National Common Market for Agriculture Commodities

Agriculture in India is a state subject and thus the states are free to frame laws related to marketing the agriculture commodities. At present such commodities are managed by the Agriculture produce market committee (APMC) and the alleged involvement of the middlemen appears to be the major hurdle in the agriculture marketing. Budget 2015 goes a step further and suggested to create a national agriculture market to end the monopoly and unevenness in the implementation of APMC’s in various states. However passing such a law would undermine the spirit of cooperative federalism as it would encroach the state’s jurisdiction.

Existing markets and its flaws

Model APMC act, 2003 provides autonomy to the farmers for selling their produce in the market. It gives them multiple options to choose among the most profitable. Farmers could sell their produce directly to the private players and hence get the most competitive prices.

However the model APMC was not implemented uniformly in all the states. It does not create even a state level market for the agriculture commodities. A major source of distortion in the market is the uneven levies/mandi tax, VAT etc. which is evident in the cascading price of the commodities. In the present act, it is mandatory to pay APMC charges of substantial magnitude which is non-transparent in nature, even when the purchase is made outside without using the infrastructure of APMC area. In addition to this the commissioning agent charges the transaction fees between the buyers and farmers.

Karnataka model

Karnataka adopted many changes to create competition within the state. It provides for separate reform committee to recommend according to the need of the state and established Rashtriya e-market Services Ltd. (ReMS). It provides for automated auction and post auction facilities along with single licensing system. It facilitated the ware-house based sale, private investment in marketing infrastructure, technology based price dissemination.

Economic survey Recommendations

Economic survey 2014-15 suggested 3 step solutions to restructure the agricultural marketing. First, states to drop the fruits and vegetables form the regulated APMC commodities. Second, policy support from states to provide alternative special markets in private sector. Third, for setting up of marketing infrastructure by liberalizing FDI in retail could create possibilities of filling the gaps in the supply-chain inefficiencies.

Parliamentary Power to override the law

The survey suggested the possibilities of bringing such reforms through parliament. Even if the states are not cooperating, then the centres is empowered by the constitution to take action. List III of the 7th schedule (concurrent list) in the constitution empowers union to enact legislation for setting common market for specified agriculture commodities, which covers supply and distribution of foodstuffs including the edible oilseeds and raw jute and cotton. Also entry 42 in the union list also provides for interstate trade and commerce. This provision in the constitution provides sufficient teeth to the central government to restructure the agriculture market where states are failed to do so.

Options with APMCs

The establishment of a national market may create a parallel framework which would enable the state APMC’s to bring about the desired changes in order to survive. It would in many ways with improved infrastructure, compromises the states APMC monopoly and gradually takeover the business of the APMC. The only way ahead for the APMC’s in the states is to modernise their marketing system and infrastructure to stand competitive in the developing market environment.