Central Idea

Experts from NITI Aayog have put forth recommendations to revamp the existing Agriculture Produce Marketing Committee (APMC) system in India’s agriculture sector.

NITI Aayog

NITI Aayog stands for the National Institution for Transforming India. It is a policy think tank and a government institution in India.
It was established on January 1, 2015, to replace the Planning Commission, which was the central agency responsible for formulating India’s Five-Year Plans.
PM serves as the ex-officio Chairman of NITI Aayog.
It has a full-time Vice-Chairperson, who is usually a renowned economist or policy expert, and also includes several full-time members and special invitees.
Its primary objective is to provide strategic and policy inputs to the central and state governments in India with a focus on sustainable and inclusive development.

APMCs are created by state governments, reflecting agriculture’s status as a State List subject under the Indian Constitution.
APMC’s existence aims to safeguard farmers from exploitation by large retailers and maintain reasonable retail price spreads.
All food produce must first be brought to market yards and then sold through auction as per the Agricultural Produce Marketing Regulation (APMR) Act.

British Raj Influence: The regulation of raw cotton under the Hyderabad Residency Order in 1886 marked the beginning of agriculture produce market regulation in India.
Royal Commission’s Recommendation: The 1928 Royal Commission on Agriculture recommended the regulation of marketing practices and the establishment of regulated markets.
Model Bill and Independence: The Government of India prepared a Model Bill in 1938, but significant progress was made only after India gained independence.
Enactment of APMR Acts: During the 1960s and 1970s, most states enacted and enforced Agricultural Produce Markets Regulation (APMR) Acts, bringing primary wholesale assembling markets under their ambit.

Ensure that farmers are not exploited by intermediaries (or money lenders) who compel farmers to sell their produce at the farm gate for an extremely low price.
All food produce should first be brought to a market yard and then sold through auction.

Each state that operates APMC markets (mandis) establish their markets in different places within their borders, geographically dividing the state.
Farmers are required to sell their produce via auction at the mandi in their region.
Traders require a license to operate within a mandi.

App-Based Sales and E-commerce: The experts suggest leveraging technology for app-based sales of farm produce by individual farmers or farmer groups. Additionally, they emphasize the potential of e-commerce and digital commerce as alternative marketing avenues.
Subsidy Reforms: To address the over-exploitation of groundwater due to free or highly subsidized power, they recommend direct payment of subsidy amounts to farmers and shifting to the metered power supply.

Corporate Investments: The paper highlights that about 80% of investments in agriculture come from private sources, mainly farmers. However, the corporate sector’s involvement remains low, and they believe there is significant potential for corporate expansion in agribusiness.
Market Integration and Competition: Encouraging corporate investment in areas like warehousing, logistics, cold chain, food processing, and value chain development would improve market integration and competition over time and space.

High-Value Crops and Livestock Activities: To boost the income of farmers with small land holdings, the experts suggest enabling them to focus on high-value crops and livestock activities while supplementing their agricultural income with non-agricultural sources.
MSP Reforms: The Minimum Support Price (MSP) system should be designed to avoid market distortions. The paper proposes using a combination of procurement and price deficiency payment to pay MSP to farmers, linked to public distribution system needs, price stability, and strategic stocks.

Reforms were passed in the form of three acts in 2020 (later repealed) which led to massive protests.

Farmers’ Produce Trade and Commerce Act: This act aimed to promote and facilitate trade and commerce of farmers’ produce outside the physical boundaries of APMCs, allowing farmers to sell their produce in other markets and directly to buyers.
Farmers Agreement on Price Assurance and Farm Services Act: This act empowered farmers to enter into agreements with buyers, ensuring a guaranteed price for their produce and access to various farm services.
Essential Commodities Amendment Act: This amendment sought to remove restrictions on the movement and storage of essential commodities, promoting a more open market.

Balancing Farmer Interests and Market Efficiency: While the reforms aim to create a more competitive and liberalized market, it is crucial to address farmers’ concerns and protect their interests.
Dialogue and Collaboration: To find common ground, constructive dialogue and collaboration between the government and farmers are essential in shaping the future of agricultural reforms.