Agriculture Market: APMC, MSP & Food Distribution

Agricultural Produce Market Committees (APMC)

• Established by the States
• Aim: to eliminate the incidence of exploitation of the farmers by the intermediaries; food produce must be brought to the market; sales are made through auction.
• E-NAM [UPSC 2018]: Launched in 2016; Pan-India electronic trading portal for farm produce. It provides the farmers access to nationwide markets, with prices commensurate with the quality of their produce. 
• Markets in agricultural products are regulated under the Agricultural Produce Market Committee Act enacted by States. [UPSC 2015] 

Finance/ Credit

• Priority Sector Lending Sectors: Agriculture, Micro, Small and Medium Enterprises, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy, etc [UPSC 2013]
• All scheduled commercial banks and foreign banks (with a sizable presence in India) are required to set aside 40% of their Adjusted Net Bank Credit (ANDC) for lending to these sectors.
• Regional rural banks, Co-operative banks and Small Finance banks have to allocate 75% of ANBC (Adjusted Net Bank Credit) to PSL.
• MSP policy, Kisan Credit Card scheme, PM-KISAN 
• Institutions: Cooperatives, NABARD, RRB’s

Minimum Support Price

• Recommended By: Commission for Agricultural Costs and Prices (CACP); Approved by: Cabinet Committee on Economic Affairs (Headed by PM) ; Nodal Agency: Food Corporation of India (FCI).
• As per Swaminathan Commission for Agricultural Cost and Prices (CACP), there are three types of production costs
• A2: Actual paid out cost.
• A2+FL: Actual paid out cost plus imputed value of family labor. 
• C2: Comprehensive cost including imputed rent and interest on owned land and capital.
• CACP considers both (A2+FL) and C2 costs while recommending MSPs;  Economic cost of food grains to the Food Corporation of India is Minimum Support Price and bonus (if any) paid to the farmers plus Procurement incidentals and distribution cost. [UPSC 2019]
• MSP is Declared for: [UPSC 2018]
  • Cereals (7): Paddy, Wheat, Barley, Jowar, Bajra, Maise and Ragi.
  • Pulses (5): Gram, Arhar/ Tur, Moong, Urad and Lentil.
  • Oilseeds (8): Groundnut, Rapeseed/Mustard, Toria, Soyabean, Sunflower seed, Sesamum, Safflower seed and Niger seed.

• • Copra; De-husked coconut; Raw cotton; Raw jute
• Sugarcane [Fair and Remunerative Price]: Governed by the statutory provisions of the Sugarcane (Control) Order, 1966 issued under the Essential Commodities Act (ECA), 1955 ]. [UPSC 2015]
• Procurement of all cereals, pulses and oilseeds at Minimum support price is open-ended. It is limited since our buffer stock is limited. 
  • Market price has no link with minimum support price and it can go below or above the MSP. [UPSC 2020]

Food Distribution

• Public Distribution System: Nation-wide portability of ration card holders under the National Food Security Act, 2013 (NFSA), through the One Nation-One Ration Card system.
• Calculation of Cost: The economic cost of food grains procured by the FCI is a total of MSP and bonus (if any) paid to the farmers plus the procurement incidentals and distribution cost. 
• Procurement Incidentals: are the initial costs incurred during procurement of food grains. 
• Distribution Costs: It includes freight, handling charges, storage costs in godowns, losses during transit etc.
• Negotiable Warehouse Receipts (NWR)
• • Launched: 2011, by the Ministry of Consumer Affairs, Food & Public Distribution.
  • Objective: Farmers can seek loans from banks against the warehouse receipts issued to them against their storage. 
  • Regulated: Warehousing Development and Regulatory Authority (WDRA).
• Receipts Issued: Warehouses registered with the WDRA → fully negotiable instrument backed by a Central legislation.
• Electronic Negotiable Warehouse Receipt (e-NWR) System → launched in 2017

Contract Farming

• Meaning: Contract farming is based on a pre-harvest agreement between the buyers and producers. 
  • It is under the Concurrent List under the 7th Schedule of the Indian constitution.
• Model Contract Farming Act, 2018 
  • Ensures buying of the entire pre-agreed quantity and price from the farmers. 
  • All pre-production; production; post-production services are under its ambit. 
  • Bars the transfer of ownership of the farmer’s land to sponsor companies.
  • Contract farming will remain outside the ambit of the APMC Act of the states/UTs. 
  • Limits of stockholding of agricultural produce will not be applicable on produce purchased under contract farming.