India: The State's Apathy Towards Agricultural Marketing


Dr D Tripati Rao

One critical issue in the budget-making process is that it continues to overlook the issue of market access for the poor farmer. The Indian farmer's 'inability to trade' has curtailed his economic freedom. Disappointingly there is no mention in the budget of the antediluvian Agricultural Produce Marketing Committee (APMC) Act. Even if the poor farmer in India is able to get access to 'cheap' credit and high yield variety seeds in order to diversify his production (allowing him to shift, for example, from producing rice to producing mushrooms, which might fetch a high price in urban markets), he is bound by the State to sell his produce only in the neighboring market and may not even get back the capital he invested. The Budget should have implemented the recommendations for reforms - suggested by the inter-ministerial taskforce set up by the Ministry of Agriculture - which encompass amendments to the APMC Act and measures for the development of competitive markets and an efficient market infrastructure. It is no wonder that today, due to the lack of market access, almost 40 per cent of India's agricultural produce is wasted.

The upward trend in production has brought in its wake new challenges as to how to handle the huge marketable surplus. A strong and robust agricultural marketing infrastructure is a core requirement. It is also essential to find markets overseas commensurate with current international trade liberalization processes. The development of market access will help farmers in two ways: first by increasing the size of the market and thus the demand for Indian agricultural output; and secondly, by allowing the transfer of appropriate price signals leading to improvements in marketing efficiency. Government-organized marketing of agriculture takes place in India through the network of regulated markets established under the provisions of the APMC Act enacted by the States and Union territories. Most of these markets lack requisite facilities for handling the produce arriving in the yard. Contrary to what was envisioned, over a period of time these markets have been bureaucratised and their controls and restrictions provide no help in direct marketing, retailing or in ensuring the smooth supply of raw materials to agro-processing units. Monopolistic tendencies and practices have thwarted the development of free and competitive trade in primary produce markets. Key activities such as grading, standardization, scientific storage management linked with information on suitable markets for excess of the marketable surplus, education of farmers in pre- and post- harvest management, and facilitating market access have become secondary activities. The Economic Survey 2003-04 indicated that the Model Act for State Agricultural Produce Marketing (Development and Regulation Act, 2003) developed by the Department of Agriculture and Co-operation needs urgent attention. Some of the Economic Survey's major recommendations include (i) that there be no compulsion on producers to sell their produce in existing rural markets so as to ensure an efficient supply-demand balance, (ii) the establishment of direct purchasing centres to facilitate direct marketing and to develop contract farming and facilitate direct contact between the producers and sellers so as to remove the price-distorting middlemen from the scene, and (iii) have State Market Boards promote standardization, grading, quality certification, market-led extension and training of farmers and market functionaries. If implemented, these measures would lead to capacity building for the farmer in terms of empowering him with the information that he can exploit in his own interest. Freeing agriculture from the many outdated controls will benefit everyone.

WATCHPOINT: The question remains as to whether and when the government will address these structural issues?


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