New agri-markets: A game-changer?

June 15, 2020 6:00 AM

This is the last chance for APMCs to reform. But, the ordinance that creates the new agri-markets replaces a decentralised structure with a highly centralised one

The virtual monopoly of Agriculture Produce Market Committees (APMCs) is expected to end sooner rather than later. The virtual monopoly of Agriculture Produce Market Committees (APMCs) is expected to end sooner rather than later.

By T Nanda Kumar

The ordinance titled The Farmers’ Produce Trade and Commerce (promotion and facilitation) Ordinance 2020 has been hailed as a game-changer, creating new opportunities for farmers to sell their produce wherever and to whomsoever they like. The virtual monopoly of Agriculture Produce Market Committees (APMCs) is expected to end sooner rather than later. Will this mean a death knell for APMCs, an institution created to do exactly the same, i.e., price discovery through a competitive auction process, proper weighing, payment on time, quality grading, etc? Will farmers benefit?

The pre-APMCs days were dominated by misinformation and price arbitrage. Traders with better communications between themselves—those were the days when telephones were a luxury, and long distance calls rarely materialised—got a sense of prevailing prices and used this information to their advantage. APMCs were thought to be the answer to these problems. Institutional and physical infrastructure were set up to ensure that all farm produce was brought to the designated markets, traders with licences were allowed to participate in auctions of graded produce and timely payments were made. Market yards and market committees were set up at the district and sub-district levels. These changed the market dynamics (at least, partially) in favour of the farmers in the early days.

APMCs were democratic institutions managed by a board/committee of mostly elected members from among the farmers and traders. The state governments, obsessed with revenue collection, found it convenient to supersede these boards and appoint administrators for long periods of time. Over time, they ceased to represent farmers’ interests. Set up with good intentions, like democratically managed committees, good infrastructure for auctions and storage, price discovery and communication, the system somehow deteriorated into a cartelised operation (licensing becoming the tool); cess collection became an obsession, and price discovery and transparency were put in the cold store. APMCs became the favourite whipping boy of many policy enthusiasts! Some went to the extent of recommending the complete abolition of these institutions (Bihar did this long ago; did their farmers do better? Doubtful!).

To be fair to APMCs, undisputedly, they created market infrastructure, and used the cess collections to improve agrarian infrastructure. Now, they will have no interest in investing beyond their market yards.

Multiple efforts to reform APMCs failed, primarily due to opposition from state governments who felt their cess collections will go down, and also from powerful vested interests.

The considered response of the Centre to all this is the new ordinance. While the legality of its provisions, especially with regard to intra-state trade and the curtailment of the definition of the market area, is open to question, let us see what could change for the farmer.

The ordinance carves out a new space called ‘trade area’, which includes everything except the market yards operated by APMCs and private mandis. All space other than these is a ‘trade area’ including farm gates, silos, factory premises, etc. This gives the farmer three choices, APMC, private market yard or a trade area. The big game-changer is that no market fee or cess is leviable in the trade area. A clear price advantage!

The central government has retained with itself the power to give licences to traders who can operate in this new area, ostensibly to protect the farmers. It has the powers to prescribe the modalities of the transaction to ensure payment to farmers on time. Enforcement of this could see the birth of a new set of inspectors! There is a dispute settlement mechanism for disputes with farmers under the SDO, and an appeal mechanism under the district collector. While these provisions are useful, farmers will be loth to use them since most of them would rather settle than litigate. New electronic trading platforms are also allowed to be set up in these areas by private individuals, FPOs and co-ops.

The question now is what are the farmers’ options? He could choose to sell in the new “trade area” for reasons of convenience, better price and assurance of payment (cash on delivery). But, how will he know the best price? If the APMCs lose most of the business, will they continue doing price discovery and reporting prices? Mandi prices are the biggest sources of localised price information for the farmer. The ordinance tries to address this by providing for a central government organisation, which will “develop” a price information and market intelligence system, and “produce” a framework for disseminating such information.

A centralised system of information dissemination, helping farmers take day-to-day decisions to sell looks very ‘imaginative’! In a digitally connected world, farmers will rely on other channels for market information, and will decide which market to choose. This is typical of the ordinance, which tries to replace a local, democratic in design—though badly managed—structure with a highly centralised, Delhi-driven one, giving extra powers to the agriculture marketing advisor in Krishi Bhavan.

The new set up will definitely encourage large companies, food processing firms, exporters, etc, to invest and source good-quality material from the origins, thereby, reducing the risk of mixing with lower grade produce. Farmers who produce quality material should get better prices if they know the market price dynamics. For the average farmer, who sells his crop at minimum support prices (MSP), mandis may remain the preferred option unless prices in the ‘trade area’ are above MSP, which is unlikely to be the case. If it stays below, the game is lost!

This ordinance does open up a new and profitable avenue for Farmer Producer Organisations (FPOs) which can take their rightful place as aggregators and ‘reliable’ suppliers. Farmers who can access the best information, and who are members of collectives, can surely benefit. For APMCs, however, this may be the last chance to change!
Will this be beginning of better prices for all farmers? There is hope, but, hope has a short life


Former secretary, food & agriculture, Government of India. Views are personal

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