A couple of months ago, three major reforms in the agricultural sector were announced under the Atmanirbhar Bharat Abhiyaan. These included reforms in the APMC (Agricultural Produce Market Committee) Act, Essential Commodities Act and the Contract Farming Act. The main argument against the APMC Act is that it creates barrier to the entry and exit of traders, and makes the sale and purchase of agri produce compulsory for farmers as well as traders. Around 17 states have already amended the Act to make trading more liberal.
Regulation rules and functioning of mandis vary a great deal across states. For instance, Kerala doesn’t have APMC Act and Bihar repealed it in 2006. Many states have introduced direct marketing of farm produce, including Rythu Bandhu (Andhra Pradesh/Telangana), Apni Mandi (Punjab) and Krushak Bazar (Odisha). The problem of mandis is not regulation, but political interference in their functioning, especially in case of commercial crops, fruits and vegetables, where production is regionally concentrated. But even after these problems, mandis continue to play an important role in providing farmers access to the market.
But have the recent reforms in the APMC Act led to better outcomes? Let’s look at the example of Bihar. The general argument is that reforms lead to private investment, which leads to more choice for farmers, further leading to better prices for farmers. In Bihar, no investment has come in building infrastructure of the market. Instead, the repealing of the APMC has led to a deterioration of infrastructure.
On the other hand, the repealing of the Act has led to proliferation of private unregulated markets, which charge a market fee from both traders as well as farmers. There is also no evidence that farmers received better prices in private mandis outside APMC. The argument that farmers do not receive remunerative prices due to APMC is flawed, as 80% farmers do not sell their product in APMC mandis.
If the Government is serious about providing remunerative prices to farmers, it needs to increase the fiscal spending to create demand in the economy. According to a research co-authored by farm economist Ashok Gulati, restrictions on agricultural marketing amounted to “implicit taxation” on farmers to the tune of Rs 45 lakh crore from 2000-2016 (i.e. Rs 2.56 lakh crore/year). No other country does this.
This makes supplementary income from dairy and poultry a necessity. National Institute of Agriculture Extension Management has revealed that of 35,000 farmers suicides examined, no farmers had supplementary income dairy or poultry.
A strong and effective network of FPOs must be created, so that individual farmers are not exploited.