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Liberalising APMC acts will calm fruit and vegetable inflation in the long run. But what about cereals?
Congress vice president Rahul Gandhi has asked all Congress-ruled states to remove vegetables and fruit from the purview of their respective agricultural produce marketing committee acts by mid-January. This move is widely seen as a long-term solution to the runaway food inflation — overall food inflation was 20 per cent and vegetable inflation was 92.5 per cent in November. In 2003, the UPA had circulated a model APMC act and encouraged states to modify their legislations accordingly. However, so far, even in key Congress-ruled states, reforms have been patchy.
At present, state APMC acts restrict trading outside state-controlled mandis. A licence is required to trade within the mandis. With space being limited and licences hard to come by, this barrier to entry has created a complex of entrenched — and politically powerful — insiders. Licenced traders have come to function as cartels. Given that prices are rarely discovered through auction, and the poor storage infrastructure, farmers selling perishable produce have few options. They get a price much lower than the retail price — the retail mark-up being two to three times the wholesale price. There will be opposition to the dismantling of entry barriers. But with three of the four biggest mandis in India — Vashi in Navi Mumbai, Bangalore and Hyderabad, where 43,000, 7,000 and 6,000 tonnes, respectively, of fruit and vegetables arrive daily — in Congress-ruled states (Azadpur in Delhi is the largest at 50,000 tonnes), Gandhi's suggestion can make a real impact on food prices in the long term.