Why APMC should exist?

Enamul Haque, MS Jairath, Hema Yadav, Shalendra

Creation of agricultural marketing/ agribusiness infrastructure is important for overall development of
agriculture and to facilitate uniform distribution of benefits among different stakeholders. The setup of
a corpus of Rs. 2000 crore with NABARD by Ministry of Food Processing Industries (MOFPI) to promote
Food Processing Units and related infrastructure to provide loan for a period of 7 years with a low
interest rate is an appreciable move. However the view of MoFPI to abolish the APMC Act has once
again brought back the issue to focus on amendment/abolition of APMR Act which has been considered
by many policy-makers and academicians as restrictive to creation of infrastructure mainly by private
players, development of alternative marketing channels for farmers and establishing of competitive
market. The review of APMR Act however should be considered in the light of overall objective of
introducing regulations by the states in the field of Agricultural Marketing.
Regulation of Agricultural markets
The Agricultural Produce Market Regulation (APMR) Act authorizes the State Governments to set up and
regulate marketing practices in wholesale markets. The objective of establishing regulated market was
to ensure that farmers get fair price for their farm produce.While comparing the scenario with preregulation era, APMCs have served some important purpose such as removal of several malpractices
and imperfections in agricultural markets, created orderly and transparent marketing conditions and
ensured a fairer deal to farmers selling their produce (Archarya 2004). However, the revenue generated
from market were used for creation of market infrastructure on ad hoc basis which did not facilitate
marketing function to the desired extent.
In order to provide efficiency in the marketing system and creating conducive regulatory and policy
environment for private investments, the Inter Ministerial Task force on agricultural marketing reforms
(2002) recommended that APMC Act must be amended to allow for direct marketing and the
establishment of agricultural markets by the private and co-operative sector. In response to this, the
Union Ministry of Agriculture proposed a Model act on agricultural marketing in consultation with State
Governments to be adopted by State Governments. The reforms in the act intended to promote
investment in marketing infrastructure and motivate the corporate sector to undertake direct marketing
and facilitate a national integrated market. Contract farming, direct marketing and public-private
partnership in management and development of agricultural markets were some of the other major
instruments of change. Few state governments have already amended their respective APMC Acts and
rest are yet to bring the reform.
Abolition of APMR Act
According to a study by FAO, it is not possible to determine whether or not welfare will be improved by
repealing market regulations without analyzing the welfare implication of existing one. The shadow cost
of repealing APMR Act may be higher as the social benefits of the act cannot be ignored by expecting
the same to create perfect competitive market which exists only theoretically. The same has been

observed in Bihar where the act has been repealed in 2006. The situation has once again exposed
farmers to exploitation as was in pre-regulation era. The act was repealed in expectation of attracting
investment from private players, better share to farmers in consumers rupee, linkages between farmers
and consumers etc. which has not been a case with the state. To create an environment which attracts
private investments and creates competitive and efficient market will need not only regulation but also
various facilitating components such as easy and speedy disposal of proposals, incentives, infrastructure
etc. Needless to say that the step taken by MoFPI in setting up the corpus with NABARD is one among
the desired action in developing such a conducive environment.
APMR Act as a tool for development
The regulation of markets and agricultural marketing was introduced by various states through
implementation of respective APMR Act to safeguard the interest of farming community and not
primarily to ensure and ideal efficient perfectly competitive market. The Act has been used by many
states as a tool for development which could interpret and implement it properly and in true spirit. The
same has been case with some of the states like Karnataka, Andhra Pradesh and Tamil Nadu etc. who
have achieved remarkable success under the same APMR Act regime. In these states, APMCs are not
only attempting to protect the interest of farmers by improvising the facilities at yard but also allowing
farmers to deal with alternatives markets such as SAFAL, Ryathu Bazar and Ujhavar Sandi etc.
Presence or absence of APMR act is one of the condition and not the only condition to attract private
investment. Removal of regulation in an environment where farmers are still placed poorly against
strong traders may led to their exploitation as was the case in pre regulation era. The current situation
calls for gradual shift in the role of state from being a watchdog to a facilitator.