Constricted by law

APMC acts impair the freedoms of farmers and consumers.

Rahul Gandhi has announced that fruit and vegetables will be removed from the list of commodities under the agricultural produce marketing committee (APMC) acts in Congress-ruled states. This is an important move towards the freeing-up of markets, and will bring in competition and remove barriers to entry. It is expected that the de-listing will reduce the prices of fruit and vegetables in the long run and encourage investment in cold-storage facilities and warehouses. If the government wishes to reform agriculture and control food inflation, the reform should not stop here.

APMC acts were passed by states during our socialist past. They restrict whom farmers can sell to, who can get a licence to buy produce, and where trading can take place. This has given rise to a system with substantial barriers to entry in the trade of agricultural products. The freedom of farmers and other citizens to buy or sell as they like has been abrogated — farmers are forced to sell to traders who hold APMC licences at APMC prices.

As with many other state structures in socialist India, APMC regimes rapidly turned into rackets. Hardly 30 per cent of the mandated "open auctions" are actually open or transparent. New licences are mostly given to persons who already have shops and godowns in the prescribed market area. Shops in these areas are limited and are mostly available only to friends and relatives of existing traders. There are no transparent criteria for sale or for getting a licence. There is no time-bound application processing period during which a licence is either granted or refused. A licence is granted for a period of one to five years. Thus, the incentive for long-term investment is diminished. Regulatory capture by local trading communities is said to be the norm. These traders control the entire marketing chain, including credit, inputs, storage etc. Prices are often bundled, and there is a lack of clarity on what the exact price of the produce is, and what the interest on the credit and other items is.

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