There is also a point of view that agriculture produce market committees (APMCs) set up under the state acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.

The APMC Act, which was passed in the 1960s, contains provisions that appear to be remnants of the License Raj era. Though the legislation aimed to create a forum for farmers to sell their produce at best possible prices, it instead lead to the creation of middlemen who exploited both farmers and consumers to create wealth for themselves.

The system of mandis under APMCs creates not only middlemen who distort the trade dynamics but also enables cartelisation, hoarding and collusion among middlemen. The situation is especially dire for perishable commodities which the farmers are forced to sell at the quoted price since they are in no position to bargain or store their produce till the price increases. The requirement of licenses for being able to sell in mandis has made the licenses a much sought after commodity, and the licensees form a cartel amongst themselves. Since the farmers have no option but to sell in the mandis, it further increases the power of the licensees. The licensees form cartels and buy produce like potatoes and hoard them in cold storage so that they may sell and make a profit when the price rises. These activities contribute to artificial food inflation in India.

Published: January 29, 2015 | Modified:October 15, 2020