Answer: 

Introduction:

Agriculture is a state subject and almost all state governments enacted APMC act in the 1950’s or so, to bring transparency and end discretion of traders. Under the APMC acts, States are geographically divided into markets which are headed by market committees and any production in that area shall be brought to a market committee for sale. This is applicable to ‘notified agricultural products’ which differs from state to state and generally includes most of the important cereals, vegetables and other horticulture products.

Body:

APMC is an extension of overall government policy which is directed toward food security, remunerative prices to farmers and fair prices to consumers. However, widespread perception for this act is that it has worked contrary to almost every stated objective, at least in the recent past.

• Monopoly of APMC : It deprives farmers from better customers, and consumers from original suppliers. This makes farming less profitable for farmers.
• Cartelization : It is quite often seen that agents in an APMC get together to form a cartel and deliberately restrain themselves from higher bidding. Produce is procured at manipulatively discovered price and sold at higher price. Hoarding of goods by APMC agents leads to food inflation.
  • The situation is especially dire for perishable commodities which the farmers are forced to sell at the quoted price since they are in no position to bargain or store their produce till the price increases.
• Entry Barriers : License fee in these markets are highly prohibitive. Farmers also have to pay commission, marketing fee, APMC cess which pushes up costs. This hampers growth of agriculture while also increasing the risk of food inflation.
• Conflict of Interest : APMC plays a dual role of regulator and Market. But its role as regulator is undermined by vested interest in lucrative trade.
• Other Manipulations : Agents have a tendency to block a part of payment for unexplained or fictitious reasons. Farmers are sometimes refused payment slips (which acknowledges sale and payment) which is essential for him to get a loan. This hampers investments in the next cropping cycle leading to stagnation of agriculture productivity.

Conclusion:

All this led the central govt to formulate Model APMC act in 2003, but it has not been emulated by states and as agriculture remains state subject, it does not have much impact. Also, some states like Bihar, Delhi have done away with APMC, but it did not improve the condition of neither agriculture nor food inflation. Hence the problem of food inflation is not solely due to APMC but a mix of structural bottlenecks like lack of supply chain leading to high wastage etc., but APMC is one of the factors and must be addressed accordingly.