Review of APMC Act and Reform Initiatives

(28th-30th August,2012)

Lallan RaiEx-Asstt AMA/Consultant,

Directorate of Marketing and InspectionN.H.IV, Faridabad-121001

COSAMB Meeting

Outline of Presentation

• Agriculture Scenario• Agricultural Marketing Scenario• Review of APMC Act• Present APMC Act-Issues and

Concerns• Need for Market Reforms• Model APMC Act, 2003• Progress of Market Reforms• Initiatives by States• Need for Future Action

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Agriculture ScenarioStrength• Varied agro-climatic conditions – wide

range of Agricultural/Horticultural products

• Leadership across several products-volume

• Large Domestic Market• Provides large raw material base to

industry• Abundant labour supply at competitive

cost• Strong Research and Development Set

upWeakness• Small land holdings with Small

Individual Marketable Surplus• Weak Credit flow and inadequate risk

coverage• Low level of value addition at the farm

gate• Lack of Market information• Absence of Common trade language

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Production Trends

4

2001-02

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

190

200

210

220

230

240

250

260

270

212.85

208.60

217.28

230.78234.47

218.11

244.78

257.44

Production of Foodgrains(Million Tonnes)

Production

2001-02

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12(P)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

44

58.74

59.5665.59

68.47

71.52

74.88

77.52

88.62

109.05114.99

128.45

129.08

134.1 146.55

149.61

Production of Fruit and Vegetables(Million Tonnes)

Fruit Vegetables

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Agricultural Marketing Scenario

Strength•Large Consumer Base•Wide network of markets across the State through APMCs•Rise in household income- enhanced demand for high value foods and FMCG products

Weakness•High Post-harvest wastages and Transportation cost•Multiple intermediaries-Low price realization by farmers•Lack of adequate Scientific Storage facilities near to Farm•Fragmented Supply Chains and High marketing Cost

Opportunities•Globalization provides better farming and value addition opportunity•Government investment policy conducive for private investment•Specialized Schemes leading to capital formation and enhancing productivity and farm income

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6

High Post-harvest Losses

COSAMB Meeting Source: ICAR Study, 2010

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Mandi Charges (incl. of purchase tax, market fees,arthia commission etc) in various States

(as percentage of MSP)

State/UT Purchase/sales Tax/Trade Tax/VAT

Marketfee

ArthiaCommission

Othercharges

Total

Bihar 1.0+3.0 - 2.0 - 6.0

Gujarat - 1.0 2.0 - 3.0

Haryana 4.0 2.0 2.5 2.0(RD Cess) 10.5

MadhyaPradesh

4.0 2.0 2.0 0.2 (NirashritShulk)

8.2

Punjab 5.0 2.0 2.5 5.0 (RD Cess@2% + ID fee @3%)

14.5

Rajasthan - 1.6 2.0 - 3.6

UttarPradesh

4.0 2.5 2.0 - 8.5

Uttarakhand 4.0 2.5 - - 6.5

Source: Price Policy for Rabi crops, the Marketing season- 2012-13

8

How to Safeguard Small Producers?

• Present Agricultural Marketing -Three main Components (GMM):

Statutory charges (6 to 12 per cent); Net margins of intermediates (6-20 per cent); and Real cost of performing marketing functions (68 to 88

per cent).

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Reduction in real cost of marketing require increasing scale of operations and technological change in the marketing system. Small farmers with low marketed surplus cannot do it. The organized sector is coming up in a big way and their role is important. Need for an institutional revolution to enable the producer organizations with professional management to emerge in the scene.Can we think of farmers’ corporations /Producers’ Companies to emerge in production as well as processing and marketing of agricultural commodities?Implications of this form of institutional set up in agricultural marketing need critical examination and serious debate.(Source: Prof.S.S. Acharya Paper)

Review of APMC Act

• Initial Regulatory Framework:• Agriculture Marketing- a State subject-

regulated through respective State APMC Act • 27States and 1 UT have APMC Act• Major Objectives of APMC Act:Development of Market InfrastructureOpen Auction for price discoveryFair Value for farmer’s produceStandardized ChargesPrompt payment to farmerDispute Settlement

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Progress of Regulation of Markets

1940 1950 1960 1970 1980 1990 2000 2009 2010 20110

1000

2000

3000

4000

5000

6000

7000

8000

73 286715

2481

6052 6217

7127 7139 7157 7246

Number of Markets10COSAMB Meeting

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Density of Regulated markets

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Andhra Pra

deshAssa

m

Jhark

hand

Gujarat

Haryana

Himach

al Pra

desh

Madhya Pra

desh

Chhattisg

arh

Mahara

shtra

Meghalaya

Orissa

Punjab

Rajasthan

Sikkim

West

Bengal

Uttar Pra

desh

Uttarakhand

0

2000

4000

6000

8000

10000

12000

304 347 397 473 156

1160596 731

350

11215

496103

794

7096

130 398963

Area covered by each market(Sq.Km.)

Need of markets within 80 sq.kms.

12

Status of Cold Storages (31.12.2009)

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4885

356

140

Private Cooperative Publc

Numbers of Cold Storages Capacity in ‘000 tonnes

2341

937107

Private Cooperative Publc

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Establishment of Market Committee

• Responsibility of enforcement of provisions of the Act rests with Market Committee

• Except Tamil Nadu(One Committee for all markets in the District) all State Acts provide for constitution of separate Market Committee

• In Maharashtra separate Market Committee for Greater Mumbai

• The number and constituents of the membership of the Market Committee differ with other Committees of State

• TN Act permits Co-operative Marketing Societies to establish a market after observing certain formalities

• It is, therefore, necessary to have a Taluk level Market Committee with uniform pattern in all the States/UTs

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Election of Members of Committee

• In most of the States provision of direct election of non-official members

• In Himachal Pradesh, the members are appointed by the Board out of the Panel maintained (given by the concerned District Commissioners)

• There should be indirect election of members from amongst the Panchayat members (already elected through direct election) to save wasteful expenditure

Composition of APMCs (%)Name of the State/UT

Producers/ Agriculturist

Licensees / Cooperative

Cooperatives Local Authority

State Govt. MLA/ MP Financial Institution

SWC/ FCI/ CWC

Uttar Pradesh

52.28 14.28 4.77 4.77 9.52 - - 14.28

West Bengal 50.00 16.70 5.55 5.55 11.10 5.55 5.55 -Assam 46.05 20.00 6.66 6.66 6.66 - 6.66 6.66Gujarat 47.70 23.55 11.76 5.88 11.76 - - -Rajasthan 46.68 13.33 13.33 26.66 - - - -Orissa 47.05 23.55 5.88 11.76 11.76 - - -Delhi 42.88 14.28 7.14 7.14 14.28 Lic. W/man

7.14Metro- Coun. 7.14

-

Goa 46.70 20.00 6.66 13.32 13.32 - - -

Madhya Pradesh

Upto 7.00

15.00 5.00 - 5.00 5.00 - -

Tripura 50.00 8.50 8.50 16.50 16.50 - - -Maharashtra 55.55 16.70 5.55 11.10 11.10 - - -Tamil Nadu 60.00 20.00 - - 20.00 - - -Punjab 52.94 35.30 5.88 - 5.88 - - -Andhra Pradesh

66.65 16.70 5.55 5.55 5.55 - - -

Karnataka 52.96 5.88 11.76 5.88 5.88 SC/T11.76

Taluk Dev/ Board 5.88

-

HaryanaSC/ST/BCrepresented

58.34 25.00 8.33 - 8.33 - - -

Meghalaya 38.48 23.07 15.38 7.67 7.69 - - -Arunachal Pradesh

22.22 22.22 11.11 - National Samity 44.45

- - -

Nagaland 54.55One SC/ST

18.18 9.90 - 18.18 - - -

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Numerical strength of Market Committees No. of persons as stipulated in market legislation

States/Union Territories

8-20 Madhya Pradesh

14-21 Uttar Pradesh

15-18 West Bengal

9 or 16 Punjab (Without representation of cooperatives)

10 or 17 Punjab (With representation of cooperative)

11 or 19 Haryana (Without representation of cooperatives)

12 or 20 Haryana (with cooperative representative)

9-16 Himachal Pradesh

9 Arunachal Pradesh

11 Nagaland

12 Tripura

13 Meghalaya

14 Delhi

15 Tamil Nadu, Assam, Rajasthan, Goa.

17 Gujarat, Orissa, Karnataka

18 Maharashtra

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Commodity Coverage• Commodities included in the Schedule or

declared as such by the Government Notification

• In Andhra Pradesh, Tamil Nadu, U.P., Maharashtra, Gujarat,

Rajasthan, Odisha, Punjab and Chandigarh regulation is specified in the Schedule

• Except Andhra Pradesh and Tamil Nadu all the Acts provides for inclusion as well as deletion of any agricultural produce from the list of notified commodities

• Manner of Notification as well as commodity coverage also vary from State to State

• No provision exists for livestock inPunjab, Chandigarh,

HP, MP and Tamil Nadu

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Realization of Market Fee By APMCs

Sl. No.

Rate of market fee

Names of States/Uts Remarks

1 Below 1% Gujarat, Pondicherry, Goa, Tripura, Parts of Maharashtra & Kerala

Maharashtra – Rs.0.75 –100Only Malabar hills districts under MCCM Act, 1933 in Kerala.

2 1 % to below 2%

Andhra Pradesh, Assam, Delhi, Himachal Pradesh, Karnataka, Madhya Pradesh, Uttar Pradesh, Orissa, Tamil Nadu, Meghalaya, Nagaland, Rajasthan and parts of Maharashtra.

FCI & State Coop. Exempted in Assam. Meghalaya & Nagaland Collection of fee not yet introduced.In Orissa 3% for animal husbandry products.

3 2 % Punjab, Haryana, West Bengal, Arunachal Pradesh

Punjab 1% for Timber.

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Contribution of income of APMCs to SAMB

Sl. No.

Percentage contribution to the Board

Name (s) of States/U.T.

1 Upto 5% Karnataka & Orissa

2 Upto 10% Andhra Pradesh, Uttar Pradesh, Rajasthan and Maharashtra

3 Upto 20% West Bengal, Tripura, Delhi

4 Upto 30% Assam and Meghalaya

5 Upto 50% Madhya Pradesh and Arunachal Pradesh

7 Upto 10-40% Punjab – Slab system depending upon income of APMC.

8 Upto 20-30% Haryana – Slab system depending upon income of APMC.

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Settlement of disputes in various States

Sl. No.

Channel for settlement of disputes States/UT

1 Secretary Arbitrator Dispute sub-committee Gujarat, Delhi, Andhra Pradesh, Bihar, Uttar Pradesh, Orissa, Tripura, Punjab and Chandigarh.

2 Secretary Arbitrator West Bengal

3 Secretary Arbitrator Board constituted for settlement of disputes

Maharashtra

4 Arbitrator Umpire Dispute Sub-Committee Rajasthan

5 Secretary Arbitrator Empire dispute Sub-Committee

Himachal Pradesh

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Present APMC Act -Issues

• Issues and Concerns:• Traders can not buy outside Market Yard-add to cost• Market Density Low – Long travel• Infrastructural facilities inadequate in markets• Rural Periodic Markets not properly developed• Bureaucratic management- lost original purpose• Congestion in market yards• Several Malpractices continue• Barrier to entry-Strong associations, License linked

to shops• Market fee not used for development in some cases• APMCs emerged as monopoly

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Need for reform in Agricultural Marketing

Necessary to : Empower producers with market information to undertake market-driven production.

Provide Multiple Choice and competitive Marketing Channels to farmers.

Attract Large Scale investments needed for building Post-Harvest infrastructure.

22

Model Act, 2003- Salient Features

Establishment of Market in Private and Cooperative sector

Promotion of Direct Marketing and Contract Farming

Establishment of Farmer/Consumer Markets

Single point licensing & Single Point levy of market fee/cess

Setting up of Special Commodity Markets/ Promotion of e-trading

Professional management of APMCsCOSAMB Meeting

Progress of Market Reforms

Reforming States46%

Partial Reforming States17%

No APMC Act in States20%

State provide for Re-form3%

States not yet

re-formed

14%

Progress of Market Reforms (31.07.2012)

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Provisions of Model Act Adopted (con..)

Area of Reforms States adopted the suggested area of market reforms

Setting up of Special Markets and Special Commodity Market

Andhra Pradesh, Gujarat, Maharashtra, Karnataka, Nagaland, Sikkim, Tamil Nadu Tripura, Jharkhand and Uttarakhand

To promote and encourage e-trading, Gujarat, H.P., Karnataka, Nagaland, Sikkim, Mizoram, Goa, Maharashtra (under Rule 5 license granted to Commodity Exchanges registered under FMC), Uttarakhand and Rajasthan

Registration of Contract Farming Andhra Pradesh, Arunachal Pradesh, Assam, Goa, Himachal Pradesh, Karnataka, Haryana, Maharashtra, Madhya Pradesh, Mizoram, Nagaland, Odisha, Rajasthan, Chhattisgarh, Sikkim, Tripura and Jharkhand and Uttarakhand

contract farming agreement recorded with the prescribed officer.

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Karnataka, Haryana, Madhya Pradesh, Mizoram, Maharashtra, Nagaland, Orissa, Rajasthan, Sikkim, Tripura and Jharkhand and Uttarakhand

No title, rights, ownership or possession shall be transferred or alienated or vest in the contract farming sponsor or his successor or his agent as a consequence arising out of contract farming agreement.

Arunachal Pradesh, Assam, Goa, Haryana, Maharashtra, Mizoram, Nagaland, Odisha, Rajasthan, Sikkim, Tripura , Jharkhand, Andhra Pradesh, Karnataka and Uttarakhand

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Provisions of Model Act Adopted

Area of Reforms States adopted the suggested area of market reforms

Dispute settlement mechanism Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Karnataka, Haryana, Madhya Pradesh, Mizoram, Maharashtra, Nagaland, Ordisha, Rajasthan, Sikkim, Tripura and Jharkhand; Himachal Pradesh and Uttarakhand

Exemption of Market Fee on the sales to the contract farming sponsors taking place outside the market yard under the contract farming agreement

Arunachal Pradesh, Goa, Karnataka (Reduced by 30%), Maharashtra, Mizoram, Nagaland, Orissa, Rajasthan, Sikkim, Tripura, Punjab (exempted under the Rules), Chandigarh (exempted under the Rules) and Uttarakhand

Single point levy of market fee Chhattisgarh, Gujarat, Goa, Himachal Pradesh, Madhya Pradesh, Mizoram, Karnataka, Nagaland, Sikkim, UT of Chandigarh, Punjab, Jharkhand, Rajasthan and Uttarakhand

Establishment of private market yard and direct purchase from farmers

Andhra Pradesh, Arunachal Pradesh, Assam, Gujarat, Goa, Himachal Pradesh, Karnataka, Madhya Pradesh ( only direct purchase), Maharashtra, Mizoram, Nagaland, Orissa (excluding for paddy / rice), Rajasthan, Sikkim, Tripura, Punjab (not for direct purchase), Chandigarh (not for direct purchase), Jharkhand and Uttarakhand

Establishment of consumer / farmer market

Arunachal Pradesh, Assam, Gujarat, Goa, Himachal Pradesh, Karnataka, Madhya Pradesh (under bye-laws), Mizoram. Maharashtra, Nagaland, Rajasthan, Sikkim, Tripura, Punjab (only enabling provision), UT of Chandigarh (only enabling provision), Jharkhand and Uttarkhand

COSAMB Meeting 26

Initiatives Taken by States Common License for Direct procurement from farmers

has been provided by Maharashtra (23), MP (8), Rajasthan (1) and Karnataka(249)

License for Direct marketing has been provided by Andhra Pradesh(171), Gujarat(21), Haryana(37), Himachal Pradesh(12) Karnataka(9), Maharashtra(107), Odisha(46), Punjab(26), Rajasthan (76) and Tamil Nadu(179).

License for Private Markets – Andhra Pradesh(2), Rajasthan(2), Gujarat(13), Tamil Nadu(6) and Karnataka(3)

License for Spot Exchange has been granted by Gujarat, Maharashtra, Karnataka, Orissa, Rajasthan and Madhya Pradesh

M.P.,Uttarakhand and West Bengal have waived market fee on sale of fruit & vegetables.

Government of Haryana introduced E-license to commission agents Smart Card based electronic records for farmers and Digital Mandi system.

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Need for Future Action

• State Governments to expedite amendment of Act/Rules on the lines of Model Act/Rules

• COSAMB may pursue member States to complete the Reform process

• Initiatives for Private Markets/infrastructure development in Reformed States

• Long term Policy stability to attract investment

• Organize farmers into Groups/Co-operatives

/Producer Companies• Promote barrier free National Market

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Thank You

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