Agri-marketing reforms can be achieved by enabling bulk buyers to purchase directly at farm gates and creating multiple private-sector e-trading platforms
In June 2024, the Union Ministry of Agriculture and Farmers’ welfare set up a 12-member committee, under the chairmanship of additional secretary, Faiz Ahmed Kidwai with the mandate to formulate a national policy framework for marketing of farm items and suggest measures to ensure the remunerative prices to farmers. The committee has recommended (i) allowing direct farm-gate purchases of agriculture commodities by bulk buyers, including organised retailers, without having to go through the state-notified mandis or pay the various levies that the operators of these market yards charge; (ii) declaring warehouses, silos and cold storages, including those run by private agencies, as “deemed market yards” (DMYs); (iii) establish and operate multiple e-trading platforms, including e-NAMs (electronic-national agriculture market) in the private sector.
Will the suggested measures help in achieving the stated objective? At present, agriculture marketing is carried out under the respective state laws viz. APMC (Agricultural Produce Market Committee) Act which has widely varying provisions. This hampers the free movement of the agri-produce between different states. Even within a state, there isn’t a free flow of the agri-produce as for the administration of marketing it is divided into several market areas and farmers in a given area can sell their agri-produce only at the designated APMC Mandi.
Between APMC Mandis, also market regulations vary widely. At the mandi, a cartel of licensed traders and commission agents (known as artisans in local parlance, their job is facilitating transactions between the farmer and the buyer) rules the roost.
The duo exploit the farmer to the hilt by giving a low price, rejections, weighing less, delaying payment, etc. Levies such as market fees, anthias commission, rural development cess (RDC) etc further erode her netback. The APMC mandis can handle only a fraction of the quantity farmers bring to sell. So, most of them are forced to come to private local markets, where sales are legally barred.
At these markets, they end up selling their produce to traders at throwaway prices. The latter have the blessings of corrupt bureaucrats and politicians and hence, won’t face any action for violating the law. True, state agencies such as The Food Corporation of India (FCI), purchase in mandis specified crops for running welfare Schemes. They make purchases at the minimum support price (MSP) notified by the Centre. But, their purchases are limited. Even so only 6 per cent of farmers – mostly rich with larger land holdings – get access to government procurement.
Although many states have made enabling provisions for setting up private wholesale markets, private markets have come up only in a few states. This is because some states have not framed rules and in others, the rules are far from conducive to attract private entrepreneurs. A few states like Maharashtra, Uttar Pradesh, Gujarat, Rajasthan and Karnataka have made provisions for farm-gate purchases but these transactions are restricted to select commodities for defined periods, and that too, after paying the taxes to the respective APMCs. Even the e-NAM (an online trading platform for agri-produce launched by the Centre in April 2016, was intended to provide a unified market – at the national and state level – to give multiple options to farmers for selling their produce and fetch a better price helped much.
This is because the states haven’t made necessary amendments in their laws to provide for electronic trading in agri-produce. Moreover, many APMCs have not set up an e-auction platform.
The proof of the pudding is in the eating. Out of a little over 7000 regulated wholesale APMC mandis, just about 20 per cent of 1400 have been integrated into the e-NAM platform. Besides, the farmers registered on the e-NAM portal are 17.5 million which is around 12.5 per cent of the total 140 million.
As for business transacted on the portal, this hovers around 12 per cent of the total value of annual trade in agri-commodities (excluding dairy and meat products). At a fundamental level, the problem has to do with the continued stranglehold of the states on APMCs. In fact, for almost everything that stakeholders need to do for doing business on e-NAM be it pan-state/India license for traders, letting farmers sell on the portal (instead of only at designated Mandi) and so on, they need to get permission from the state authorities.
To cap it all, extant laws don’t permit private entities to engage in agri-marketing. Now, the Committee’s recommendations to allow direct farm-gate purchases of agri-commodities by bulk buyers, including organised retailers without having to go through the state-notified mandis or pay the various levies that the operators of these market yards charge; giving warehouses, silos and cold storages, including those run by private agencies, DMYs status and setting up multiple e-trading platforms including e-NAMs in the private sector essentially seek to give more options to farmers for selling their produce.
But, the million-dollar question is How do you make these ideas work? For bulk buyers to directly purchase from farmers – bypassing APMCs – the concerned State will have to make provision in its APMC Act.
Likewise, to enable farmers to sell straight from warehouses, silos and cold storages etc, the State has to amend the law. Similarly, for buying and selling to happen on the e-platform, the State will have to make necessary amendments to the Act.
This is acknowledged by none other than the Committee itself when it says “To align with the proposed national policy, the states and union territories would have to notify state policy on agri-marketing as the subject falls in the domain of states”. But, the states are unlikely to give the desired relaxations in their laws.
In the past, they have done little to liberalise agri-marketing despite much prodding by the Centre; Remember a Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Law passed by the latter in 2017 which gave more options to farmers for selling besides a ‘single pan-State license’ for traders buying from anywhere in the State. But, this was ignored by the states.
Faced with the unwillingness of States to unshackle the farmers from the clutches of APMCs and the dire need to open up agri-marketing, the Union government used its powers under the Constitution to offer them a parallel front. In September 2020, it enacted the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 to regulate inter-state trade and intra-state trade, providing for freedom of choice to the farmer or trader to conduct trade and commerce while allowing traders to purchase specified farm commodities directly from farmers anywhere in the country, even outside the State APMCs.
To realise the full potential of this law and give legal protection to farmers while engaging with buyers, it enacted two other laws viz. Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 and the Essential Commodities (Amendment) Act, 2020.Unfortunately, bowing to year-long protests by a handful of farmers and the Supreme Court order in January 2021 staying their implementation, Modi announced their repeal on November 19, 2021. The SC never said these laws were unconstitutional.
A revolutionary move by the Centre to give a remunerative price to the majority of poor farmers and increase their income was sabotaged by middlemen/traders who had much to gain from the continuation of the status quo.
The situation can be retrieved only if the SC pronounces its verdict on merit.
(The writer is a policy analyst; views are personal)
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