Government has announced APMC reforms. I decided to speak to some farmers from Solapur district in Maharashtra to understand how the trade happens under APMC. This is part one of a two part series where we try to understand what’s wrong with the present structure and what can change with the reforms announced.
APMC Act
- Enacted in the ’50’s, APMC laws were intended to protect the farmers from middlemen.
- Agriculture is a State Subject and most states have enacted and amended the act from time to time
- The idea was APMC market/mandi formed under the act would help discover fair price for farmer’s produce.
- There were provisions originally which provided a mandi monopoly over a particular geography. Farmers from that area had to sell their produce through that particular mandi only. In Maharashtra that has changed.
What happens when the farmer goes to sell his produce
- The three players here are – the farmer, Arhatiyas (the intermediary/middlemen) and the trader.
- When Mahesh Shinde, the farmer from Solapur in Maharashtra is ready to sell his produce, he will do the packing etc and head to the APMC market/mandi as they call it.
- Usually there is a mandi at Taluka level and at district level. The district ones are bigger.
- Mahesh will factor in quantity he needs to sell, prevailing market price and usual difference between prices at different mandis to decide which one to go to.
- If Mahesh has higher quantity to sell he will head to the district yard as it has bigger traders.
- But many small and marginal farmers don’t have the means or find it uneconomical to travel to mandi and are forced to sell their produce to middlemen in their village at whatever price which is offered.
Then the auction
- Every market yard will have Arhatiyas (middlemen) who stand between farmers and the traders.
- Although Arhatiyas are not suppose to be traders, many arhatiyas also do trading activities through related entities.
- Mahesh approaches the Arhatiya of his choice to sell the produce.
- At a set time, auction takes place for the produce.
- At auction, there will be a gathering of farmers, Arhatiyas and traders.
- It is Arhatiyas who set the base price and traders start the bidding.
- Farmers like Mahesh have no say in the price discovery process.
- Farmers can back out after the auction if they are not satisfied with the price.
- But practically it is difficult to do so as someone like Mahesh has already spent money in transporting the goods, he lacks working capital which restricts his holding capacity and also doesn’t have adequate storage facilities.
- It is alleged that the traders and arhatiyas form a cartel and decide the price.
- Basically the farmer is helpless and at the mercy of the trader and arhatiyas.
- Along with this the farmer has to pay a host of charges to the APMC.
The Cartel
- In the ideal world, there should be competition between traders.
- If there are super normal profits, there are incentive for the trader to break the ranks and outbid others.
- But the entry is traders is restricted by a license from the committee
- Market committee is formed through elections among traders and farmers.
- But It is usually dominated by traders.
- They have no incentive to allow more traders to enter which affects their profits.
- These committee members are usually politically affiliated and have successfully prevented reforms for decades now.
The Reforms
Next we look at the reforms announced and what changes on the ground.
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