PROJECT REPORT

ON

COMPETITION CONCERNS IN AGRICULTURAL PRODUCE

MARKETING COMMITTEES

1
Table of Contents Page Number

Table of Contents.......................................................................................... 3.

Abstract......................................................................................4.

1. Importance of Agricultural Sector...................................... 5.

2. Agricultural Marketing: Acts and Rules........................ 7.
3. The Agricultural Produce Marketing
Committee Act.......................................................................... 8.
4. The APMC Act: Limitations and
Competition Concerns................................................................ 10.
5. An APMC Example: Relevant Provisions of the Maharashtra Agricultural Produce
Marketing Rules, 1967.........................................................................14.
6. Model APMC Act, 2003.............................................15.
7. Provisions of Model APMC Act, 2003................................................... 16.
8. Implementation by States.................................................................... 20.
9. Shortcomings in Model APMC Act, 2003…………………………. 22.
10. The Way Forward................................................................................ 25.
11. Conclusion.......................................................................................... 30.

References…………………………………………………………………………31.

2
Abstract:

Agriculture is the pillar of the Indian economy. Development in agricultural

sector is essential in order to facilitate growth of the economy. Marketing plays
a pivotal role in the agricultural sector as it is through marketing that the
agricultural commodities reach to other sectors, industries and ultimately to the
final consumers. Primarily, the purpose of agricultural marketing is to ensure
fair prices to the farmers.

The APMC Laws were formulated with a view to serve this purpose but
contrary to expectations the provisions of APMCs have resulted in creating
hindrances to competition for both buyers as well as sellers in these Markets.

Through this research paper, I aim to make a detailed study of the competition
issues present in agricultural markets established under the APMC Acts and
Rules and suggest suitable reforms to address these issues for promoting
growth in the Agricultural Sector of India.

3
 1. Importance of Agricultural Sector

The agricultural sector plays a significant role in the Indian economy, and at
present it is amongst the top two farm producers in the world. Approximately
60% of the total number of jobs available in India is provided by this sector,
with almost two-thirds of the rural population being entirely dependent on
agriculture as a means of living. The contribution of agricultural sector towards
the total GDP of India is 18 percent, and it occupies almost 43 % of India’s
geographical area. Developed countries like the USA have an advanced
agricultural structure but the contribution of these systems towards the national
income is as less as 2%. On the other hand, in developing countries like India
the agricultural sector acquires a significant portion of the total GDP. The share
of the agricultural sector’s capital formation in GDP is 1.9% at present.

The foreign trade of India is deeply associated with the agricultural sector.
Agriculture accounts for about 14.7 % of the total export earnings. Besides this,
20% of the total export earnings come from goods that are made using
agricultural produce as the raw material.Thus, the contribution of agriculture
and related goods toward the exports of the country is approximately 35%.

In the industrial sector, raw material for production of goods is procured by the
industries mostly from the agricultural sectors. Industries like cotton textiles,
sugar, jute, oil, rubber etc. are directly dependent on agriculture. Spinning oil,
handloom, rice thrashing etc. are the various small scale industries which are
dependent on the agricultural sector for their raw material.

According to a study by BRICS, 1% Growth in Agriculture is 2-3 times more

effective in poverty removal than equivalent growth in industries or service
sector.

Thus, for a stable economy, it is absolutely essential to protect and promote the
agricultural sector, as all other constituents of the economy such as the
4
industrial sector, international trade and employment rate are directly or
indirectly dependent on agriculture.

5
 2. Agricultural Marketing: Acts and Rules

In India, Agriculture is a State subject and is governed by the rules and

regulations of the respective state governments. As regards marketing of
Agricultural produce, the following Acts and Rules have been formulated:1

 Recruitment Rules for the Post of Marketing Officer (Group-I) in Ministry

of Agriculture & Farmers Welfare Department of Agriculture Cooperation
& Farmers Welfare.

 Organic Agricultural Produce Grading and Marking Rules, 2009

 Organic Agricultural Produce Grading and Marking (Amendment)

Rules ,2011

 General Grading & Marking Rules 1988

 Agriculture Produce (Grading & Marking)Act,1937 (Act No1 of 1937)as

Amended

 Model APMC Rules

 Model APMC Act

Through this project report, I aim to study the Act and Rules relating to
Agricultural Produce Marketing Committees in detail.

3. The Agricultural Produce Marketing CommitteeAct

1
http://www.agricoop.nic.in/ActsRules.aspx

6
Agricultural Markets in most states of India are established under the State
APMC (Agricultural Produce Marketing Committee) Acts.

Earlier, the agricultural sector in India faced various problems which acted as an
impediment in its growth. One such problem was the exploitation of farmers at
the hands of moneylenders in villages. More often than not, one single person
acted as the money lender, trader and bank to a farmer in these villages. This
multiple role played by a single person led to the perpetual indebtness of the
farmer, thereby deincentivizing him to improve productivity and quality.  Thus,
in order to protect the interests of the farmers and ensure fair prices for their
produce, the APMC Acts were introduced mostly in the 1950s and 1960s.

According to Arpita Mukherjee, a senior fellow at the Indian Council for

Research on International Economic Relations, the aim of such acts was to give
the farmers a fair and consistent price for their produce.2 By creating regulated
markets, the price paid to farmers by licensed middlemen for their produce
could be monitored, thereby ensuring that they were not exploited. 3 The basic
objective of market regulation was thus to regulate trade practices, increase
market efficiency through reduction in market charges, reduce intermediation
and protect the interest of the producer-seller.

The APMC Act empowers state governments to notify the commodities, and
designate markets and market areas where the regulated trade takes
place.4Under the Act, the entire geographical area of the State is divided into
smaller areas and markets are established in each area, which are managed by
the Market Committees constituted by the State Governments. States also
constitute a Market Board which supervises these market committees. Market

2
http://www.themenplattform-ez.de/wp-content/uploads/2012/07/2010_11_01-The-Indian-Farmer-Middlemen-
and-APMCs.pdf
3
Ibid.
4
http://www.gktoday.in/apmc-act-2003/

7
Boards generally consists of chairmen of all APMCs, representatives from the
relevant Government Departments etc.

Once a particular area is declared a market area and falls under the jurisdiction
of a Market Committee, no person or agency is allowed to carry on wholesale
marketing activities freely. The transactions between buyers and sellers are
made through ‘commissioned agents’ registered with the market committees.
Prices are to be fixed by means of an open auction in a transparent manner in
front of an official of the market committee. The agricultural supply chain
therefore comprises of farmers who first sell it to the nominated members of the
‘market committees’, and they, in turn, sell it to trader and so on, till the product
reaches the final consumer at retail outlets.

The Agricultural Produce Market Act exists in all the states and the union
territories, except in Kerala, Manipurand the union territories of Andaman and
Nicobar Islands, Dadra and Nagar Haveli, Lakshadweep, and Daman and Diu.
There are about 2,477 principal regulated agrimarkets and 4,843 sub-market
yards regulated by the respective APMCs in India.5 Thus, India has thousands of
agricultural markets.

However, over a period of time these market regulations have started

functioning against the interests of the farmers, thereby defeating the very
purpose for which they were formulated.The restrictive and near monopolistic
nature of the markets established under the APMC Actstrammels competition in
the agricultural sector and also prevents the private sector from investing in it.

The shortcomings in the APMC Acts which lead to competition concerns in the
agricultural sector have been discussed in the next chapter

4. The APMC Act: Limitations and Competition Concerns

5
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private Limited,
New Delhi (8th Edition)

8
APMCs were implemented with the salient objective of ensuring fair and
remunerative prices to the farmers through open auctions of the produce at the
regulated markets or mandis. The rationale behind this was to create a situation
of perfect competition in regulated markets, which means a large number of
buyers and sellers, but on the contrary, they have resulted in creating a
monopolistic situation.

As per the Act, in order to participate in regulated markets or mandis, it is

mandatory for buyers to have a license, which is issued to them by the Market
Committee under whose jurisdiction the market falls.Owning space or a shop
within the market yards has been made compulsory for procuring a license in
the market. This poses as a major entry barrier for a new trader, thus preventing
competition.

The bargain-power of the licensed buyers increases as they are limited in

number. The sellers, due to shortage of options, are forced to sell their produce
to traders at prices determined by the latter. Thus in these markets, farmers are
often the price takers,and not the price makers.

Further, as these buyers are few, the sale to final consumers takes place in a
market which is monopolistic. Thus, prices are not determined by free play of
demand and supply.

In other words, the very requirement for exchanges in agricultural produce to

compulsorily take place only with licensed traders participating on the buyers’
side has meant that the market is a near monopsonistic one – a buyer’s market
instead of a seller’s market – thus breaking down the very basis for competition.

Another issue with the mandatory requirement of licensing for participation in

agricultural markets is that the buyer has to acquire a different license for
different market areas even within the same State.

9
There is a major problem of storage in India being short by 10 MT of cold
storage capacity.6 This leads to the wastage of 30% of agriculture produce every
year, and the percentage of processed food in India is as low as 7%. 7The
bargaining position of the farmer is worsened by this problem of storage. Most
of the agricultural products are perishable commodities, and once the producer
enters the market with his produce he has to sell it within a short period of time,
as the market infrastructure or the lack of it and the absence of direct marketing
leaves him with no other option.With lack of information across mandis and a
small time period between the harvest and selling periods, once the farmers
reach the nearest mandi with the produce he becomes a price taker.8

The Act provides that farmers can sell their produce only and only in the
regulated marketsestablished under the APMCs of their respective States,
through a system of open auction involving commission agents/intermediaries.
This regulation impedes competition as farmers are not given the option to
directly sell their produce to the buyers or take their produce outside these
regulated markets for trade. In the absence of direct marketing, the Exporters,
processors and retailers are forced to depend on middlemen for procuring
agricultural produce, thus causing systematic inefficiencies. They are also not
able to realise the desired quality and quantity of produce for their trade.

Further, the system of open auction has also proven to be inefficient. Lack of
self regulation by the farmers provides incentives for exploitative cartel
formation among the traders, who may decide amongst themselves not to bid
high. There is also a possibility of exploitation of farmers at the hands of
commission agents, who may organise themselves into associations with traders
and other market functionaries, and sell their produce to the buyers at lower

6
< http://www.cuts-ccier.org/compeg/pdf/Report-Seminar_on_Has_APMC_regime_hit_end_of_the_road.pdf>
accessed 15th July, 2016
7
Ibid.
8
<file:///C:/Users/Owner/AppData/Local/Temp/Rar$DI01.078/Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf>accessed 15th July, 2016

10
prices. In addition to this, these associations may also restrict the entry of new
traders in the markets, hampering the very spirit of competition.

The APMCs of the states levy multiple fees of substantial magnitude which are
non-transparent and hence work as a source of political power. Statutory levies/
mandi tax, VAT, etc. are major sources of market distortions. Such high taxes at
the first level of trading have significant cascading effects on commodity prices,
as the commodities pass through the supply chain. For rice, these charges can be
as high as 14.5 per cent in Andhra Pradesh (excluding the state VAT) and close
to 10 per cent in Odisha and Punjab.

The area served per regulated market varies from 74 sq km in Punjab to 2257 sq
km in Assam.9 On an average, a regulated market serves 459 sq km area in the
country which is quite high.10 Farmers have to travel long distances with their
produce to avail the facility of regulated markets.11 Many farmers are not able to
carry their produce to these markets because of inadequate transport facilities.
The inability to transport the accumulated produce inhibits many temporarily
from participating in market auctioning.12 This creates less competition in
regulated markets.13 Therefore lack of transport facilities also poses as a
potential threat to competition. To address this issue, the National Commission
on Agriculture (1976) had recommended that the facility of regulated market
should be available to the farmers within a radius of 5 km and if this is
considered a bench mark, the command area of a market should not exceed 80
sq km.14

On top of all this, a number of unfair practices like short weights, unwarranted
deductions, high rate of commission and other market charges prevalent in most

9
http://agmarknet.nic.in/amrscheme/markreform1.htm
10
Ibid.
11
Ibid.
12
http://www.cci.gov.in/sites/default/files/AO.pdf
13
Ibid.
14
http://agritech.tnau.ac.in/agricultural_marketing/agrimark_India.html

11
of mandis take away a substantial share of the price paid by the purchasers and
place the farmers at a disadvantage.15

5. An APMC Example: Relevant Provisions of the Maharashtra

Agricultural Produce Marketing Rules, 1967:-16

15
<file:///C:/Users/Owner/Downloads/A%20Study%20on%20Cost%%20Intermediation-769%20(3).pdf>
accessed 17th July, 201620of
16
<http://www.themenplattform-ez.de/wp-content/uploads/2012/07/2010_11_01-The-Indian-Farmer-
Middlemen-and-APMCs.pdf> accessed 17th July 2016

12
 Rule 5 clearly provides that no person shall market declared agricultural
produce at areas other than the principal market areas that are established
therein.
 Rule 6 desires that any person who desires to operate as a trader in a market
area for the marketing of any declared agricultural produce has to submit an
application in that regard to the Director of the Marketing Committee of the
area in order to obtain a license. However, Rule 6 also provides that the Director
may authorise any market committee to permit a market functionary to operate
anywhere within a market area.
 Under Rule 12, every declared agricultural produce shall be disposed of by
public auction.
 Rule 14 provides that the price of declared agricultural produce at the marketing
centers shall be settled by public auction.
 Rule 17 makes it mandatory for the commission agent or the trader to issue a
bill to the purchaser for every purchase. Bills shall be prepared in triplicate with
one copy going to the Marketing Committee for upkeep of its records.
 Rule 19 makes is mandatory for the Market Committee to maintain a regular
and proper account of every declared sale of agricultural produce in a market
area.
 Rule 20 also prevents difficulty to the producer by making instant, on the spot
payments mandatory once the articles have been weighed.

6. Model APMC Act, 2003

13
The Central government finally took note of the limitations in the APMC Acts
in the year 2000. The Ministry of Agriculture appointed an Expert Committee
which was followed by an Inter Ministerial Task Force to review the existing
system. The recommendations were discussed at the National Conference of
state ministers in September, 2002. In January, 2003 a Standing Committee of
state ministers also went through the propositions.

After having consultation with State Governments on the recommendations

made by Inter Ministerial Task Force, the Ministry of Agriculture, Government
of India formulated a Model Law on Agriculture Marketing in the year, 2003
and circulated to State Governments for implementation.

The salient objectives of the Act are to provide for development of efficient
marketing system by curbing competitive irregularities in the initial APMC
Laws, to promote agri-processing and to lay down procedures and systems for
putting in place an effective infrastructure for the marketing of agricultural
produce.

14
 7. Provisions of Model APMC Act, 2003
 Direct Marketing:The model APMC Act has provided for direct marketing
between farmers and traders. It is not mandatory for the Farmers to bring their
produce to the APMC Market, and they are free to directly sell their produce to
any trader, private person or consumer. ‘Direct marketing’ can help in the
reduction of the number of intermediaries and ultimately ensure better price
realisation for the farmers. It obviates the need to first bring the produce to the
market area, saving both time and money on transportation. This also ensures
grading of farm produce at the farm gate, instead of the present practice of
grading in the cities and thus adding to municipal waste. 17 Through direct
marketing, producers can meet the specific requirements of traders and
consumers. It can also help reduce wastages by promotion of direct movement
of goods.18
 Contract Farming: Chapter VII, Section 38 provides for Contract Farming.
The term “Market Functionary” has been expanded to include buyers and
sponsors of contract farming.19Contract farming, which is currently the most
dominant form of backward integration, is an important method by which
uncertainties in agriculture production can be reduced to a certain extent and
efficiency of the agriculture supply chain increased.20

In the method of Contract Farming, the farmer is required to plant the

contractor’s crop on his land, and harvest and deliver a quantum of produce to
the contractor, based upon anticipated yield and contracted acreage.21 Towards
these ends, the contractor supplies the farmer with selected inputs, including the
required technical advice, while the farmer supplies land and labour.22
17
:///C:/Users/Owner/AppData/Local/Temp/Rar$DI00.750/Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf
18
Ibid.
19
Section 2(29)
20
file:///C:/Users/Owner/AppData/Local/Temp/Rar$DI01.078/Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf
21
Ibid.
22
Ibid.

15
A contract reduces price risk for a producer and can be terminated at a
considerably short notice. Also, contractual arrangements are attractive to
farmers seeking capital and new technology and other inputs and production
services. Generally new crops and seeds and other inputs are promoted under
such arrangements.

For the corporate, the benefit arises from leveraging low cost farm products and
increasing productivity. Food processors can minimise their overhead costs per
unit of production by operating their plants at or near fully capacity while using
supplies of assured, stable and quality raw material obtained from farms under
contract. For a processor, contracts offer more flexibility in the face of market
uncertainty, make smaller demands on scarce capital resources and impose less
of an additional burden on management. They also overcome the land constraint
for corporate firms, reduce production risk, and are politically more acceptable
than corporate farming.23

At a more macro economic level, contracting can help to remove market

imperfections in produce, capital, land and labour markets, and remove
intermediaries and therefore make upstream value chains (agricultural
marketing) more efficient. It can also help in better co-ordination of local
production activities as it often involves initial investment in processing,
extension etc.24 Contracting can also lead to more employment opportunities for
farm and non-farm labour as it generally deals with labour intensive high value
crops requiring labour for harvesting, grading, and packaging at the farm level,
and processing, transportation, packaging and marketing at the post-farm stage.
It also reduces the seasonality of employment and results in higher wages by
generating competition in the labour market.

23
Eaton, C S, and Andrew W Shepherd, (2001), “Contract Farming – Partnerships for Growth”, AGS Bulletin
No. 145, Food and Agriculture Organisation, Rome
24
Grosh, B (1994), “Contract Farming in Africa: An Application of the New Institutional Economics”, Journal
of African Economics, 3(2): 231-61

16
 Registration:A person desiring to operate in the market area as trader,
commission agent, weighman, hammal, surveyor, warehouseman, contract
farming buyer, owner or occupier of processing factory or such other market
functionary, is required to apply to the local Market Committee for
registration.25 He is not required to acquire a license to operate as a market
functionary, as was the case under the initial APMC Act.

Moreover, any person may buy agricultural produce in the market yard / sub
market yard on day to day basis even without getting registration in manner
prescribed by the State Government.26

Also, he can operate as a market functionary in more than one market area.27

 Role of Commission Agent: No commission agent shall act in any transaction

between the producer and the purchaser and he shall not deduct any amount
towards commission from the sale proceeds payable to the agriculturist-seller.28
 Single point levy of market fee:As per section 42, there shall be a single levy
of market fee on the sale of notified agricultural commodities in any market
area.
 Special Market and Special Commodity Market: Under Section 20, Separate
provision is made for setting up of of ‘Special Markets’ in any market area for
specified agricultural commodities- mostly perishables.
 Marketing infrastructure: The Model Act also provides for the creation of
marketing infrastructure from the revenue earned by the APMCs.
The model APMC Law, therefore, redefined the role of APMCs to promote
alternative marketing systems, contract farming, direct marketing and Farmers
markets, apart from providing for State Agricultural Produce Marketing
Standards Bureau for promotion of grading, standardisation and quality
25
Section 44
26
Section 44(1)
27
Ibid.
28
Section 44(6)

17
certification of agricultural produce that would facilitate pledged financing,
among other benefits.

18
 8. Implementation by States

In the National Conference of State Ministers on Agricultural Marketing and

Land Reforms held on January 7, 2004, all the State Governments agreed to
adopt the Model Act on Agricultural Marketing in their respective States. 29In
the present date, as many as 18-20 States have partially adopted the provisions
of the model APMC Act and amended their respective APMC Acts.

The states/Union territories which have triggered reforms in the agricultural

marketing infrastructure are Andhra Pradesh, Rajasthan, Gujarat, Goa,
Himachal Pradesh, Nagaland, Karnataka, Chandigarh, Jharkhand, Uttarakhand,
Punjab, and Mizoram.In addition, some of these states have also implemented
single registration/license for trade transaction in more than one market in the
entire state.

In a status report submitted to the department of agriculture, eleven states in

India have adopted the provision for single levy of market fee on the sale of
notified agricultural commodities.

Private market yards have been established inAndhra Pradesh, Rajasthan,

Gujarat, Goa, Himachal Pradesh, Nagaland, Karnataka, Chandigarh, Jharkhand,
Uttarakhand, Punjab, Mizoram, Odisha, Nagaland, Sikkim, and Maharashtra.

A total of 21 states, including the States of Rajasthan, Tripura, Uttarakhand,

Sikkim, Haryana, Chhattisgarh, Nagaland, and Maharashtrahave adopted the
provisions relating to contract farming.

The States which have reformed their APMCs to facilitate direct marketing are
Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Goa, Gujarat,
Himachal Pradesh, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra,
Nagaland, Orissa, Rajasthan, Sikkim and Tripura.

29
<http://indiabudget.nic.in/es2004-05/chapt2005/chap818.pdf > accessed 22 nd July 2016.

19
9. Shortcomings in Model APMC Act, 2003

20
The piecemeal adoption of the Model APMC Act by various States has helped,
to a certain extent, in improving the situation in agricultural marketing. For
example, the Karnataka Model provides for a single licensing system, offers
automated auction and post auction facilities, facilitates warehouse-based sale
of produce, commodity funding, prices dissemination by leveraging technology
and private sector investment in marketing infrastructure, and all these
provisions have given rise to greater competition within the State.

But there can be problems in implementation of the provisions of this Act.

Some of the deficiencies in implementation that can possibly hamper the proper
working of the act have been described ahead.

The model Act provides that traders shall acquire license in order to establish
private markets. In Maharashtra, Some of the traders stated that they are not in
position to take any advantage of new APMC act as the licenses for starting
private markets are not easily available as there are numerous restrictions on the
location of such markets.30 They, therefore, felt that the scope for promoting
competition and creating new additional markets that could function
simultaneously with regulated markets seem to be very limited at present. Also,
efforts to galvanise and speed up direct marketing have been few because of
lack of awareness among the farmers and traders.

The success of contract farming depends considerably on the availability of

genuine information about the market trends. Information asymmetry between
farmers and the corporate opens up avenues for exploitation of farmers as these
are long term contracts, and once they are entered into by farmers at lower
price, market price doesn’t matter for contract period.Thus, information
asymmetry can prevent contract farming from achieving its purpose.

30
http://www.cci.gov.in/sites/default/files/AO.pdf

21
One of the key and alarming findings of the ComPEG project is that private
sector is reluctant to participate in the agricultural marketing sector even after
amendments in the law.31 Responding to the issue of lack of private
investments in the sector in question, Sanjeev Chopra, Joint Secretary (NHM),
Department of Agriculture and Cooperation, Government of India stated that
failure of the APMC is not the only reason. 32 The lack of infrastructure like
proper roads, power for cold storage facilities etc. is equally responsible for
keeping the private sector away.33 He added that these are not just policy
constraints but erroneous practices that the states often follow. This makes
investments not only financially unviable but practically as well.34

Lack of proper infrastructure impedes proper implementation of various

provisions of the Model Act. For example, contrary to what has been mandated,
one third of regulated markets in the country were reported as not having a
common auction platform.35 Infrastructure for marketing of perishables like
fruits and vegetables was described to be terribly inadequate.36Because of this,
the extent of competition which could have potentially been provided by
Special Commodity Markets was not achieved.

While a number of States Governments have reformed their APMCs on the

lines of the model APMC Act, some other States have shown reluctance. There
is a perception that the positions in the market committee (at the state level) and
the market board (which supervises the market committee) are occupied by
politically influential persons. They enjoy a cozy relationship with the licensed
commission agents who wield power by exercising monopoly power within the

31
<http://www.cuts-ccier.org/compeg/pdf/Report-Seminar_on_Has_APMC_regime_hit_end_of_the_road.pdf>
accessed on 21st July, 2016.
32
Ibid.
33
Ibid.
34
Ibid.
35
file:///C:/Users/Owner/AppData/Local/Temp/Rar$DI00.171/Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf
36
Ibid.

22
notified area, at times forming cartels. The resistance to reforming APMCs is
perceived to be emanating from these factors.37

Moreover, the APMC legislation generates huge revenues for the State. This
also makes Governments reluctant to adopt provisions of Model APMC Act.
Even the model APMC Act treats the APMC as an arm of the state, and the
market fee as the tax levied by the state rather than the fee charged for
providing services.38

In order to avoid these reforms, some states have even created entry barriers in
private markets by prescribing either prohibitive license fees for setting up such
markets, or the minimum distance between private markets and APMC markets.

10.The Way Forward:

Reforms and Suggestions

37
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private Limited,
New Delhi (8th Edition)
38
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private Limited,
New Delhi (8th Edition)

23
To address the issues prevailing in the APMC Laws and accelerate competition
in agrimarkets, it is important to effectively reform the APMCs on the lines of
Model APMC Act and make way for provisions such as direct marketing,
contract farming, infrastructure development etc. Various other initiatives of the
Central Government should also be considered by the State Governments for
effective growth of competition in their respective markets.

Even though some of the reforms proposed under the Model APMC Act can
play a key role in promoting competition in agricultural markets, yet State
Governments have shown reluctance in adopting these reforms. This is because
the regulated markets under the initial APMC Acts generate huge revenues for
State Governments in the form of multiple market fees and taxes. Thus, in order
to encourage States to bring about reforms in their agriculture marketing
systems, it is important to treat the market fee as the fee charged for providing
services rather than as tax levied by the state.

The provisions relating to direct farming should be effectively adopted by the

States and farmers should be given the opportunity to move from a buyer’s
market to a seller’s market.In order to encourage direct marketing of
agricultural produce in states, farmers and traders should be informed about the
provisions of the model APMC Act, and issues pertaining to procurement of
license for establishing private markets and location of such markets should be
resolved.

The APMCs and other market infrastructure may be put to use to organize
farmers’ markets. Farmer Producer Organizations (FPOs) and self-help groups
(SHGs) can be encouraged to organize farmers’ markets in areas that have large
open spaces.

24
Companies can be encouraged to help in setting up such ‘direct agriculture
markets’ by including ‘facilitation of organization of farmers markets’ in the list
of corporate social responsibility (CSR)activities under Companies Act 2013.

The Small Farmers Agribusiness Consortium (SFAC) has taken the initiative for
developing a Kisan Mandi in Delhi with a view to providing a platform to FPOs
for direct sale of their produce to prospective buyers, totally obviating
unnecessary layers of intermediation in the process. 39 The SFAC plans to scale
its activities in other states based on the outcome of the experience of the Delhi
Kisan Mandi.40

On the request of the Central Government, a number of state governments have

exempted the marketing of fruits and vegetables from the purview of the APMC
Act. The NCT of Delhi has put fruits and vegetables outside its APMC. This is
a valuable initiative as it promotes direct sale of perishables like fruits and
vegetables, thereby reducing wastage of such commodities due to storage
issues.

A comprehensive advisory has been issued to the States by the Central

Government to go beyond the provisions of Model Act and declare the entire
state a single market with one license valid across the entire state and removing
all restrictions on movement of agricultural produce within the state. This
initiative of the Centre should be appreciated and all State Governments should
come forward to declare the entire state as a single market, with a single license
valid across the entire state.

The free and fair play of competitive market forces has been hindered not only
because of geographical constraints but also poor infrastructure. 41 Improvement

39
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private Limited,
New Delhi (8th Edition)
40
Ibid.
41
file:///C:/Users/Owner/AppData/Local/Temp/Rar$DI01.078/Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf

25
in the transport facilities available to farmers can help in maintaining
competition in regulated markets.

Thus, by removing information asymmetry and keeping the farmers updated

about the latest market trends, this deficiency in the method of contract farming
can be removed.

The creation of a National Agricultural Market was suggested by the Union

Budget 2014-15 (para 82) and Union Budget 2015-16 (para 33) as a priority
issue of the Government. The Union Cabinet on 2 July 2015 announced its plan
to go ahead with the project.

The NAM (National Agriculture Market) through an Agri-Tech Infrastructure

Fund (ATIF) has been established by the Government of India in July 2015,
which will be implemented upto 017-2018.42 NAM will provide a common e-
market platform of regulated wholesale markets in states/ Union Territories
(those states/Union territories that are desirous to join the platform). The SFAC
(Small Farmers Agribusiness Consortium) will implement this e-platform and
will cover 250, 200 and 135 mandis during 2015-16, 2016-17 and 2017-18
respectively.

The DAC and FW (Department of Agriculture, Cooperation Farmers Welfare)

will meet expenses on software and its customisation for the regulated mandis
of the states/ Union territories free of cost. To integrate with the NAM, the
APMCs of the states/Union territories will need to meet certain pre-requisites,
which are given below:

(a) A single license to be valid across the states;

(b) Single point levy of market fee; and

42
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private
Limited, New Delhi (8th Edition)

26
 (c) Provision for electronic auction as a mode for price discovery.

The Objectives of NAM are:43

 A national e-market platform for transparent sale transactions and price discovery
initially in regulated markets. Willing States to accordingly enact suitable
provisions in their APMC Act for promotion of e-trading by their State
Agricultural Marketing Board/APMC.

 Liberal licensing of traders / buyers and commission agents by State authorities

without any pre-condition of physical presence or possession of shop /premises in
the market yard.

 One license for a trader valid across all markets in the State.

 Harmonisation of quality standards of agricultural produce and provision for

assaying (quality testing) infrastructure in every market to enable informed
bidding by buyers. Common tradable parameters have so far been developed for
25 commodities.

 Single point levy of market fees, i.e on the first wholesale purchase from the
farmer.

 Provision of Soil Testing Laboratories in/ or near the selected mandi to facilitate
visiting farmers to access this facility in the mandi itself. M/s. Nagarjuna
Fertilizers and Chemicals Ltd. is the Strategic Partner (SP) who is responsible for
development, operation and maintenance of the platform. The broad role of the
Strategic Partner is comprehensive and includes writing of the software,
customizing it to meet the specific requirements of the mandis in the States
willing to integrate with NAM and running the platform.

43
http://www.enam.gov.in/NAM/home/about_nam.html

27
Thus, NAM addresses the problems in APMCs by creating a unified market
through online trading platform, both, at State and National level and promotes
uniformity, streamlining of procedures across the integrated markets, removes
information asymmetry between buyers and sellers and promotes real time price
discovery, based on actual demand and supply, promotes transparency in auction
process, and access to a nationwide market for the farmer, with prices
commensurate with quality of his produce and online payment and availability of
better quality produce and at more reasonable prices to the consumer.44

Majority of the States and all of the Union Territories have shown their interest to
join the e-platform.45

In addition to these reforms, initiatives can also be taken by the Competition

Commission of India under its advocacy mandate to spread awareness among
farmers about the benefits of competition in markets in general, and about these
reforms in particular, as success of any law or reform is directly linked with the
acceptability of it by people to whom it is applicable or who are affected by it.
Educating the stakeholders about the benefits of these reforms is therefore
imperative.

The Commission can also encourage farmers, traders and consumers to report any
instances of anti-competitive activities such as abuse of dominant position,
formation of cartels and creation of monopolies, etc. which they notice in the
agricultural market areas.

11. CONCLUSION
44
http://www.enam.gov.in/NAM/home/about_nam.html
45
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education (India) Private
Limited, New Delhi (8th Edition)

28
The Agricultural Produce Marketing Committee Act was articulated by the
Government with good intentions and was quite relevant and necessary at the
time of its enactment. However, with the passage of time the Act became
inefficient due to the presence of anti-competitive elements in its provisions.
Even the Model APMC Act, 2003 proved to be an inadequate solution to these
competition issues because of reluctance on part of the State Governments to
adopt these reforms and lack of awareness among the farmers and traders,
coupled with the fact that the draft APMC Act retains some of the anti-
competitive provisions of initial APMC Act.

However, if competition concerns in the Agricultural Produce Marketing

Committee Act are removed by way of adoption of suggested reforms and other
such measures, it can prove to be a boon to the Agricultural sector and aid
considerably in its growth.

BIBLIOGRAPHY

29
Indian Economy for Civil Services Examinations, Ramesh Singh, McGraw Hill Education
(India) Private Limited, New Delhi (8th Edition)

 REFERNCES

 http://www.enam.gov.in/NAM/home/about_nam.html
 file:///C:/Users/Owner/AppData/Local/Temp/Rar$DI01.078/
Competition_and_Regulation_in_India-
2009_Leveraging_Economic_Growth_Through_Better_Regulation.pdf
 http://www.cuts-ccier.org/compeg/pdf/Report-
Seminar_on_Has_APMC_regime_hit_end_of_the_road.pdf
 http://www.cci.gov.in/sites/default/files/AO.pdf
 http://indiabudget.nic.in/es2004-05/chapt2005/ chap818.pdf
 Eaton, C S, and Andrew W Shepherd, (2001), “Contract Farming –
Partnerships for Growth”, AGS Bulletin No. 145, Food and Agriculture
Organisation, Rome
 Grosh, B (1994), “Contract Farming in Africa: An Application of the New
Institutional Economics”, Journal of African Economics
 http://agmarknet.nic.in/amrscheme/markreform1.htm
 http://agritech.tnau.ac.in/agricultural_marketing/agrimark_India.html
 file:///C:/Users/Owner/Downloads/A%20Study%20on%20Cost%
%20Intermediation-769%20(3).pdf
 http://www.themenplattform-ez.de/wp-content/uploads/2012/07/2010_11_01-
The-Indian-Farmer-Middlemen-and-APMCs.pdf
 http://www.gktoday.in/apmc-act-2003/
 http://www.agricoop.nic.in/ActsRules.aspx

30