State agriculture ministers seek barrier-free national market

09 July 2014

A committee of state ministers in charge of agricultural marketing constituted by the union ministry of agriculture has recommended reforms in agricultural marketing in the country, including amendment to the State Agriculture Produce Market Committee (APMC) Acts, to evolve a barrier-free national market.

The amended APMC Act and rules should specify clearly the provisions for setting up of private wholesale markets and terminal market complex (TMC) for smooth development of infrastructure, the committee said in its draft recommendations.

The committee has recommended a single window unified single registration system for traders/ market functionaries in the states to facilitate free trade in agricultural produce across the country.

In order to move towards barrier-free national market, market fee / cess may be levied only for first transaction between the farmer and trader and in subsequent sales between trader to trader / consumer, there may be only service charge related to services provided in the state and no market fee should be levied for subsequent transaction, it said.

In some of the states, there are check-gates for recovery of market fee, which hinder smooth movement of agricultural commodities and leads to wastages especially in perishables like fruit and vegetables. States should take Initiative to remove such physical barriers, if any.

States should notify the type of documents required for the producer-seller to be a farmer, so that his consignment is not halted at the check posts / barriers.

The proposed Agricultural Produce Inter-State Trade and Commerce (Development & Regulation), Bill may, to start with, be applied for a few perishable agriculture commodities and may be expanded for other commodities depending upon the experience of its working, the committee suggested.

Efforts may be made to ensure proper and regular data entry in `Agmarknet' nodes provided in the regulated markets in the state for the benefit of the farmers,

In order to ensure transparent transactions of agriculture produce and to get best price for the produce, there is a need for electronic trading in the mandi which should be at least at district level.

Onus on states to change Acts
While the committee's report, submitted to the central government suggested amendments to the APMC Act on lines of a Model Act, the onus for bringing relevant amendments in the APMC Acts lies with the governments of states and union territories as agricultural marketing is a state subject, an official release said.

The committee has suggested that states should amend their APMC Acts on the lines of the Model Act and the reforming states should also notify rules, and may complete the process early. In order to derive full benefits of reforms by small and marginal farmers, states have been asked to promote formation of self-help groups of farmers and other commodity interest groups.

The committee wanted the present system of licensing of traders/commission agents to be substituted with a modern and progressive system of registration with open and transparent criteria for registration.

The amended APMC Act and rules should specify clearly the provisions for setting up of private wholesale markets and terminal market complex (TMC) for smooth development of infrastructure. The reformed states should come forward for development of TMCs at various locations in their states so that facilities of backward and forward linkages could be provided to the farmers and other entrepreneurs involved:

In order to simplify the procedure and promote private sector investment in development of wholesale and terminal market complex in the country, the committee suggested that there should be a unified single registration for main market (hub) and the collection centers (spokes). The collection centers may be treated as sub-yard under the Act to provide for a unified registration system, the committee said.

The validity period of unified single registration for private wholesale markets, including collection centers should not be between five years and 10 years or even more.  The private agriculture markets should be given exemption on land ceiling for smooth development of market infrastructure in the country, it pointed out.

The committee suggested appointment of professionals for efficient management of existing markets, for which either CEO of the market committee may be appointed from outside the cadre or existing personnel may be given professional training to manage the APMCs efficiently.

In order to meet the need for an independent regulator for market operation, the committee suggested separation of the post of director of marketing from the post of managing director of state agricultural marketing board. Also, it said, in order to clearly demarcate the operator/service provider and the director of marketing should not draw salary and allowances from the state agricultural marketing board.

States may de-link the provisions of compulsory requirement of shop for registration of traders / market functionaries for increasing the competition.

The private markets should be treated at par with the existing APMCs and there should be simplified procedure for registration / licensing. The requirement of the security and bank guarantee should be reasonable to facilitate entrepreneur for development of need based market infrastructure in the country.

The minimum parameters for setting up of private market may be prescribed and farmers from any market area may come to sell their produce in the market of their choice.

The developmental fee to be charged from private markets should be at par with APMCs and it should be deposited with respective state government / marketing board, which should be spent on infrastructure development outside the Mandi.

Complete deregulation of markets in the states has only helped to increase transaction costs rather than reducing it, and it has not helped in attracting any investment from private sector either.

Therefore, there is a felt need for an appropriate legal and institutional structure with a developmental type of regulation to ensure orderly functioning of agriculture markets and attract investment for infrastructure development in such states, the committee noted.       

Investment in infrastructure
Under the Essential Commodities Act, there is a need to have distinction between genuine service providers and black marketeers/hoarders to encourage investment and better service delivery to the farmers.

There should be a stable and long term national policy on storage and movement of agricultural produce to achieve the objective of unified national market. The committee has recommended that contract farming sponsors and direct marketing licensees may be exempted from the stock limits up to six months of their requirement in the interest of trade and facilitating long term investment.

In order to reduce wastages, promote investment for development of marketing infrastructure and to ensure smooth movement of perishable horticultural produce across the country, states/union territories should waive the market fee on fruit and vegetables and Government of India may also consider compensating the losses of revenue during initial period to the states on this account.

Investment in marketing infrastructure under RKVY may be increased to minimum 10-15 per cent of state RKVY spending in reformed states. Efforts should be made to encourage private investment in marketing infrastructure outside the APMCs also.

In order to enhance the private sector investment in marketing infrastructure development projects, there is  a need to provide subsidy/viability gap funding for such investments, being long gestation period projects and treat them ''as infrastructure project'' so as to attract FDI and ECB for their development.

States may promote PPP model for infrastructure development and exempt market fee on trade transaction taking place inside the private market yard. However, states can levy minimum user charges (in lieu of market fee) for developing general infrastructures like connecting/rural roads, etc, preferably not exceeding 0.5 per cent of the value of produce transacted for the use of any facilities created by the states/APMCs.

State governments should also explore the areas for private investments and PPP projects for market and marketing infrastructure development.

Since the requirement of marketing infrastructure in the North East and hilly areas is different from the rest of the country, a separate agricultural marketing strategy may be adopted and the Government of India should constitute a 'corpus fund' for development of marketing infrastructure in these areas.

The committee prescribed a maximum limit for market fee/cess, including rural development fund, social development fund and purchase tax, etc of 2 per cent of the value of the produce and the maximum commission charges of not more than 2 per cent for food grains/oilseeds and 4 per cent for fruits and vegetables;

It also recommended waiver of mandi fee on direct marketing entrepreneur who provides the minimum specified infrastructure facility to the farmers. Also, if a person has already paid mandi fee in a state where it procures agriculture produce and brings the same to another state for processing, no mandi fee should be charged.

Mandi fee should be levied on primary agricultural produce only and not on secondary agriculture produce (processed agricultural produce) like besan, maida and ghee etc. However, user charges can be levied based on the use of infrastructure and services;

Contract farming
To encourage contracting parties and simplifying and rationalising the registration process, the committee suggested setting up district-level authority for registration of contract farming and non-levy of market fee under it.

The APMC should not be the authority for registration / dispute settlement under contract farming. The disputes may be settled within 15 days and the decretal amount of appeal should not be more than 10 per cent of the amount of goods purchased under contract farming.  Appeal should be disposed of within 15 days.  No solvency certificate / bank guarantee may be required from private sponsor/operator, if payment is made to the farmers on the same day of procurement of their produce.

States should promote small and marginal farmers' groups associations or their company/society to encourage contract farming in the states. Successful template of contract farming may be developed after studying the successful models adopted in other countries.

Grading and standardisation
There is a need for grading of agricultural produce before it is sold to facilitate the farmers to fetch the prices commensurate with the quality.

States should provide directorate of marketing and inspection (DMI), necessary inputs such as name of commodity, quality parameters important for formulation of grade standards for producers' level grading under Agricultural Produce (Grading & Marking) Act, 1937, which are relevant and specific to their state.

To promote the grading and testing of agricultural produce, states are required to take initiative for establishing grading units with trained manpower in the market to attend to work of grading and to promote private laboratories for testing agricultural produce on user-charge basis.

Other recommendations included convening of a national-level conference on agriculture marketing at New Delhi under the chairmanship of union agriculture minister for consideration of the report, and organising farmers' groups to enhance their bargaining power to improve price realisation and shorten the food supply chain by introducing direct marketing/sourcing of agriculture produce directly from the farmers to the consumers and processors.

The committee wanted the central government to have a more consistent stand in their import-export policy as any sudden switch-on and switch-off in policy impacts the farmers adversely.

Members from Haryana was of the view that Haryana already has sufficient marketing infrastructure and perhaps, there may be no need for the private market to come into the state. That notwithstanding, Haryana would like to see the successful working model of private market in other states before deciding in this regard.

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