Alternative marketing options key to inflation control

Jan 24 2014, 02:42 IST
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SummaryA significant fallout of the current agricultural market system is declining competitiveness.

A significant fallout of the current agricultural market system is declining competitiveness. This leads to increase in prices at the consumer level, without benefiting the farmer. Ramesh Chand, director, the National Centre for Agricultural Economics and Policy Research (NCAP), spoke to Sandip Das on the issues concerning agricultural marketing in the country and ways to fix it.

Have the Agricultural Produce Market Committees (APMCs) performed their role of providing a marketing platform for the farmers’ produce?

All wholesale markets for agricultural produce in states that have adopted the Agricultural Produce Market Regulation Act (APMRA) are termed as ‘regulated markets’. Apart from Kerala, Jammu and Kashmir, and Manipur, all other states have enacted marketing legislations known as APMC Acts. It mandates the sale or purchase of agricultural commodities in a notified area at a specified market yards or sub-yards. These markets are required to have the proper infrastructure for sale of farmers’ produce. Prices are to be determined by open auction, conducted in a transparent manner in the presence of designated officials. APMC Acts have served some important purposes in last two decades. They got rid of malpractices and imperfections in agricultural markets, created orderly and transparent marketing conditions, and ensured a fairer deal to farmers. Decades ago it was a pressing need at the time and it transformed agricultural markets in most states.

Pressure has mounted to change this market regulation and remove its various restrictions. The APMC Act was relevant when private trade was underdeveloped, exploitative and controlled by mercantile power. At present, due to the marketing monopoly provided to the state by the Act, it is preventing private investments in agricultural markets.

Why APMCs have been held responsible for distortion in agricultural commodity prices?

Agricultural markets are crowded with small traders who operate on a small scale in a limited market segment. In agriculturally advanced Punjab, there are as many as 22,000 commission agents, this implies one for every 50 farmers. Then there are a host of other middlemen such as wholesalers, transporters, labour contractors and brokers in each market. As the size of their business is small, they seek large margins on small volumes of business. Thus, the marketing channels for agricultural produce remain long and fragmented, and lack economies of scale. On an average, four to six transactions take place before the produce reaches consumers from the point of sale by producers. As each transaction involves cost and some margin for

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