Model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017

The model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was presented in April 2017 and seeks to replace APMC act 2003.It is seen as a major agriculture marketing reform to help farmers directly connect with the different buyers and enable them to discover optimum price for their commodities.

Need and Rationale

Traditionally the agricultural produce was sold by the farmers in the village or nearby places. However, the system was characterized by malpractices by middlemen, inadequate price to the farmers etc. So the State’s enacted their APMC acts to set up regulated agricultural markets so as to ensure that farmers get a fair price for their produce. But even this arrangement led to a lot of problems.

Features and Problems

On the basis of geography, the state is divided into different sub markets and it falls under the jurisdiction of a Market Committee formed by the state government. The members of market committee are either elected or nominated by the government. In such markets no person is freely allowed to carry out their wholesale marketing activities. Only the authorized trader and commission agents were allowed to carry out procurement and distribution of agricultural produce brought by the farmers. The agents had to procure license to get their shops in these agricultural markets. But the system resulted into following problems:

  • It led to the monopoly of the APMC.As the farmers were supposed to sell only to the authorized agents on the basis of auction so the agents used to form cartels and deliberately specify a lower price above which they will not procure. Similarly when wholesalers and retailers came to purchase from them they use the same technique of cartelization. Thus, the farmers used to get lower price for their produce and consumers had to pay more.
  • Procuring a license was a difficult task as it was based not on any transparent system but was procured on money power thus breeding corruption. It also led to the monopoly of some licensed traders causing entry barrier to new traders.
  • Various types of fees were levied. For instance-market fees on buyers, licensing fees on commission agents, other charges on warehousing agents, loading agents etc. Also the fees differ from state to state. Consequently it created market distortions and increase in the price of the commodities.
  • The agriculture markets were usually located far away from the villages. Therefore most of the times to avoid the transportation cost, small farmers sold their produce to the village middlemen who are usually the farmers money lender also. Consequently he forces farmers to sell the produce at lower prices. The practice is in a way reverting back to the old traditional system thereby defeating the purpose of the APMC.
  • The dual role of market as well as regulator is assigned to the APMC. But as the members of the committee are elected out of the agents operating in the market so their vested interests has undermined its role as a regulator.
  • Further the traders use to delay payments to farmers for months. Even if they pay at the time of sale then the trader arbitrarily deducted some amount.

Objectives of the Model Law

The purpose is to create a single agriculture market with a single license wherein agriculture produce as well as livestock could be traded. Some of the important provisions:

  • The new model law seeks to establish a regulated wholesale agri-market at a distance of every 80 km. To enable this, it has proposed to issue licenses to new private players and traders who wish to set up a wholesale market. Even private market yards, warehouses and cold storages will be allowed to act as regulated markets.
  • Unlike the current system, now only by paying unified single fees, farmer/trader will be able to transact in all such regulated agri-markets within the state. There will be no separate fees for individual markets.
  • It caps market fee (including developmental and other charges) at not more than 1 per cent for fruit and vegetables, and two per cent for food grain. It caps commission agents’ fee at not more than two per cent for non-perishables and four per cent for perishables.
  • Besides, it stipulates a single license for trading within the state and at the national level.
  • All regulatory powers will lie with the office of the director of agricultural marketing in the state, who will also issue licenses to traders and new private players. As of now this power lies with the mandis managed by the Board of directors.
  • It also has the provision for promoting online or spot (e-national agriculture market) agriculture market platforms.

What are the expected benefits?

  • Allowing warehouses and cold storages to act as regulated markets will increase avenues for the farmer to sell their produce which will make the system competitive and end the monopoly of APMCs. Consequently it help farmers as well as consumers in terms of price discovery. Also it will help in taking the farmers out of the clutches of the middlemen as more and more markets will be available within few kilometers location.
  • Cascading effects of multiple fees will be eliminated.
  • Electronic trading platforms will make transactions, especially price determination, totally transparent. It will also give access of markets to the famers at the national level.
  • Overall it will reduce wastage of farm produce and help achieving the aim of doubling farmer’s income by 2022.
  • It also seeks to promote direct interaction between farmers and end-users of farm commodities, including retail chains, exporters and agro-processing industries.

Way Forward

Since the success of the fresh move will depend largely on the states’ cooperation, the Centre will need devise ways and means to motivate them to actually carry out the suggested changes.