After Agriculture Minister Narendra Singh Tomar tabled the 3 bills on agricultural reforms a few days ago, there were a lot of talks about APMCs and how these acts would end the role of APMCs. Well, once you read this post, you would want to end their role ASAP anyway. Trust me on this, and read on.

What are APMCs?

After Independence to overcome the vicious cycle of debt and exploitation of farmers at the hands of moneylenders/traders controlling all the supply & distribution of the agri produce, Agricultural Produce Market Committees (APMCs) were introduced by states.

These APMCs are managed by Market Committees (constituted by the state governments).A Market committee comprises of 15-20 members who were either elected/nominated by the respective state govts.(elections were very rare). [ You may read about which political party dominates APMCs in Maharashtra ]

The entire state is divided into market areas, and each area is under a market committee. Once this is done, NO person/agency is allowed to freely carry out the wholesale marketing activities in the agriculture produce. Market committees ONLY could authorize commission agents/ traders to carry out procurement & distribution activities through Mandis.Thus, even after the abolishment of License Raj in 1991, it is still prevalent in the agricultural sector through these APMCs.

Not only this, APMCs charge license fee from warehousing agents, loading agents commission agents, etc.Fee is also charged from both the seller (farmer who comes to sell) and the buyer (wholesaler). Some hidden charges also include legal fee, Mandi Tax, etc.

Letā€™s say a farmer sells his produce like – potatoes to the APMCs for ā‚¹10/Kg, he will first pay plethora of taxes to the agents, who in turn are going to charge similar set of taxes even from the wholesaler. Thus, in the end, a common man pays ā‚¹60/kg for potatoes, whereas the farmer takes home only a meagre sum, based on say, ā‚¹5 per kilo (after taxes). Only the middleman is at profit.The middleman here refers to agents of APMCs.

Also, when a farmer sells his produce to the APMC Mandis, there is NO immediate payment. Rather, he has to wait for a couple of days before the amount gets credited to his account.This means – a lag in payment and liquidity. APMCs play a dual role of ā€œregulatorā€ and a ā€œcontrolled marketā€.

Most of the states even impose restrictions on the interstate selling and procurement of agricultural produce. Hence, barring market integration.

Now, the three bills introduced that are all set to bring a sea change in this sector are –

1) The Farmersā€™ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020

The act ends the monopoly of APMCs to exclusively procure from the farmers. It however has NOT ended the farmer’s choice to keep selling to APMCs if he gets good return. Farmers will now have a CHOICE to sell in the open market or keep selling to APMCs. This act provides a level playing field to all sellers, hence paving way for a free market.

2) The Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020

To ensure a fair treatment to farmers outside APMCs, this bill provides for price assurance & trade agreement during sale/ purchase of farm produce through a written agreement. Farmers will sign these contracts with the buyers and will be insured by the court of law to receive their payments in time, irrespective of drought, famine, and other unforeseen reasons.

3) The Essential Commodities (Amendment) Bill, 2020

To ensure free market mechanism, this act will remove cereals, pulses, oilseeds, edible oils, onions, and potatoes from the list of essential commodities to prevent regulation in production, distribution & movement. However, the government is still authorized to regulate the supply & distribution of these commodities during emergencies ( unforeseen events such as this pandemic, War etc).

The bottom line is – APMCs in major states have only served few political goons for decades. Introduction of free market in agriculture is definitely going to produce some friction – as any other new reform such as industrialization, liberalization, privatization, but it is definitely going to be beneficial in the long run.

PS – I have tried to simplify this as much as possible. If you connect with me on this, request you to share it so that maximum people get the idea because at present, there is a lot of misinformation going on regarding this, and we don’t need confusions to outnumber sanity with regards to a reform which has the capacity to ensure financial freedom for the farmers.

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