Agricultural Produce Market Committee (APMC)

Introduction

APMC operate on two principles:

• 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.

Presently, markets in agricultural products are regulated under the Agricultural Produce Market Committee (APMC) Act enacted by State Governments. There are about 2477 principal regulated  markets  based  on  geography  (the APMCs) and 4843 sub-market yards regulated by the respective APMCs in India. 

Effectively, India  has  not  one,  not  29  but  thousands  of agricultural markets. This Act notifies agricultural commodities  produced  in  the  region  such  as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., and provides that first sale in these commodities can be conducted only under the aegis of the APMC through the commission agents licensed by the APMCs set up under the Act.  

The typical amenities available in or around the APMCs are: auction halls,  weigh bridges, godowns, shops for retailers, canteens, roads,  lights, drinking water, police  station,  post-office,  bore-wells,  warehouse,  farmers amenity center, tanks, Water  Treatment plant,  soil-testing Laboratory, toilet blocks, etc.  Various taxes, fees/charges and cess levied on the trades conducted in the Mandis are also notified under the Act.

APMCS LEVY MULTIPLE FEES, OF SUBSTANTIAL MAGNITUDE, THAT ARE NON-TRANSPARENT, AND HENCE A SOURCE OF POLITICAL POWER

APMC  charge  a  market  fee  of buyers, and they charge a licensing fee from the commissioning agents who mediate between buyers  and  farmers.  They  also  charge  small licensing fees from a whole range of functionaries (warehousing agents, loading agents etc.).  In addition,  commissioning  agents  charge commission fees on transactions between buyers and farmers.

The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc. are a major source of market distortion. Such high level of taxes at the first level of trading have significant cascading effects on the prices as the commodity passes through the supply-chain.

For Example rice, these charges can be as  high  as  14.5  percent  in  Andhra  Pradesh (excluding the state VAT) and close to 10 percent in Odisha and Punjab. For wheat, too, these charges can be quite high.

Moreover, though the market fee is collected just like a tax, the revenue earned by the APMCs does not go to the State exchequer and hence does not require the approval of State legislature to utilize the funds so collected. Thus APMC operations are hidden from scrutiny.

The rate of commission charged by the licensed commission agents is exorbitant, because, unlike direct taxes, which are levied on net income, the commission is charged on the entire value of the produce sold.  The license fee charged from various market licensed operators is nominal, but the small number of licences granted creates a premium, which is believed to be paid in cash.

Image courtesy : flickr.com

There is a perception that the positions in the market committee (at the state level) and the market  board  –  which  supervises  the  market committee  -  are  occupied  by  the  politically influential. They enjoy a cosy relationship with the licensed commission agents who wield power by exercising monopoly power within the notified area, at times by forming cartels.  The resistance to reforming APMCs is perceived to be emanating from these factors.

Issues

There are many problems faced by farmers due to the restrictions imposed by the APMC Act. Even after receiving the produce, some traders delay payment to farmers for weeks or months. 

If payment is made at the time of sale, then the trader may arbitrarily deduct some amount, on the excuse that he has not received payments from the other parties. To avoid tax, some traders do not give sale slips to farmers. As a result, it is difficult for the farmer to prove his income to get loans from banks. On average, the farmer is able to receive barely 25% to 33% of the final retail price.

Middlemen receive double commission (both from seller and buyer), thus making consumers pay for this spread. Also middlemen do not pass the benefit to either side. During peak seasons, when they buy from farmers at low prices, they do not drastically reduce the prices to final consumers. Conversely, during lean seasons, when consumer prices are high, the farmers do not get higher returns on their produce.

source: indiabudget.nic.in

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