Agricultural market reforms have been stuck in the middle for 15 years as it is a state subject.

There is no doubt that the agrarian sector is in the grip of distress in general, and in some parts, even a crisis, due to various domestic and global factors. Many short-term relief and reform measures are being attempted to deal with this situation in the last couple of years at the Union and state level, ranging from loan waivers to direct cash payments across many states, besides the focus on doubling farmer income over a period of 7 years by the Union government (by 2022).

However, it is important to realise that within the farm sector, there are only three ways to improve farmer incomes i.e. yield increase, cost reduction and better price realisation. It is here that the role of agricultural markets becomes crucial, as even if some improvement is achieved in the yields as there are large yields gaps in some crops in many states. This can be partially addressed with farm extension effort during the short and the medium term, though there does not seem to be much public sector focus and innovation in this domain, this yield increase would not lead to higher income if prices and markets are not in place.

Thus, agricultural markets are key to ensuring better farmer incomes as there are issues of interlocked produce and credit markets at the local market level, and the MSP mechanism being restricted in its coverage of regions and crops besides being prone to many other obstacles for farmers to benefit from it.

In India, agricultural market reforms have been stuck in the middle for 15 years as it is a state subject. The Union Ministry of Agriculture and Farmer Welfare (MoAFW) had prescribed a model APMC Act in 2003 for states to adopt, which made new channels of contract farming, private wholesale markets, and direct purchase, legal for the first time. But, the progress on amending APMC Acts in line with the model Act has been tardy and varied both in terms of magnitude and content of reforms. In fact, Bihar abolished the Act altogether instead of amending it in 2006. Recently (after 15 years), the MoAFW has circulated two separate model Acts on wholesale agricultural markets (APMC), and on contract farming. Besides, there have been new initiatives like E-NAM and deficiency price payments (Bhavantar Bhugtaan Yojana-BBY) to ensure better price discovery and MSP benefits to farmers. But, these are again restricted in their implementation in terms of only a couple of states attempting BBY and only a small percentage of markets (less than 10 percent targeted by Ministry) implementing the E-NAM.

Unfortunately, the model APLM Act, 2017 still maintains the Commission Agent (CA or Arthiya) as the central actor in the APMCs whereas this institution of CA should have ideally been done away with as now there are many new actors like PACS, PCs and other FPOs which are already procuring from farmers in states such as UP, Bihar, and Madhya Pradesh for FCI and other public agencies at the local level and are also bringing in credit and other input and market linkages to their member and non-member farmers. In fact, Madhya Pradesh did away with CAs from the APMC markets during the 1980s itself, which is not even discussed often.   Further, the APLMA, 2017 Act restricts the domain of APMC regulation only to the APMC market yard, not the notified area. The 2017 Act also brings livestock markets under the APMCs for the first time without realising that the dynamics of the two markets (agricultural produce and livestock) are entirely different.

Similarly, the model Contract Farming and Services Act, 2018, which has inadequate logic for a separate Act (earlier it was under APMC Act), also falls short on many counts in terms of farmer interest protection and small farmer inclusiveness. For example, it does not provide explicitly for group contracts which is a must for bringing small farmers into the contract farming mechanisms as individually they are not attractive to contracting agencies and they (smallholders) can’t bargain effectively with corporates. In fact, contract farming in India has mostly excluded smallholders with the exception of a couple of crops like gherkins. In fact, both the Acts now focus on promotion and facilitation rather than regulation which is reflected in their titles themselves.

So far as perishable produce markets are concerned, many state governments are increasingly delisting fruits and vegetables from the APMC regulation. But, it is not bringing any benefits to the farmers other than lowering the transaction cost for buyers and the APMC losing the market fee. It would have been better if the deregulation was permitted only for those players who go to buy directly from farmers or enter into contract farming arrangements which should have brought benefits of better prices, lower transaction cost, and better technology to farmers.

Since agricultural market reforms are about giving farmers a choice of channels, therefore, all channels i.e. direct purchase, contract farming, farmer-consumer market yard, private wholesale market, and APMC need to be promoted and regulated as one or two channels can’t provide effective marketing facility for all farmers, especially marginal and small farmers in India in any state.