In the post-Independence era, the first reforms in agriculture marketing were initiated in the 1960s and 1970s, when the states enacted Agricultural Produce Marketing (Regulations) Act, or APMC Act. The organised APMC markets came into existence so that the farmers in their vicinity could bring in their produce for sale. APMC markets were to have physical auctions to ensure transparent price discovery.
Gradually, the Arthiyas, the commission agents or middlemen, at the APMC markets formed coteries and gained control over the management of APMCs while the farmers did not find representation in the operation of these markets. Several reforms such as the Model APMC Act of 2003, the Model APMC Rules of 2007, delisting of perishable fruits and vegetables from the APMC ambit in 2014 and the launch of electronic-National Agricultural Market (eNAM) etc., were initiated over the last two decades.
However, APMCs continued to have monopoly over the trade of agricultural commodities and the non-issuance of new licences to traders stopped the entry of new entrepreneurs. Non-integration of APMCs also ensured that there was no smooth flow of commodities from farmers to consumers and the multiple intermediaries in between resulted in higher prices of commodities without bringing commensurate benefit to farmers.
After issuing ordinances in June, the Narendra Modi government has now passed three crucial legislations in Parliament -- The Farmers’ Produce Trade And Commerce (Promotion And Facilitation) FPTC Bill; The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services (FAPAF) Bill, and The Essential Commodities (Amendment) Bill.
The FPTC Act, 2020, allows barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under state APMC legislations. The Act allows farmers to engage in direct marketing, thereby eliminating intermediaries. It stipulates that “no market fee or cess or levy, by whatever name called, under any state APMC Act or any other state law, shall be levied on any farmer or trader or electronic trading and transaction platform…” This is the provision which has led to protests, mainly in states like Punjab, Haryana and parts of Uttar Pradesh where apprehensions have been expressed that the Centre may not continue with Minimum Support Price (MSP) for procurement of rice and wheat from farmers. Agriculture Minister Narendra Singh Tomar has stated that the FPTC Act has no link with MSP operations, the legislation does not even refer to MSP.
Although the Commission for Agricultural Costs and Prices (CACP) recommends MSP for 23 agricultural commodities prior to the commencement of Kharif and Rabi seasons, the Food Corporation of India (FCI), in association with state government agencies, largely procures wheat and rice, mostly from Punjab, Haryana, Rajasthan, Madhya Pradesh, Odisha, Chhattisgarh, Telangana and Andhra Pradesh, which ensures grain supplies required under the National Food Security Act (about 60 million tons annually). According to estimates, only some 6% of the farmers get the benefit of MSP operations while other bodies like Nafed, Cotton Corporation of India, etc., do take up MSP operations on request for oilseeds, pulses, cotton etc.
The real reason behind the protests against the new legislation is the fear that it would lead to huge revenue losses. It is only in Punjab and Haryana, where rice and wheat procurement by FCI is routed through APMC markets. Punjab imposes levies of 8.5% (market fee 3%, Arthiya commission 2.5%, rural development cess 3%) on MSP, while Haryana levies around 6.5%. The FCI could go for direct purchase with farmers avoiding the APMC markets, thus depriving commission agents as well as state governments of revenue worth some Rs 2,700 crore annually.
Taking advantage of FPTC legislation, the multi-state cooperative Nafed’s arm Federation of Farmer Producer Organisations and Aggregators (FIFA) has set up e-Kisan mandi in Pune in collaboration with Maharashtra Farmers’ Producer Company (Maha FPC). Nafed plans to create 50 to 100 such mandis over the next year across the country bringing farmers, traders and buyers on a common platform where only 1-1.5% of the total turnover is levied as service charge. Many more such alternative markets are expected to come up in the next few years where the farmers would have a choice to sell their commodities to the highest bidder.
The FAPAF Act essentially provides a legal framework for contract farming in the country which is expected to empower farmers for engaging with processors, wholesalers, aggregators, retailers, exporters, etc. Under the provision of the legislation, in case of higher market price, farmers would be entitled to get better remuneration than the minimum price agreed upon. These provisions protect farmers against price risk and allow processors of the commodities to ensure quality produce from the farmers. Increased processing and exports of the commodities would result in higher remuneration for the farmers.
The amendment to ECA limits the scope of the legislation to only those circumstances when the government could impose stock holding limits for pulses, potatoes, onions, edible oilseeds, and oils, only under extraordinary circumstances. These circumstances include, war, famine, extraordinary price rise (100% in retail prices of horticultural crops and 50% increase in the retail prices of non-perishable food items), and natural calamity of grave nature. Often, sudden imposition of stock limits to curb price rise disrupts the supply chains and results in artificial shortage of the commodities.
The immediate impact of these sweeping changes in India’s agriculture marketing system is expected to result in more private investment in infrastructure such as storage and warehouses and with the competition, the APMCs could also provide better facilities to farmers and retain their business. The government’s thrust on creation of Farmers’ Producer Companies (FPOs) will give farmers bargaining power in marketing their produce.
(The writer is a Delhi-based researcher and policy analyst in agriculture)