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Ever since Congress Vice-President Rahul Gandhi declared that the solution to containing food inflation lay in removing fruits and vegetables from the purview of the Agricultural Produce Marketing Committee (APMC) Act, the legislation has been much debated.
Is the APMC Act, which came into being nearly 50 years ago with the aim to protect the interests of farmers and ensure organised trading of agricultural produce, really the reason why people have to shell out more and more for fruits and vegetables?
The states-implemented Act had led to the creation of regulated markets, also called mandis. Today, the country has 7,246 such mandis each of which caters to an average area of nearly 450 sq km. The mandis control almost the entire wholesale trade of agricultural goods. How these mandis operate has a huge bearing on the retail prices of fruits, vegetables and other agriculture produce.
Studies show that though only 20 per cent of the over 242 million tonne of fruits and vegetables produced in India is traded through regulated markets, it is this 20 per cent which determines the price of the entire lot. Because of the cartelisation, the 20 per cent of the farmers are forced to sell at very low rates, which then affects the prices for the remaining 80 per cent. So, the mandis, as they exist today, serve the interest of neither the farmers nor the consumers.
The APMC Act was first amended in 2003 to bring it in sync with the changing needs of the agriculture processing and food sector. The amendments in the model Act took into account modern concepts like contract farming, promoted gradation and standardisation and dispensed with the licence system. The buyer and the seller in the mandi both were, until then, required to have a licence to trade.
However, one crucial factor was ignored. The Act continued to allow the states the power to exempt any agriculture commodity brought for sale in the market area from the mandi tax. It is this power that has been, time and again, used by state governments to exercise control over the trade of fruits and vegetables.
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Farmers point out that the gap between the wholesale price and the retail price is a whopping 100-150 per cent. "In the last one year, the input cost like the price of seeds, fertlisers, pesticides, labour et cetera has gone up 50-60 per cent, but the wholesale price at which the farmer sells to the traders remains more or less the same. As a result, farmers are not very keen on growing vegetables. Only small and marginal farmers, with land holdings of less than four acres, grow vegetables," says Shamsher Singh, a vegetable farmer from Punjab's Mohali district.
| ACTING ON REFORMS | |
| STATE OF REFORMS IN APMC | STATES |
| States where reforms have been brought in the APMC Act for direct marketing, contract farming and markets in private/co-op sectors | Andhra Pradesh, Arunachal Pradesh, Assam, Goa, Gujarat, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Mizoram, Nagaland, Orissa, Rajasthan, Sikkim, Uttarakhand and Tripura |
| States which have introduced APMC reforms only for contract farming | Chhattisgarh, Punjab, Haryana, Madhya Pradesh and Chandigarh |
| States which have introduced APMC reforms in direct marketing | Delhi, Madhya Pradesh and Chhattisgarh |
| States which have introduced APMC reforms in direct marketing | Delhi, Madhya Pradesh and Chhattisgarh |
| States which do not have the APMC Act | Bihar, Kerala, Manipur, Andaman & Nicobar islands, Dadra and Nagar Haveli |
| States where administrative action has been initiated on reforming APMC | Meghalaya, Haryana, J&K, West Bengal, Delhi, Uttar Pradesh and Puducherry |
| States where APMC Act already provides for reforms | Tamil Nadu |
| States which have exempted fruits and vegetables from market fee | Madhya Pradesh, Chhattisgarh and West Bengal (Partial) |
| Source: Report On Food Processing Industry In India by ICRIER | |
Punjab is a classic example of how despite successive governments pursuing reforms in the APMC Act, prices of fruits and vegetables continue to soar. Though it is primarily an agriculture-dependent state, Punjab has not amended the APMC Act in its entirety. Farmers here can only sell their produce in government-mandated markets (mandis) to licenced middlemen.
The consequence of this is that just like in many other part of the country, the retail price of most vegetables in the state is 100-150 per cent higher than the wholesale price.
Shamsher Singh also alleges that there is cartelisation of traders and commission agents who fix the price of an agricultural produce. As a result, farmers are forced to sell their produce at the price this 'cartel' offers.
Gurbakhsh Singh, another farmer, says, "Farmers with large land holdings are not very keen to grow vegetables because this requires a lot of labour and constant monitoring as compared to wheat and rice. It is the only small farmers who grow vegetables for cash flows." He adds, "In last few years we have seen that fruits and vegetables are not as remunerative as they used to be because of the high input cost. It is the traders or the middleman who make profit."
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Traders, meanwhile, blame the huge gap between wholesale and retail prices of vegetables on taxes like the market fee, rural development fee, commission for the arhityas (middlemen), besides loading and unloading charges.
Even modern concepts like the 'Kisan Mandi' and 'Apni Mandi' (where farmers can sell their produce directly to consumers) have not been very successful. Here too traders, middlemen and commission agents rule.
"Since most of them are small-time farmers they cannot afford to sit in mandis from morning to late evening to sell their produce. They also have to take care of their cattle and work in the field. So they come to the Kisan or Apni Mandi in the morning and sell their produce to the traders at whatever price they offer," says Kulwant Singh, a farmer in one such mandi. Kulwant Singh says he can afford to take time out and be at the mandi through the day because he lives in a joint family and has others at home who can take care of the cattle and the fields in his absence.
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Not everybody, however, agrees that APMC is the reason fruits and vegetables are high. "Delisting fruits and vegetables will not cool down prices overnight," says Ajay Vir Jakhar, chairman, Bharat Krishak Samaj. "Along with this crucial bit of reform, physical infrastructure of market places also needs to be improved, and research and development in newer and better varieties of fruits and vegetables has to be incentivised."
Jakhar says that China and India started the process of protected agriculture (by creating greenhouses) around the same time. China now has around 2 million hectares of land under protected agriculture, while India has only 26,000 hectares. In greenhouses, the producer can control the yield of the crop by creating ideal conditions. "This shows how we have neglected basic infrastructure for development in agriculture," Jakhar says.
"Along with delisting fruits and vegetables, you also need to ensure seamless and barrier-free movement of perishable commodities, so that the produce from one state can smoothly move into another without a sizeable mark-up in its price," says another expert.
Ramesh Chand, director, National Centre for Agriculture Economics and Policy Research, says that agriculture marketing is a state subject and hence, it is primarily the duty of the state to undertake broad reforms in farm marketing. "There are many facets of amendments to the APMC Act. If those are not brought about comprehensively, prices of fruits and vegetables will not come down," says Chand. "Half-hearted attempts," he adds, "won't serve any purpose."
