Monday, March 06, 2017

Fair markets for farmers?

- by Aishwarya Pramod

We've all heard stories about exploitative middlemen in Indian agriculture. They're charged with shortchanging farmers, and causing high food prices for end consumers.

I wanted to figure out how agricultural produce makes its way to our local bazaars. Who is in charge of ensuring that the farmer gets a fair deal?

The answer, at least in the 50's and the 60's, came in the form of Agriculture Produce Market Committees (APMCs). Agriculture is a state subject, and several states set up their own APMC Acts to regulate the sale of agricultural produce.

At APMC market yards, licensed agents connect farmers to wholesalers and other buyers. Prices are decided based on auctions, instead of giving the middleman the ability to set the price. APMCs also mandate the use of fair weighing machines, as well as fair payment for loading/unloading labour.

Today there are ~2500 principal APMC markets and ~4800 sub-market yards in the country.

Vashi APMC Market
However, as it turned out, the APMCs weren't as good as envisaged. For starters, the APMCs impose multiple high fees on all actors that operate in them, distorting prices. Farmers often ultimately bear the costs of these levies. The intermediary agents can form cartels. Prices can be manipulated, because the markets function quite opaquely. The market is regulated by the APMC committee, who are elected from the agents operating in the APMC, leading to a conflict of interest.

To encourage states to reform their APMCs, the central Ministry of Agriculture formulated a Model APMC Act in 2003. It requested state governments to amend their laws to bring them in line with this model law.

Some of the suggested reforms in the APMC Model Act include:
1) No more government monopoly on setting up APMCs. Anyone can apply to set up a market
2) Farmers are not compelled to sell in the APMC but can go to any market, outside the APMC, or take up contract farming
3) The Act attempts to better regulate contract farming to give farmers more options
4) The Act also streamlines fees and levies.

Several states are now in the process of amending their acts, though progress is slow. In 2016, Maharashtra for example, exempted farmers from having to sell fruits and vegetables at APMCs, despite opposition from APMC traders.

Some states like Andhra Pradesh, Tamil Nadu, Punjab and Haryana have experimented with 'rythu bazaars' or 'apni mandis', where farmers sell their products directly to consumers. But not all farmers have the capability to bring their products to urban markets. So the middleman provides a necessary and useful service to them, and the direct-to-consumer model has very limited applicability.

The central government is also working on connecting multiple APMC markets across the country using a single electronic platform called the electronic National Agriculture Market (e-NAM). The e-NAM is still taking baby steps. I wonder how the agricultural markets will evolve in future. More options for farmers and more transparency in general seem like the way to go :)

1 comment:

Tony M. said...

Good post.