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Demystifying APMC

Legal Framework and Market Dynamics in India

Niharika Gangwar
Niharika Gangwar

Published on: Jun 20, 2024

Deepesh Sharma
Deepesh Sharma

Updated on: Jun 20, 2024

(13 Ratings)
878

The primary sector of the Indian economy is agriculture, which plays a pivotal role in the nation’s socio-economic fabric. Numerous Agro-based enterprises and services heavily rely on agriculture and its related sectors for sourcing raw materials, thereby directly impacting the overall well-being of the general public, rural prosperity, and employment. Although there is consistent growth in productivity and aggregate production, it is imperative to ensure that the farming community gains access to enhanced marketing facilities and infrastructure to secure fair prices for their produce. By incorporating value addition in agriculture, significant improvements can be made to elevate the living standards of the majority of the population.

The Agricultural Produce Market Committee (APMC) system is a critical yet evolving element of India’s agricultural landscape. Established under individual state governments Agricultural Produce Marketing Regulation (APMR) Acts, APMCs function as market boards, overseeing the trade of agricultural produce and livestock within designated marketplaces (mandis). Their primary objective is to ensure a fair and regulated marketing environment that protects farmers’ interests.

Historical Context and Objectives

Prior to Indian independence, the agricultural market lacked regulation, Farmers faced exploitation by middlemen and creditors, often forced to sell their produce at abysmally low prices. According to a 2013 study by the National Centre for Agricultural Economics and Policy Research distress sales accounted for nearly 60% of all agricultural produce transactions. The APMC system, introduced in the 1960s, aimed to address these issues by:

  1. Preventing exploitation: APMCs regulate market practices, ensuring fair competition and minimizing the influence of powerful intermediaries.
  2. Ensuring fair prices: Through a system of auctions and minimum support prices (MSP) set by the government for select crops, APMCs strive to offer farmers a fair return on their produce.
  3. Streamlining marketing: APMC yards provide designated marketplaces with infrastructure for storage, grading, and packaging, facilitating efficient transactions.
  4. Market information: APMCs disseminate market data on arrival of produce, prevailing prices, and demand trends, empowering farmers to make informed selling decisions.

Agricultural Produce Market Committee (APMC) system in India stands as a cornerstone of the nation’s agricultural trade, serving as a crucial intermediary between farmers and consumers. This intricate network of regulated markets, established under the purview of the APMC Acts, both at the central and state levels, governs the buying and selling of agricultural produce across the country.

All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) which is termed as “Regulated Markets”. Where all the States have enacted APMC Act except the State of Kerala, J & K, and Manipur.

The State List of the Constitution includes agriculture. The majority of states have APMCs, which are governed by state governments under the corresponding APMC Acts, to manage agriculture marketing. The APMCs set up the framework for the marketing of agricultural products, controlled the selling of those products and the collection of market fees from those sales, and controlled the level of competition in the agricultural market. The model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was produced by the Government in 2017 to provide states a blueprint to follow when passing new laws and implementing extensive market changes in the agricultural industry. The 2017 model Act seeks to improve the movement of commodities, support the operation of alternative marketing channels, integrate fragmented markets, promote transparency, and enable free competition. According to the report released by the 15th Finance Commission (chaired by Mr. N. K. Singh) in November 2019, states that adopt and execute this Model Act in its entirety would be qualified for certain financial incentives.

APMC Yards – The Hub of Agricultural Trade

APMC yards serve as the physical marketplace for agricultural produce. Here, commission agents, licensed by the APMC, act as intermediaries between farmers and buyers. The sale process usually involves open auctions, where registered buyers bid for the produce, promoting transparency in pricing. APMCs levy fees on transactions (cess) to fund their operations and market development initiatives. However, a 2020 report by the Agricultural Economics Research Association estimates that nearly 60% of agricultural trade still bypasses APMC yards, often due to their limited reach and perceived inefficiencies.

What is APMC?

The APMC was established by the state governments of India as a marketing and regulatory body to protect Indian farmers against large merchants. Additionally, it controls the costs of crops from fields to grocery stores. Through APMCs, the state governments of India control the rate of increase in crop prices. Maintaining proper pricing transparency, monitoring transactions, and—most importantly—ensuring that farmers receive paid on the same day they sell their crops are among APMC’s essential obligations and responsibilities.

Working of the APMC

It stipulates that certain market areas, yards, or sub-yards must be used for the sale or purchase of agricultural goods covered by its notifications. The infrastructure needed to sell farmers’ produce must be present at these markets. The market committee official must be present during an open auction that is transparently performed to establish the prices in them. There are clearly defined market charges for different agencies, like commissions for commission agents (Arhtiyas); statutory charges, like market fees and taxes; and produce-handling charges, like produce cleaning and loading and unloading. No other deduction is permitted from the proceeds of farmers’ sales. Different states and commodities have different market prices, expenses, and taxes.

Who are Arhtiyas?

Arhtiyas often referred to as ‘Bichauliya’ or ‘middlemen’, facilitates the transaction between farmers and the actual buyers, making them more akin to a broker. The buyer can be a private trader, a processor, an exporter, or a government agency like the Food Corporation of India (FCI).

Provisions relating to Farm laws:

  1. Essential Commodity Act, 1955 – To provide, in the interest of the general public, for the control of the production, supply and distribution of, and trade and commerce, in certain commodities.
  2. Agriculture Produce Grading and Marketing Act, 1937 – To formulate standards and carry out grading and marking of agricultural and allied commodities.
  3. Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 – It provides farmers with the freedom to sell their produce outside the traditional Agricultural Produce Market Committee (APMC) Mandis.
  4. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 – This act allows farmers to enter into agreements with agribusiness firms, processors, wholesalers, exporters, and large retailers for the sale of their produce at pre-determined prices.

Schemes for Welfare of Farmers:

  1. Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) – It is a central sector scheme launched on 24th February 2019 to supplement financial needs of land holding farmers, subject to exclusions. Under the scheme, financial benefit of Rs. 6000/- per year is transferred in three equal four-monthly installments into the bank accounts of farmers’ families across the country, through Direct Benefit Transfer (DBT) mode.
  2. Pradhan Mantri Kisan MaanDhan Yojana (PM-KMY) – It is a central sector scheme launched on 12th September 2019 to provide security to the most vulnerable farmer families. PM-KMY is contributory scheme, small and marginal farmers (SMFs), subject to exclusion criteria, can opt to become member of the scheme by paying monthly subscription to the Pension Fund. Similar, amount will be contributed by the Central Government.
  3. Pradhan Mantri Fasal Bima Yojana (PMFBY) – It was launched in 2016 in order to provide a simple and affordable crop insurance product to ensure comprehensive risk cover for crops to farmers against all non-preventable natural risks from pre-sowing to post-harvest and to provide adequate claim amount.
  4. Rastriya Krishi Vikas Yojana- Detailed Project Report based schemes (RKVY- DPR) – The scheme focuses on creation of pre & post-harvest infrastructure in agriculture and allied sectors that help in supply of quality inputs, market facilities, etc to farmers and many more other schemes to promote agriculture sector in India.

(https://pib.gov.in/ with Release ID: 200201)

Compliances:

APMC mandates that the buyers, sellers, and commission agents obtain licenses to participate in market transactions. Licensing ensures that only authorized individuals or entities engage in agricultural trade, thereby safeguarding the interests of farmers and buyers. APMC regulations outline procedures for grading, weighing, pricing and selling agriculture produce within designated market yards. Compliances with these procedures promotes uniformity and transparency in market transactions, enhancing trust and confidence among market participants. It regulates pricing mechanisms to prevent market manipulations and ensure fair prices for farmers. Compliances involves adhering to prescribed pricing norms and making timely payments to farmers for their produce. Its quality standards to maintain the integrity and safety of agricultural produce sold in markets. Compliances requires farmers and traders to adhere to quality specifications and ensure that only produce meeting the required standards is traded. Proper documentations of transactions, including invoices, receipts and agreements is essential for compliance with APMC regulations. Accurate record-keeping facilitates transparency, accountability and traceability in agriculture trade. It levies market fees and other charges on transactions conducted within designated market yards. Compliances involves the timely payment of market fees as per prescribed rates and regulations. It provides mechanisms for resolving disputes arising from market transactions such as mediation, arbitration and adjudication.

A pan-India electronic trading portal named National Agriculture Market (eNAM) has been launched to create a unified national market for agricultural commodities for existing APMC mandis. (https://enam.gov.in/web/Enam_ctrl/enam_registration)

The National Agriculture Market (NAM) acts as a nationwide electronic trading platform, connecting various Agricultural Produce Market Committee (APMC) mandis throughout the country to form a unified national market for agricultural commodities. The e-NAM portal serves as a centralized resource for all APMC-related information and services, encompassing commodity arrivals, prices, buy and sell trade offers, and the ability to respond to trade offers, among other features.

Challenges and Reforms:

  1. APMC have been criticized for fostering monopolistic practices and cartelization among traders and commission agents, leading to price manipulation and exploitation of farmers.
  2. Many APMCs lack adequate infrastructure and facilities, such as storage facilities, grading centers, and transportation infrastructure, hindering efficient market operations.
  3. APMCs often impose regulatory barriers and market fees, which can distort price signals and hinder the free flow of agricultural commodities across markets.

In response to these challenges, the Government of India has initiated several reforms aimed at liberalizing agricultural markets and enhancing farmer income. The Introduction of the Agricultural Produce and Livestock Marketing (Promotion and facilitation) Act, 2017, commonly known as the APMC Act, seeks to promote competition, reduce market distortions and empower farmers by allowing them to sell their produce outside the traditional APMC mandis.

The twelfth plan working group on agriculture marketing highlighted various challenges facing the agricultural marketing sectors in their report to the Planning Commission 2011. These issues likely encompassed aspects such as infrastructure inadequacies, lack of market access for farmers, price volatility, inefficient supply chains, and regulatory hurdles. Their overview aimed to identity key areas for improvement and suggest strategies to enhance the efficiency and effectiveness of agricultural marketing system in India.

Need for Reforms and Development of Agricultural Marketing:

  1. To improve the accessibility of farmers’ markets
  2. To bolster the facilities, infrastructure, and services of the established organized marketing system as stipulated by the APMC Act
  3. To enhance the efficiency and professional management of APMC markets
  4. To facilitate the establishment of alternative marketing channels through the involvement of the private sector, thereby fostering competition in services
  5. To promote investments from both the public and private sectors in the development of post-harvest and marketing infrastructure.
  6. Limited reach: APMCs primarily operate in designated mandis, leaving a significant portion of agricultural trade, particularly in perishables and horticulture, unregulated.
  7. Inefficiencies: The multi-layered intermediary system with commission agents can lead to delays, higher transaction costs (including cess), and potential exploitation for farmers.
  8. Limited market access: Restrictions on private participation in mandis and inter-state trade can hinder competition and price discovery, potentially impacting farmer returns.

Conclusion:

The Agricultural Produce Market Committee Act has played a crucial role in safeguarding the welfare of farmers and ensuring equitable trade practices within the agricultural domain. Through the establishment of designated marketplaces, removal of intermediaries, and establishment of price stability, this legislation has effectively empowered farmers and facilitated rural development. Although ongoing debates persist regarding its efficacy, there is no denying the substantial impact of this act on the enhancement of farmers’ livelihoods and the overall progress of the agricultural sector. Consequently, the implementation of Agricultural Committees and an integrated price-based system bears immense advantages for farmers. Enhanced productivity shall ensue as prices increase due to scarcities in agricultural commodities within the market. Moreover, the fortification of supply chain management would consequently contribute to comprehensive economic growth.

The future of the APMC system remains under debate. While the reforms aim to introduce greater flexibility and efficiency, some critics argue that they might weaken the safety net provided by APMCs, particularly for small and marginal farmers who may lack bargaining power in a deregulated market. The success of these reforms will depend on effective implementation, ensuring:

  1. Strengthening farmer associations: Empowering farmers through cooperatives and producer organizations to improve bargaining power and access to markets.
  2. Developing robust market infrastructure: Investing in efficient transportation, storage facilities, and market information systems to benefit farmers across the country.
  3. Ensuring fair competition: Implementing robust regulatory frameworks to prevent exploitation by large corporations or private players.

The path forward for the APMC system lies in striking a balance between protecting farmers’ interests and promoting a market.

Disclaimer

The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.

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