be lightly regulated and it will be stipulated that in every transaction in the market a price not less than MSP shall be paid. The proposal to repeal APMC Acts would be a natural sequel to the establishment of multiple, easily accessible markets.
On the contrary, what the Modi government has done is to weaken the safety net (of MSP) and dilute public procurement. Farmers are protesting on the streets because they fear that MSP will be done away with. State governments are worried that Public Procurement and PDS will be jeopardized. Once the three pillars of food security are undermined, the food security system that is being created under the National Food Security Act, 2013 will collapse.
The Modi government’s laws do not create thousands of alternative markets. Instead, they will allow contract farming and open the door for the entry of corporates and, eventually, cartels. Against such powerful purchasers, the small/ medium farmers would not have equal bargaining or contracting power and the convoluted dispute resolution mechanism, under the new laws, will ruin the farmer.
Another empty promise
The Agriculture Minister told Parliament that the new laws have absolutely nothing to do with MSP. That is literally true! Yet, he said that the government will ‘guarantee’ MSP to the farmers. It was a bizarre promise. How will the government know which farmer sold what produce to which purchaser? If the intention was to make MSP mandatory in every private transaction, why did the Bills not contain a clause that the price paid to the farmer by the purchaser shall not be less than the notified MSP?
Just as demonetisation was a disaster and economic mismanagement since 2017-18 is a continuing catastrophe, the two Farm Bills that will become law will debilitate the Indian farming community and the agricultural economy. They also dealt a blow to states’ rights and federalism.
Apparently, the Modi government believes that it can fool all the people all the time.