New Delhi: A central government group headed by finance ministry’s chief economic advisor Kaushik Basu, which is meant to come up with a strategy to combat inflation, on Monday discussed ways to tweak India’s agricultural marketing legislation that fragments the market for produce and restricts competition in the supply chain linking farms to wholesale markets.
According to a finance ministry statement, Basu said agricultural prices are a critical signalling mechanism to consumers. However, when a shortfall in production results in a disproportionate rise in price, there may be flaws in the marketing system, he added.
Agricultural wholesale trade functions within the boundaries set by states through their respective Agricultural Produce Market Committees Act (APMC). Typically, the legislation bestows government-approved wholesale markets with almost exclusive rights over acting as the link between farmers and consumers. The legislation fragments India’s agricultural market and often keeps out companies from dealing directly with farmers.
The finance ministry statement said Kishore Biyani, chairman, Future Group, was asked to make a presentation to the group on a retail practioner’s perspective on ”de-bottlenecking the food value chain.”
“He (Biyani) suggested that one may look at APMCs as an institution for price discovery without actually moving the supplies to the market yards,” the statement, said.
The Basu-led Inter Ministerial Group on Inflation was set up by Prime Minister Manmohan Singh in February to come up with a long-term strategy to deal with food inflation and macroeconomic demand management. Other members of the group include heads of government departments in agriculture and civil supplies which deal with agriculture and public distribution system.