X NOTES: Economic Survey 2015 - A National Market for Agricultural Commodities

Introduction

Presently, markets in agricultural products are regulated under the Agricultural Produce Market Committee (APMC) Act enacted by State Governments.
This Act notifies agricultural commodities produced in the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., and provides that first sale in these commodities can be conducted only under the aegis of the APMC through the commission agents licensed by the APMCs set up under the Act.
The typical amenities available in or around the APMCs are: auction halls, weigh bridges, godowns, shops for retailers, canteens, roads, lights, drinking water, police station, post-office, bore-wells, warehouse, farmers amenity center, tanks, Water Treatment plant, soil-testing Laboratory, toilet blocks, etc.

Multiple levies by APMCs.
The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc.are a major source of market distortion.
Such high level of taxes at the first level of trading have significant cascading effects on the prices as the commodity passes through the supply chain.
The rate of commission charged by the licensed commission agents is exorbitant, because, unlike direct taxes, which are levied on net income, the commission is charged on the entire value of the produce sold.

The scope of the Essential Commodities Act (EC Act) is much broader than the APMC Act. It empowers the central and state governments concurrently to control production, supply and distribution of certain commodities, including pricing, stock-holding and the period for which the stocks can be kept and to impose duties.
The APMC Act on the other hand, controls only the first sale of the agricultural produce.
Apart from food-stuffs which are covered under the APMC Act, the commodities covered under the EC Act generally are: drugs, fertilisers, and textiles and coal.

provides for direct sale of farm produce to contract farming sponsors.
provides for setting up ``Special markets” for ``specified agricultural commodities”– mostly perishables.
permits private persons, farmers and consumers to establish new markets for agricultural produce in any area.
requires a single levy of market fee on the sale of notified agricultural commodities in any market area.
replaces licensing with registrations of market functionaries which would allow them to operate in one or more different market areas.
provides for the establishment of consumers' and farmers' markets to facilitate direct sale of agricultural produce to consumers.
provides for the creation of marketing infrastructure from the revenue earned by the APMC.

The model APMC Act also increases the competitiveness of the market of agricultural produce by allowing common registration of market intermediaries.

The provisions of the Model APMC Act do not go far enough to create a national – or even state level common market for agricultural commodities.
fees/commission falls on the farmers since buyers would discount their bids to the extent of the fees/commission charged by the APMC and the Commission agents.
not adequate to create competition for APMCs even within the State, since the owner of the private market will have to collect the APMC fees/taxes, for and on behalf of the APMC, from the buyers/sellers in addition to the fee that he wants to charge for providing trading platform and other services.