What are APMCs? How are they connected to farmers freedom?

The majority of urban youth lacks awareness regarding agriculture and farmers' plight. Because we don't know about it, we aren't empathetic towards farmers and their rights. With my agro-literacy series, I aim to change the situation for the better. Fingers crossed :) 

What are APMCs?

One persistent problem in the country has been the exploitation of farmers by middlemen. When farmers grow crops, their biggest concern is “where to sell them”? The issue is compounded by the fact that most crops are of a perishable nature and farmers simply didn’t have the kind of space where they can store crops till the time they find a better price to sell the produce. To complicate matters further, agriculture is a credit heavy business. Meaning, months in advance, farmers have to incur costs of seeds, cattle, water, fertilizers, and other inputs. Other problems include the uncertainty of rains and lack of resources to protect crops from wild pigs, locusts, or other pests. With limited support from formal structures, farmers heavily rely on moneylenders for quick cash. They, in turn, exploit the poor farmers with high-interest rates and purchase of their produce at throwaway prices. Hence for the longest time, farmers have been exploited by intermediaries and forced to sell their produce at extremely low prices. This is known as “distress sales”.

Enter state governments.

APMC Act  Version 1.0

In order to prevent distress sales, all state governments established marketing boards called the APMCs or Agricultural Produce Market Committees, that played the role of a regulator in the aggregation and distribution of farmers’ produce, to make sure they made decent money. (Agriculture being a state subject, it falls under state jurisdiction, and hence each state has its own version of the APMC act). Market places or APMC yards known as “mandis” were set up in various places within a state. At present, there are 2,477 APMCs and 4,843 sub-market yards in India.

However, this act had its own loopholes.

Initially, food produce was bought to these mandis, and sales were then made through an English auction only to the licensed market functionaries. The traders (who were verified and given licenses to operate within the market) then sold it to wholesalers, retailers, mall owners, and the like. Hence what started as a solution became a problem in itself, because a monopoly situation was created where farmers could ONLY sell their produce through the mandis and it was illegal to sell outside. The traders, weighmen, paddlers, hamals, and others had to get licenses to operate in a limited space. With the stringent license requirements, most people resorted to bribing officials and started overcharging farmers to recover their investment.

There were also several delays in payments to the farmers - sometimes for months at a time. Auction system also led traders to form cartels leading to more exploitation and low prices for the farmers. The farmers had to compulsorily pay for loading, weighing, unloading, and other activities, thus further reducing their share. There was also evidence of hoarding by the traders that led to extreme price fluctuations. Usually, when farmers get their produce to these mandis, the transportation back is not free. Due to the number of farmers coming to the mandi and the limited space being flooded with bulk produce, very few could access the storage units. During auctions, the traders quoted a price. Even if the farmers didn’t agree with that price, they had no option but to accept. A lot of times, the selling price was less than the cost price. By law, traders were supposed to earn a maximum of only 6% commission on the produce but they didn’t stop at that. They sold it to retailers/consumers at a premium. End result: farmers earned less than 1/3rd of what consumer paid.

Enter central government.

APMC Act Version 2.0

To overcome the demerits of the existing system, the central government proposed the Model APMC act with new rules and guidelines. There were several significant changes to the earlier version. Farmers are now no longer forced to bring the entire produce to the mandi. They can sell it to whoever they want. Even in the mandi, there would be single-point registration. Processors, graders, packers, traders, etc. can now directly purchase from the farmer. Moreover, private market yards, co-operative markets, and farmer-consumer markets can also be formed with direct purchase centers thus ending the state monopoly. PPP (public-private partnership) is also allowed in the management of agricultural markets (think: cold storages, post-harvest handling, pre-cooling facilities, etc.). Farmers can also enter into contracts with the company (for example Dawaat basmati) with pre-defined prices and quality, input support and other commitments. The act also promoted grading and standardization of produce. The new act aims to bring transparency in the system and ensure fair and timely payments to the farmers.

If the new act is so amazing, what’s the problem now?

While the revised act is pretty amazing on paper, the problem is that most of the states have not adopted the Model APMC Act because the middlemen cartel is very powerful. Since agriculture is a state subject, the central government cannot enforce and the state governments have the power to modify the act and pick and choose the amendments. Even in the states that have regulated the APMC act and farmers can directly sell to private players, they’re still choosing to go to Mandis. Why? Because most produce is perishable in nature, it is imperative that sale happens quickly. APMCs have access to cold storage infrastructure. However there is a lack of basic private agricultural rural infrastructure that makes farm gate sourcing and storage very expensive hence more reliance on middlemen cartels.

To combat this, Electronic National Agriculture Market (eNAM), a pan-India online virtual market was set up in 2016 to create a unified national market for agricultural commodities (It aims to be like amazon for agriculture). Through eNAM any person or state is ideally able to purchase from the farmer meaning more options for the farmers to sell to. However, there is then the issue of technical infrastructure, technical literacy, fast transportation in case of perishable items, ambiguity regarding the quality of the product. A very small portion of trade happens through eNAM and most farmers are still exploited through the APMCs.

Food for thought

So far we have tried state regulation of the agricultural markets, public-private partnerships, contract-farming amendment, and now digitalization. Yet the exploitation and corruption are not going away. While the intentions behind all the reforms have been good, the implementation has always proved to be difficult. India still doesn’t have a national market for food and it is easier for private players to import from other countries! I’d love to know your ideas and suggestions. Kindly write in the comment box.

Note: Farmers' livelihoods have been so ignorantly restricted ever since the beginning. Agriculture was not liberalized during the 1991 reforms. Recently the government has passed a new ordinance with the aim of increasing farmer freedom. I shall discuss it in future posts.