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The new law envisaged by the Economic Survey will enable farmers to sell their produce across state borders. Photo: Aniruddha Chowdhury/Mint
The new law envisaged by the Economic Survey will enable farmers to sell their produce across state borders. Photo: Aniruddha Chowdhury/Mint

Will a national common market for farm products curb price rise?

Economic Survey recommends creating a new law that will stop price manipulation by trader cartels

New Delhi: The Economic Survey has recommended introducing a new law to create a national common market for farm products that will override the existing agricultural produce market committees (APMC) and enable farmers to sell their produce across state borders, preventing price manipulation by trader cartels that have been blamed for rising vegetables prices.

“Parliament has the power to legislate a national common market under the Constitution which gives it the ability to legislate the freedom to buy and sell, for farmers and traders, across state lines. This law can override state APMC laws and restrictions that have been placed on the farmer’s right to sell food within and outside the state," it said.

Currently, state APMC Acts control wholesale buying and selling of agricultural produce at designated mandis (markets) within a state. Under the new law that the Economic Survey envisages, APMC’s mandiswill become one among many trading venues in a competitive market.

To create a national common market, the Survey also recommended amending the Essential Commodities Act and the Land Tenancy Act that create barriers to free trade.

“To create a national market the Central government needs to use powers under the Union List and the Concurrent List of the Seventh Schedule of the Constitution to end the monopoly powers of the APMCs and replace other punitive and coercive state laws affecting the food market," it said.

A new law will be a bold step in the right direction, but it may not be sufficient to address the existing problems, according to Ashok Gulati, chair professor for agriculture at the Indian Council for Research on International Economic Relations

“For the last 10 years the Centre has been advising states to reform the APMC Act, but it has not happened. When it is illegal for a large player to buy directly from farmers, why will they invest in effective and efficient value chains," said Gulati. “Not having an APMC Act did not help Bihar. A state has to invite private players and give tax incentives to invest in back-end value chains."

The new law may also face opposition from some state governments and traders. Traders have threatened to shut Delhi’s wholesale markets after the Centre suggested removing vegetables and other perishables from the ambit of the APMC Act to control spiralling food prices. Maharashtra’s agriculture minister on 7 June refused to remove onions and potatoes from the state’s APMC Act.

States will be bound to follow the central Act on creating barrier-free markets, after agriculture marketing, a state subject, is brought under the Concurrent List. “The move will help farmers get better returns and promote agricultural diversification, at least in those states where private markets are already developed. In poorer areas, the private sector can now develop markets," said Pramod Kumar Joshi, South Asia director of International Food Policy Research Institute.

“The APMC Act has not achieved the basic objective of setting up a network of physical markets. There are some successful initiatives in direct marketing, such as Apni Mandi in Punjab, Uzhavar Sandhai in Tamil Nadu, Shetkari Bazaar in Maharashtra, Hadaspur Vegetable Market in Pune, Rythu Bazar in Andhra Pradesh, Krushak Bazaar in Odisha, and Kisan Mandi in Rajasthan," the Survey said.

“Designated markets under the APMC Act serve a useful function of price discovery. Without the benchmark of mandi rates there might be no transparency in prices for small farmers," said Himanshu, assistant professor, Jawaharlal Nehru University, Delhi.

“If the core issue is food inflation, creating competing markets will do little to solve it. Rising wholesale prices implies rising fertilizer, irrigation and labour costs. Creating more marketing avenues will not solve it."

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