MP, UP and Guj end state monopoly on agri markets
Private mandis or wholesale markets to compete with those run by state committee
NEWDELHI: The Bharatiya Janata Party (BJP)-ruled Gujarat, Madhya Pradesh, and Uttar Pradesh have ended decades-old monopolies of state-run agricultural produce market committees (APMCs), often blamed for exploitative trading, by permitting privatisation of seller-buyer platforms for farmers, in what analysts say is a far-reaching reform.
The three states, which produce about two-thirds of the country’s wheat, apart from various commodities, such as rice, cotton, oilseeds, pulses, and vegetables, will now allow privately owned mandis or wholesale markets to compete with those run by APMCs, which, though elected, are essentially close-knit cartels, according to some studies.
These reforms in “agricultural marketing,” or the mandi system that controls buying and selling of farm produce have been a long time in the making and various government panels and economists have often argued for changing the existing structures of agricultural trade.
APMC regulations require farmers to only sell to licensed middlemen in notified markets,
A market in UP’s Ghaziabad district. usually in the same area where farmers reside, rather than in an open market.
They often act as cartels, evidence suggests. In December 2010, when prices peaked during the last major spike, a probe by the country’s statutory anti-monopoly body, the Competition Commission of India, revealed that one firm accounted for nearly a fifth of the total onion trading for that month at Lasalgoan APMC, Asia’s largest onion market in Maharashtra’s Nashik.
Ushered in the 1960s, APMC regulations were meant to protect farmers from being forced into distress selling.
Under APMC system, farmers have to go through smaller crop aggregators to access bulk buyers. Over time, this has spawned layers of intermediaries spanning the farm-to-fork supply chain. This results in a large “price spread”, or the fragmentation of profit shares due to the presence of middlemen. Farmers often get the lowest shares.
On May 12, the Gujarat government stepped in with the Gujarat Agricultural Produce Markets Ordinance 2020, allowing private traders and even farmers to set up markets. The ordinance, which has the effect of law, also allows farmers to sell harvests from any point of sale, not allowed earlier.
Madhya Pradesh, too, has introduced a slew of reforms in agricultural marketing allowing farmers to sell from silos and warehouses and the freedom to sell to any buyer of their choice, not necessarily to APMC-run markets. These decisions were taken on May 2.
The Union government has, in the past, made attempts to push states to reform the mandi system. But not many came through. One reason for this, an agriculture ministry official said requesting anonymity, is that agents in APMC markets exert outsize influence over farmers.
Since the Covid-19 lockdown has disrupted traditional farmto-fork supply chains, the void created has enabled the government to quickly move in with reforms to keep supplies going, the official said.
In September last year, an interministerial panel at the Centre for rural and agriculture sectors, one among 10 such committees formed to suggest various reforms, had identified persistent trade barriers within the mandi system that continue to hurt farmers. This has been cited as a major reason for depressed agricultural markets, responsible for lower farm profits.