ANALYSIS OF APMC MARKET

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PROF.SHIVPRAKASH HARSHITA KUSHWAH
ISBR, BENGALURU PGDM22077
SHIV KUMAR SINGH

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SR.NO. TOPIC PAGE NO.

CONTENTS

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INTRODUCTION
Agricultural Produce Market Committees (APMC) is the marketing board established by the
state governments in order to eliminate the exploitation incidences of the farmers by the
intermediaries, where they are forced to sell their produce at extremely low prices.

All the food produce must be brought to the market and sales are made through auction. The
market place i.e., Mandi is set up in various places within the states. These markets
geographically divide the state. Licenses are issued to the traders to operate within a market.
The mall owners, wholesale traders, retail traders are not given permission to purchase the
produce from the farmers directly.

What is APMC?

 Agricultural Produce Market Committee (APMC) is a system operating under the

State Government since agricultural marketing is a State subject.

 The APMC has Yards/Mandis in the market area that regulates the notified
agricultural produce and livestock. 

 The introduction of APMC was to limit the occurrence of Distress Sale by the farmers
under the pressure and exploitation of creditors and other intermediaries.

 APMC ensures worthy prices and timely payments to the farmers for their produce.

 APMC is also responsible for the regulation of agricultural trading practices. This
results in multiple benefits like:

 Needless intermediaries are eliminated

 Improved market efficiency through a decrease in market charges

 The producer-seller interest is well protected

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SEGEMENTATION, TARGETING AND POSITIONING
Bengaluru’s APMC was established in 1955 and was designed to be a “friend” of the farmer.
Before the establishment of these committees and markets, farmers sold produce in
local, unregulated markets where prices for produce fluctuated wildly or where farmers were
vulnerable to be cheated in price or the quantity weighed. Farmers often got low returns on
produce, and consumers would end up buying at higher prices. Middlemen and traders made
the bulk of the profit. 

Hence, regulated market yards were envisioned to house multiple traders and buyers under
one roof, to ensure that competition would stabilise prices for farmers. Theoretically,
consumers too would benefit from the quality check on produce by agents and buyers.

The APMC yard in Yeshwanthpur is spread over 85 acres, and over 92 commodities
are traded here. Many of the buyers and sellers are from outside the city; hence the
commodities traded are mostly those with longer shelf life, such as onions, potatoes, garlic,
ginger, chillies, coconuts, and food grains including wheat, maize, ragi and rice. Each
commodity is traded at specific places in the yard.

Additionally, some commodities are traded in the “sub-yards” of the APMC in KR Puram
(perishable vegetables and flowers), Binny Mills, Anekal, Dasanapura (which was recently
opened to ease congestion in Yeshwanthpur yard), among others. The Binny Mills market,
for instance, handles over 1,200 tonnes of more than 40 varieties of fruits and vegetables.
Unlike the Yeshwanthpur yard, the commodities in the sub-yards are mostly sold to
consumers within the city.

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In Yeshwanthpur yard, onions come from across the state and Maharashtra, while the buyers
arrive from Tamil Nadu, Kerala, Odisha and West Bengal, says B Swamy, who is one of the
1,597 licensed commission agents here.

MARKETING CHANNELS OF APMC

a) Direct Marketing

APMC model act promotes direct marketing. As farmer is allowed to sell his goods outside
APMC, he can now, under APMC model act, directly sell to consumer. This completely
eliminates the middleman and narrows the gap between farmer’s sale price and price paid by
consumer. There are numerous successful examples all over India such as Apni Mandi in
Punjab, Rythu Bazar in Andhra Pradesh, Uzhavar Sandhai in TN, Shetkari Bazaar in
Maharashtra, Hadapsar Vegetable Market in Pune, Krushak Bazaar in Odisha and Kisan
Mandi in Rajasthan.
Central government sponsors ‘Agricultural marketing Infrastructure, Grading &
standardization Scheme’ for development of infrastructure for direct marketing .

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b) Contract Farming

Under contract farming inputs material may be provided by purchasing party for a particular
crop and there is a crop buyback agreement in advance Quality is specified in advance. This
is mainly entered into by big corporates who are in business of food processing. So far there
has been mixed results. It removes uncertainty of Income for the farmer and he can fetch
good prices.

c) Future contracts and ‘negotiable warehouse receipts’ in agriculture

A futures contract is a contract between two parties where both parties agree to buy and sell a
particular asset of specific quantity and at a predetermined price, at a specified date in future.
Hence, these contracts are instruments for Risk management, price discovery and trading.
This trading attracts intense scrutiny of market analysts for prediction of future trends of
demand and supply, which in turn yield much useful data for manufacturers and producers.
This has much utility for the farmers as they can decode future trends and plan their
production accordingly. Farmer can similarly sell his production in advance in futures market
and buyers can buy in futures market.

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Shortcomings in the APMC System

1. The monopoly of APMC – Monopoly of any trade (barring few exceptions) is bad,
whether it is by some MNC corporation by government or by any APMC. It deprives
farmers of better customers and consumers from original suppliers.
2. Entry Barriers – License fees in these markets are highly prohibitive. In many
markets, farmers are not allowed to operate. Further, over and above license fee,
rent/value for shops is quite high which keeps away competition. At most places, only
a group of the village/urban elite operates in APMC.
3. Cartelization – It is quite often seen that agents in an APMC get together to form a
cartel and deliberately restraint from higher bidding. Produce is procured at a
manipulatively discovered price and sold at a higher price. Spoils are then shared by
participants, leaving farmers in the lurch.
4. High commission, taxes, and levies – Farmers have to pay commission, marketing
fee, APMC cess which pushes up costs. Apart from this many states impose Value
Added Tax.
5. Conflict of Interest – APMC plays the dual role of regulator and Market.
Consequently, its role as regulator is undermined by vested interest in the lucrative
trade. They despite inefficiency won’t let go of any control. Generally, members and
chairman are nominated/elected out of the agents operating in that market.
6. Other Manipulations – Agents have a tendency to block a part of the payment for
unexplained or fictitious reasons. Farmer is sometimes refused a payment slip (which
acknowledges sale and payment) which is essential for him to get a loan.

Findings

 Asymmetrical market information and Inadequate marketing infrastructure

 During the visit we found that storage facilities in general and cold storage facilities in
particular is less. This calls for medium and big producers to take storage facilities by
paying heavy fees to private service provider.
 The farmers have been experienced difficulties in getting timely payment even after
the sale of their produce.

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  Education among market participant is considered to be most significant factor in
discharging their duties and responsibilities more efficiently and effectively.

Suggestion

 Lots of changes have to be brought into the marketing activities in the APMC yard.
Scientific grading and enlightenment for all commodities in the market yard be made
compulsory in a phased manner.
 Illiteracy of formers and lack of Medias for communication of information has been a
big problem in rural as well as semi-urban areas. Hence, it is recommendable to each
APMC for equipping the intelligence cell and branch offices with highly qualified and
trained staff to perform the job quicker to help producers at right time.
 Proper co-ordination between the financial agencies established by APMCs or any
other organization to be set up for this purpose is necessary. This definitely prevent
the exploitation of farmers by private financiers.
 To avoid the injustice at the time of weighment of farm produce, on arrival and sale,
APMCs needs to make it compulsory to install electronic weighting machines. The
issue of weighment note to the agriculturist by agents is made it compulsory.
 It was noticed from the market yard during the visit, different types of malpractices
on the part of the unscrupulous market functionaries. In order to eliminate this
harassment to farmers, the marketing committee has to detect such unethical practices
from market participants and they be severely punished with fine and imprisonment.
 A network of rural storage centres should be built on a priority basis in order to
prevent distress sales, wastage and loss arising out of inadequate and defective storage
facilities.

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Conclusion
India’s long-neglected agriculture sector is all set to grow faster. We have improved a lot
since independence. In the last few years, it has grown at an average rate of 3.1% only, and
there is a need to step up the growth in this sector. Then only India’s GDP growth cross 9%
and rural income and rural employment increases. It is time to APMCs to give concrete shape
to the agro-industrial integration by starting industrial units based on agricultural raw-
materials. This integration will create a better economic atmosphere for the growth of the
Karnataka region.