Freeing the Farmer

Context:  Farmers’ Produce Trading and Commerce (FPTC) Act threatens rent-seeking by APMC mandis under cover of regulation.

Problems related to the Agricultural Produce Market Committee (APMC) acts

• Loss in the growth of market facilities:  Farmers suffered as market facilities did not keep pace with the increase in output and regulation did not allow farmers to sell outside APMC markets.

• The enhanced role of middlemen: Due to poor market infrastructure, farmers were left with no choice and were forced to seek the help of middlemen

• Transformation of APMC markets from infrastructure services to a source of revenue generation: In several states, commission charges were increased without any improvement in the services.

• Heavy burden on the exchequer:  To avoid farmer protests, high charges were to be paid by buyers like Food Corporation of India (FCI), resulting in a high cost to the Centre, increases the logistics cost for domestic production and reduces trade competitiveness.

Benefits of FPTC Act

• It provides a constitutional route to address long-pending issues of market reforms.

• Provides the freedom to sell and buy farm produce at any place: In APMC markets or outside the mandated area and to any trader.

• Ensures easy transactions: The Act allows transactions on electronic platforms to promote e-commerce in agriculture trade.

• No threat to APMC mandis and their business: since the real threat is the service charge levied by the states ranging from as low as 1% in states like Andhra Pradesh to as high as 8.5% in Uttar Pradesh.

• It will put pressure on APMC markets to become competitive.

Conclusion:  States should keep mandi charges below a reasonable level to ensure the co-existence of APMC mandis and private channels permitted under the new Act in a true competitive spirit.