APMC Act review may abolish mandi tax

The Agricultural Produce Marketing Committee (APMC) Act may be amended by the end of the current year to abolish the 'mandi' tax and permit farmers to sell their produce outside 'mandis', said Sharad Pawar, Union minister of agriculture, consumers affairs, food and public distribution, on Sunday.

Farmers were facing difficulties owing to certain provisions of the Act.

In most states the APMC Act prohibits transactions outside the mandis. Even in states that allow transactions outside the mandi, the Act states that while procurement may be direct, companies need to pay a mandi tax.

An amendment in the Act might abolish the 'mandi tax' system. In its place, the Central government might possibly set up a fund that would pay an incentive to state governments to amend the state APMC Act in line with the model central APMC Act.

"A solution would be found in the interest of the farmers, who will have the right to sell their commodities anywhere they want to. The mandi taxation system will be removed. The Centre may give incentives to states to amend their APMC Acts," said Pawar.

To help the agriculture sector grow faster, rural income and employment had to be stepped up, Pawar said at a function at Anand organised by Gujarat Co-operative Milk Marketing Federation Ltd (GCMMF).

The APMC Acts of different states had become a stumbling block for hypermarkets seeking to scale up operations. Hypermarkets seeking to source bulk quantities of food and grocery had to work through an intermediary in APMC markets, and could not deal with the farmer directly.

The model APMC Act of 2003 permitted the implementation of 'modern forms of distribution' but was yet to be implemented by a number of states.

States such as Madhya Pradesh, Rajasthan and Uttar Pradesh had amended the APMC Act, permitting companies such as ITC Ltd to set up its e-choupal network to procure goods. It would take some time for the other states to implement the model APMC Act, primarily because of their reluctance to change the existing supply lines, Pawar said.

The Central government enacted the model Act to create 'land share companies' and privatise agricultural produce marketing as part of farm sector reforms.

The model Act, named State Agricultural Produce Marketing (Development and Regulation) Act 2003, sought to amend the APMC Act to permit private and corporate bodies to establish a marketing network for agriculture produce and change land leasing laws to facilitate renting of the operational land by private companies.

The Act also sought to eliminate well-entrenched 'ahartiyas,' or commission agents, who control marketing of farm produce at present all over the country.

Direct marketing of farm produce would be encouraged. At present, it was regulated and done through commission agents by state governments under the APMC Act.

Other reforms may include promotion of contract farming, formation of competitive agricultural markets in private and co-operative sectors, expansion of marketing credit system and development of negotiable warehouse receipt system through forward and futures markets.

The amended Act permitted private companies and co-operative sector units to establish direct marketing centres for farm produce and to develop supporting services for farmers.

The Karnataka government has already permitted the National Dairy Development Board (NDDB) to set up an 'integrated produce market' at Bangalore for marketing fruits, vegetables and flowers.

The Punjab and Haryana governments had accepted the concept but feared loss of revenue collected at present through the mandi tax. Mandi tax collection in Punjab last year was Rs 400 crore. Haryana had collected Rs 300 crore.