How Maharashtra APMC amendment could push traders away from markets

The amendment has also done away with the process of the requirement of separate licenses considering the entire state as a single market

Maharashtra government's decision to amend the APMC Act making it illegal for a private trader to purchase any agriculture produce below the government-fixed MSP from the coming kharif harvest season hasn't found support from several quarters.

NITI Aayog member (agriculture) Ramesh Chand said that prices cannot be enforced if demand-side factors are not supportive of a particular price, unless, off course, traders are paid some incentive for doing so. 

He said if MSP was possible to be implemented for all commodities by making it legal, governments would have done it long back.

The amendment said that any trader who fails to purchase farm goods at MSP could attract a jail term of one year or fine of Rs 50,000.

"Now, the danger is that traders would buy better quality produce at MSP and will avoid buying remaining produce if market prices are not reasonably high," Chand told Business Standard.

A few years back, Maharashtra had tried the same experiment with soybean but it couldn't expand as traders just purchased high-quality produce, leaving the remaining with farmers.

The amendment has also done away with the process of requirement of separate licenses to trade and the entire state has been considered as a single market.

This would enable farmers and traders to buy and sell at any mandi without the requirement of the mandatory license.

"This is a welcome and appreciable move," Chand said.

Though being talked about for a long time, Maharashtra, thus, becomes the first state to give a sort of legal backing to MSP. 

The need to make purchases at MSP was also one of the suggestions made by the Commission for Agriculture Costs and Prices (CACP) in its last non-price recommendations for kharif 2018-19, though it had propagated a different way.

In one of its recommendations to ensure how farmers get maximum benefit of Centre's MSP, CACP had suggested bringing a legislation, titled 'Right to Sell at MSP', which would give legal backing to the entire exercise and ensure that no one purchases any crop below the fixed mandated price.

Maharashtra's latest amendment is a step in that direction, it seems. 

Trade and industry players, too, strongly objected to the proposal on the grounds that any interference in normal demand-supply mechanism in mandis could end up jeopardising markets and make the government the biggest buyer of commodities.

"Price discovery based on demand and supply is best done in the mandis and if the government tries to artificially set a floor price for private traders, they would simply pull out, leaving the government with the sole responsibility to purchase at MSP, as is the case in wheat and rice," Pravin Dongre, chairman of Indian Pulses and Grains Association, said. 

Dongre said that such a rule is in the best interest of farmers, provided that the government agrees to remain a big buyer of commodities.  

Rajendra Sharma, a former chairman of Azadpur APMC, the largest wholesale market in Delhi, said such an idea is not practically implementable and might end up complicating trade.  

"How will you implement such a proposal in onion and potatoes, where there is no MSP, so these farmers won't get any benefit. This (amendment) will fall through," Sharma said. 

However, some traders have welcomed the move on the grounds that this could curb speculative trading in commodities.

"At least this would curb tendency among pulses and oilseeds speculators to sell below the market rate and artificially pull down prices for their own benefit," said P K Gupta, a leading mustard trader from Jaipur.