Vous êtes sur la page 1sur 10

Mrunalhttp://mrunal.

org

[FoodProcessing]NuisanceofAPMCActs,Commission
AgentsMarketingofagriculturalproduce:issuesand
constrainsforGSMains
PostedBySupportStaffOn21/08/2013@11:22pmInEconomy|72Comments

Prologue
APMCActs:WhatandWhy?
OldAPMCActs:Problems?
Licenseraj=Looteraraj
Hoarding
APMCDefinitionvsMSP
ModelAPMCAct
ModelAPMCAct:SalientFeatures
ModelAPMCAct:Limitations/Problems
AdditionalsuggestionstoreformAPMC
Contractfarming
BelowAPMCMandimarket
DirectSale/Cooperativemarkets
RythuBazar
VirtualMarkets
ITCeChoupal
SingleFoodRegulator
Problemwithoverlappinglaws
FSSAIAct2006:Features

Prologue
Intheprevioustwoarticleson[FoodProcessing],wesaw

Introtofoodprocessingindustry:AwesomenessandObstacles
TruckloadofGovernmentSchemesandbodies
Inthisthirdarticle,weseetheAPMC,FSSAIActandfewothertopics.

AlthoughUPSCSyllabusnowherementionsAPMCActbutitneedstobepreparedwithrespectto

GS3:Marketingofagriculturalproduceandissuesandrelatedconstraints(GS3)
GS3:FoodprocessingSupplychainmanagement(SCM):upstreamissues(Becauseoutdated
APMCActspermitcommissionagents=lengthenandfragmentthesupplychain=increaseraw
materialcost.)
Evenforfoodinflation,FDIinMultibrandretail=APMCangleneedstobediscussed.

APMCActs:WhatandWhy?
Innewscolumns,andTVDebatessurroundingfoodinflationandFDIinmultibrandretail,youve
oftenheardexpertstalkingaboutAPMCacts.So,whataretheseAPMCActsandhowdidtheyled
toproliferation/nuisanceofmiddlemen/intermediariesinfoodsupplychain?
InoldBollywoodvillages,thereisalwaysoneLala/Muneemtypecharacter.Helendsmoneyto
farmersforseeds/cattle/marriageexpenses,thenarbitrarilypurchaseshiswheat/rice
@throwawayprices+compoundinterestrate+illiteracy=>farmersinperpetualdebt.
Tofixaboveproblem,StategovernmentsstartedenactingAgriculturalProduceMarket
Committee(APMC)actssince50s.
APMCactsrunontwoprinciples:

Ensurethatintermediaries(andmoneylenders)donotcompelfarmerstoselltheirproduceat
thefarmgate@throwawayprices=farmerisnotexploited
Allfoodproduceshouldfirstbebroughttothemarketyard=>sellthroughauction=farmersgets
goodmoney.
UnderAPMCActs:

AStateisgeographicallydividedandMarket(Mandis)areestablishedatdifferentplaceswithin
thestates.
Farmershavetoselltheirproducethroughtheauction@mandi.
TooperateinMandi,atraderhastogetlicense.
Wholesale,retailtraders(e.g.shoppingmallowner)orfoodprocessingcompanyetccannotbuy
farmoutputdirectlyfromfarmer.TheyvetogetitthroughtheMandi.
OldAPMCActs:Problems?
StateAPMCMarketCommitteeshave1017members
EitherelectedornominatedbyGovernmentinaccordancewithprovisionsofthe
respectiveStateAPMCAct.
Membership ButinseveralStates,regularelectionsofAPMCs=notheld.
APMCboardareadministratedbybureaucrats.Asaresult
APMCbodieshavelostdemocraticnature.
bureaucratsruntheshow=redtapes+bribery
MostManditradersdofollowing:

Evenafterreceivingthefruit/veggies/grains,theydelaypaymenttofarmersfor
weeksandmonths.

Farmers Ifpaymentisdoneonspot,thentraderwouldarbitrarilydeductsomeamount,on

Cheated excusethathehasnotreceivedpaymentsfromtheotherparties.
Toavoidtax/cess,thetradersdontgivesaleslipstofarmers=>Lateritisdifficult
forfarmertoprovehisincometogetloansfrombanks.
onanaveragebasisthefarmerisabletoreceivebarely1/4thto1/3rdofthefinal
retailprices
Middlemen@Mandichargecommissiononbothseller(farmer)+buyer(theurban
Double
retailer/foodprocessor)
Commission
=doublecommission=finalconsumerhastopayevenmore!
Middlemendonotpassthebenefittoeitherside

Hurting duringpeakseason,whentheybuyfromfarmer@lowprices,theydont
BothSides drasticallyreducethepricestofinalconsumer.
duringleanseason,whenconsumerspricesarehigh,thefarmersdonotget
higherreturnsontheirproduce.
Resistance Middlemenhaverentseekersmentality.
ToReform Theyresistanythingthatllincreasetransparencyorreducetransactioncostand
time.
EvenwhenelectronicauctioncentreswereestablishedliketheSafalNational
ExchangeinBangalore,theexistingmarketsdidnotallowthetransitiontoa
transparentsystem.
Middlemenhavenofacilitiestodograding/sorting,alltheydoispasstheproduce
NoValue fromfarmertofinalconsumerandchargetruckloadofcommissioninbetween.
Addition Thus,postharvestlossescontinuetobeintherangeof18to40percentfor
severalcommodities
Forcereal,pulsesandoilseeds,governmentannouncesMinimumsupportprices
(MSP).Sofarmersknowinadvance,whatthepriceoftheirproduce.
Butformostperishablesfruits/veggies,governmentdoesntdeclareMSP.
Price
thus,farmersarecompletelydependentforpricediscoveryandonintermediaries
Discovery
Duringpeakproductionofseasonalcrops,pricesdropsodrastically,thefarmers
cantevencoverthecashexpensesoftransportationtomarkets,leavealonethe
costofproduction.
Thelicenseetradersandcommissionagentshaveformedinformalcartels
Noauction @mandis.Noauctiontakesplace.Evenifauctionisheld,collectivelythese
traderskeeplowbiddingsofarmerneverbenefits.
Cess=taxontax
IneveryMandi,everytransactionissubjectedtomarkettax+marketcess.
ThisCessmoneyistobeusedforfurtherdevelopmentofMandiinfrastructure
sortinggradingstoragefacilitiesetc.
Cess Butmoneyisnotusedforthatpurpose(Raja/Kalmaditypeelements
omnipresent.)
Asaresult,fruitsandveggiesoftengetrottenduetolackofprocessing,storage
facilitiesattheMandi.Eventhegoodproducegetscontaminatedduetofliesand
larvae=>gastrointestinaldiseases.
Licenseraj=Looteraraj
TooperateinanAPMCMarket(Mandi),youneedtogetalicense.Thislicenserajleadsto
followingproblems:

InmostMandis,thepreconditiontogetlicense=>youmustownashoporwarehouseinthe
Mandi.ButShops/warehousesarelimitednnumber=extremelyhighprices.
Ifyoucantfindashop/warehouse,thenyoullhavetofindanoldmanwhohaslicensebut
leavingbusinessduetoage/healthproblemsandhissonsnotkeentojointhisprofession.Then
youbuyhisshop/license@extremelyhighprice(becausetherewillbeotherbuyerstoo
outbiddingeachothertobuyhislicense!)
Inanybusinesswherelicenseisrequired=>Bribeshavetobepaid.BeitTelecomorminingor
APMCmandi.Soagain,youmustexploitthefarmerstorecoveryour(bribe)investment.
Because1+2+3=>Commissionagent/middleman/traderhastomakeheavyinvestmenttostart
hisbusinessinAPMC.So,hedecidestoexploitthefarmerstorecoverthatbiginvestment.

InMandi,evenweighmen,Paddlers,Hamalshavetogetlicense=>theyalsoneedtopayhuge
bribes=>theyalsooverchargethefarmerstorecovertheir(bribe)investment.

Hoarding
Overtheyears,IndiasAgroproductionhasincreasedbutnumberofintermediariesinAPMC
remainedconstant=theircartelcontrolsthesupply=hoarding,opportunisticprofiteering.But
how?Letsunderstandthatwithpotatoexample:

Potato:peaksupply DecembertoMarch
Potatodemand Throughouttheyear.
Bigtraders,agents:theybuypotatoesfromfarmers@throwawaypricesintheMandi.
Theyrentlargecoldstoragehousesacrossdifferentstatesforstoringpotatosonly.(Majorityof
coldstoragefacilitiesinUttarPradeshandWestBengalonlydevotedtoPotatostorage)
ThusthesetraderscontrolthepotatosupplyacrossIndia.Andwhoevercancontrolthesupply,
cancontroltheprices.
Thankstothishoardingandcartelism=>inpeakandleanseasonofpotato,youllfindprice
differenceupto150percentorevenmore.Similarcaseforonions,tomatoes,daaland
everythingelse.
APMCDefinitionvsMSP
InAPMCActs,thedefinitionofagriculture=verywideandvogue.
Althoughmainfocuswasoncereals,pulsesandoilseeds,evenhorticultureproduce(fruitsand
veggies)alsocamewithinthebroaddefinitionofagriculture.
Andoverthelastfivedecades,theshareofperishableproduceintheAPMCmarketisincreasing
Forexample,theAzadpurMandiinDelhiprincipallycaterstoperishablecropsratherthancereal
oroilseeds.
Oksowhatstheproblem?
Problem=governmentdeclaresminimumsupportprices(MSP)formanycereal,pulsesand
oilseedscrops=>middleman@APMCcannotexploitthefarmersbeyondalevel(otherwisehe
cansellittotheFCI)
butforfruitsandveggies,governmentdoesntdeclareminimumsupportprices(MSP)=>gives
plentyofopportunityforthemiddlemantoexploitfarmer(aswellasendconsumer).
ModelAPMCAct
SofarwesawthatoriginalAPMCActsenactedbyvariousstates=bogus,inefficient,useless,
ridiculous.

Afteryearsofbadassthuggaryandinefficiency,suddenlyUnionagricultureministrywoke
2003 up,draftedanewModelAPMCact,andaskedtheStategovernmentstoadoptit.(Why?
BecauseAgricultureisastatesubject.SoitisuptotheStatestoreformtheirlaws..)
2006 BiharrepealeditsstateAPMCactaltogether.
Sofaronly16stateshaveadoptedthemodelAPMCact.(asperthereplygivenby$harad
2012
PawarinLoksabha)
Thisnew/reformed/modelAPMCActof2003hasfollowingfeatures

ModelAPMCAct:SalientFeatures
NewModelAct OldBogusAct
FarmerdoesntneedtobringhisproducetoAPMCMandi.Hecandirectly farmersmustbring
sellittowhomeverhewants.(Although,ifhedoesntbringhisproduceto allproducetothe
Mandi,thenhecantrunforelectioninthatAPMCmarketingcommittee.) Mandi.
Noonecanpurchase
FarmersProcessors,exporters,graders,packers,etc.canbuyagricultural farmproducefrom
producedirectlyfromfarmers. farmeroutside
Mandi.
OnlyStatemanaged
PermitsPrivatemarketyards,DirectPurchaseCenters,farmersmarketfor APMCMandicanto
doingtradeinagricultureproduce.(monopolyofMandis=destroyed) thetrade.
(monopoly)
PublicPrivatePartnershipinthemanagementanddevelopmentof lolz
agriculturalmarketsinthecountryforpostharvesthandling,coldstorage,
precoolingfacilities,packhousesetc.
AseparateChaptertoregulateandpromotecontractfarming
arrangementsinthecountry. lolz
Disputeresolutionmechanismforcontractfarming.
commissionagents
Prohibitscommissionagentsinanytransection.
permitted.
establishStateAgriculturalProduceMarketingStandardsBureau
forGrading,StandardizationandQualityCertificationofagricultural lolz
produce(sotheycanfetchhigherpricesindesiforeignmarkets)
IncreasedtheresponsibilitiesofAPMCcommittee.Theyhaveto:

ensurecompletetransparencyinpricingsystemandtransactionstaking
placeinmarketarea
ensurepaymentforagriculturalproducesoldbyfarmersonthesameday mahalolz
promoteagriculturalprocessing+valueaddition
Publishdataonarrivalsandratesofagriculturalproducebroughtintothe
marketareaforsale.
SetupandpromotepublicprivatepartnershipinMandiManagement.
OkthisnewModelAPMCactsoundsallwellandgood.Butherearetheproblems

ModelAPMCAct:Limitations/Problems
Sofar,Only16statesadoptedtheModelAPMCAct(asof2012).Why?Because
Middleman/traderlobbymadetruckloadofcashfromexploitingfarmersandconsumers.Partof
thatmoneygiveninelectionfundingtorulingpartiesinStates=>reformsstalled.
ModelAPMCactisnotuniformlyadopted,stateshavemadetheirownmodifications.For
example
AndhraPradeshpermittedprivatemarketsbuttheyvetopayalicensefeeofRs
Andhra 50,000andprojectmustbemin.10crores=discouragessmallfarmer/trader
associationsfromsettinguptheirownprivatemarkets.
Odisha Orissahasnotpermittedprivatemarketsforpaddy/rice
Haryana OnlyadoptedContractfarmingrelatedprovisions.
Some
EventheprivatemarketsaresubjectedtoManditaxandMandicess.
states
commission MadhyaPradeshabolishedcommissionagentsystembutsomeotherstatesdidnt
agent adoptthisprovisionofmodelAPMC.
RepealeditsAPMCactin2006.
Now,SDMisinchargeoftheunregulatedmarkets
Bihar
NomarketfeearechargedfromthefarmersButotherchargesfor
loading/unloading/Hamalchargesarevogue/uncontrolled.
YettoamenditsAPMCAct.
WB Mamataopposingtheconceptofcontractfarmingonthepremisethatitcould
jeopardisefarmersinterests.
AdditionalsuggestionstoreformAPMC
(Theseweremadebycommitteesofplanningcommission,interministerialgroupsetc.)
Remove HorticultureshouldbespecificallyexcludedfromdefinitionsofAPMC.Because
horticulture theseMandisaremainculpritsforinflationandwastageoffruitsandveggies.
EAuction AllAPMCsMandisshouldintroduceelectronicauctionplatform
OpenmembershipofAPMCsbyencouragingwholesalersandretailerstoenter
Membership
intotransactionswiththegrowers.
AnyoneshouldbeallowedtotradeinAPMCmarket.Licensingsystemshouldbe
abolished.
NoLicense
TheAPMCMarketCommitteeshouldonlyfixthetransactionfeeandkeepaBank
Guaranteefromtraderstoensurethatthefarmerspaymentisnotaffected.
No
allthetaxes/cessleviedinAPMCMandisshouldbeabolished.
Cess/Tax

Contractfarming
Contractfarmingisaforwardagreementbetweenfarmersandbuyers

Agreestobuyproducefromfarmer@predeterminedprice.
buyer Usuallyprovidesinputs(Seeds,fertilizers,pesticides),technologyandproduction
practicessothatfinalproducemeetshisdesiredquality.
Agreestogrowandsupplytheproducetothebuyer@predeterminedquality,quantity
farmer
andprices.
Contractfarmingisprevalentonlyinthosestates,wheretheAPMCactsarefavorablefor
privateplayere.g.AndhraPradesh,HimachalPradesh,MadhyaPradesh,Maharashtrawho
adoptedthemodelAPMCAct.

Areaundercontractfarming
State Farmproduce Buyercompany
(acres)
Potato,Tomato, Pepsico(fortheirpotato
6000
Chilli chips)
Punjab
Basmati,Maize 400 MahindraShubhlabh
Soyabean 1200 ITC
Karnataka Ashwagandha 700 HimalayaHealthcare
Madhya
Wheat 15,000 HindustanUnilever
Pradesh
ContractFarmingalsodoneforexportorientedcroppingofBasmati,Chilli,Gherkinsand
soybean.

BelowAPMCMandimarket
BelowtheMandimarkets,thereareprimaryassemblymarketssuchasvillagebazaar,weekly
haatintribalareasetc.
Thereiswidevariationintheirgovernance.SomestatesrunthemunderPanchayatiRaj
institutions,somestatesputthemundersupervisionofdistrictadministration.
Conditionofcattlemarketsandfishmarketsareevenworse.Mostofthemdonothaveeven
basicamenitieslikesheds,sanitationordrinkingwater.
Immediatereforms/upgradesnecessaryinallthesemarkets.
DirectSale/Cooperativemarkets
LongbeforethecirculationofModelAct(2003),severalStateshadpromotedFarmersMarket.
Example

RythuBazar
ByAndhragovernmentin99
toeliminatemiddlemen
tohelpfarmersdirectlyselltheirproducetocustomers
EveryfarmerintheRythubazaarsellshisproduceasaretailer.
Currentscenario:

RythuBazarinAndhra >100
villagescovered >2000
farmerscovered >40000
similarldirectmarketinginiativesinotherstates:

PunjabandHaryana ApniMandi
Rajasthan KisanMandi
TamilNadu UzhavarShanthigal
Maharashtra Shetkaribazaar
Problem:Overtheyears,smalltradershavetakenovertheplaceoffarmersinmanyofthese
markets=againproblemofmiddlemenandcommissionagents.

InSouthKorea,withdirectmarketingofagriculturalproducts=middlemenwereremovedandas
aresult:

consumerpricesdeclinedby upto30%
farmersincomeroseby upto20%

VirtualMarkets
Exampleofsuchvirtualmarkets=Futureexchange,SpotExchange,WarehouseReceiptSystem
andWebMarketing.
InIndia,theMultiCommodityExchange(MCX)andtheNationalCommodityDerivatives
Exchange(NCDEX)arethetwobiggestplayersintheagrofuturesmarket.
Setupanemandi(onlinewholesalemarket).
NCDEX FarmerwillfirstdeposithisproducetoaNCDEXnominatedwarehouse,getsreceipt.
Thisreceiptcanbetradedbytheparticipantontheemandiacrossthecountry.
Workingonsimilarprojectlikeabove,withhelpofYesbank.
MCX MCXonlineportalforcommoditytradingalsoavailableinregionallanguagestohelp
nonEnglishspeakingfarmers.
analliedtopicisnegotiablewarehousereceipts,butwellseeitinthenextarticleunderfinance
taxationFDIexports.

ITCeChoupal
In2001,ITC(IndiaTobaccoCompanyLimited)startedsmallinternetkiosksatthevillagelevel.
Providesfollowing:

directprocurementframework
Realtimemarketinformationrelatedtoprices
Availabilityofinputs:seeds/fertilizers,theirprices
scientificfarmpractices
weather,monsoondata
Disputeresolutionbetweenthecompanyandthefarmers.
Coverage morethan
farmers 4million
villages 40,000
kiosks 6000
ThankstoITCseChoupal,farmersincomeincreasedby1015%(comparedtoearlierwhen
theyreliedonmiddlemen@mandi)

Anywayswellseemoreabouttheseintermediatemarket,supplychainsinindividualarticlesfor
fruitveggiesetc.Nowmovingtothenextlawtopic

SingleFoodRegulator
USA Singleregulator:FoodandDrugAdministration(FDA).
UK Foodstandardagency(FSA)isthesingleauthorityforformulatingallfoodlaws.
AustraliaandNewZealandhaveacommonsingleregulatorknownasFoodStandards
Aus+NZ
AustraliaNewZealand(FSANZ)
Totallyawesome:justcheckthelistofoverlappingandoutdatedlaws

PreventionofFoodAdulterationAct1954(PFA)
EssentialCommoditiesAct1955(ECA)
Vegetableoils,Deoiledmealandedibleflourcontrolorder,1967(VPO)
FruitProductOrder,1955(FPO)
India
MeatFoodProductsOrder,1973(MFPO),
MilkandMilkProductsOrder,1992(MMPO)
AgriculturalProduce(GradingandMarketing)Act1937
BureauofIndianStandards,1986
StandardsandWeightsMeasureAct,1976
Export(QualityControlandInspection)Act,1963
In2006,Aftersleepingfordecades,GovernmentenactedFoodSafetyandStandardsAuthority
ofIndia(FSSAI)Acttoprovideforasinglefoodlawregulator,andrepealedthoseoutdatedacts.
Butuntilthen,forsomanyyears,thoseoldlawsdidnotallowIndianfoodprocessingindustryto
grow.How?

Problemwithoverlappinglaws
Manyministriesdealwithfoodlaws=multiplebodieswhichsetfoodstandards=ambiguity,
confusionforconsumers,tradersandmanufacturers.
Veryfewstandardsdevelopedforrawagriculturalproduce.
Theydealtonlywithphysicalparametersofsize,colourandfarmimpurities.Butnoton
microbiologicalandtoxicologicalcharacteristics(whicharenecessaryforexporttoUS/EU).
Foodlawsareofteninconsistentandcontradictingeachother.e.g.EmulsifiersandStabilisers
arepermittedforuseinJams,Marmalade&FruitChutneyunderPFAbutnotunderFPO.
Inmanycases,whereonestandardismorestringentthantheother.Thenfoodentrepreneur
wouldadoptthemorestringentstandardinordertopreventpotentialpenalizationandbribe
harassmentbyfoodinspectors.Forexample,FPOallowsuseofartificialsweetenersincertain
fruitproductswhereasPFAdoesnot.Hence,theindustryavoidsusingartificialsweeteners
altogether.
FSSAIAct2006:Features
EstablishedastatutorybodyTheFoodSafetyandStandardsAuthorityofIndia(FSSAI)@Delhi
UndertheAdministrativecontrolofMinistryofHealth&FamilyWelfare
RepealedvariousoutdatedcentralActsviz.
PreventionofFoodAdulterationAct(PFA)
VariousOrdersbyCentralMinistriese.g.FruitProductOrder(FPO),MeatFoodProductsOrder.
MilkandMilkProductsOrder,Vegetableoil,EdibleflourOrderetc.
FASSAImaderesponsiblefor:
ScientificFoodstandards:framethem,enforcethem
Regulatethemanufacture,import,processing,distribution,andsaleoffood.
MakeGuidelinesforaccreditationoffoodlaboratories,foodsafetymanagement
Guidelines
bodies.
Internationaltechnicalstandardsforfood,sanitaryandphytosanitarystandards
(SPS)
ScientificadviceandtechnicalsupporttoCentralGovernmentandState
Advisory
Governmentsfoodsafetyandnutritionrelatedpoliciesandrules.
Survey CollectDataonfoodconsumption,foodcontamination,biologicalrisketc.
Createinformationnetworkacrossthecountrytoconnectpublic,consumers,
Panchayatsetc.
Networking Providethemrapid,reliableandobjectiveinformationaboutfoodsafety
Rapidalertsystemforfoodcontaminationandbiologicalrisk
Promotegeneralawarenessaboutfoodsafetyandfoodstandards.
HRD Trainingtopeopleinvolvedinfoodbusiness
Inthenextarticle,weseethefinancetaxationFDIexportmattersrelatedtofoodprocessing
industry.ThenwelldigintoSupplychainmanagement,upstreamdownstreamrequirementsfor
individualsectors:dairy,confectionary,fruitveggiesmeatfish,etc.

ArticleprintedfromMrunal:http://mrunal.org

URLtoarticle:http://mrunal.org/2013/08/foodprocessingnuisanceofapmcacts
commissionagentsmarketingofagriculturalproduceissuesandconstrainsforgs
mains.html

Copyright2014Mrunal.Allrightsreserved.