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A first, but big step

Maharashtra’s decision to end APMC monopoly in fruits and vegetables should be emulated by other states

By: Editorial | Updated: July 23, 2016 12:10:03 am

The Maharashtra government has done well not to give in to pressure to rollback its decision to delist fruits and vegetables from the state’s Agriculture Produce Market Committee (APMC) Act. Delisting basically allows companies or traders to buy produce directly from farmers, rather than having to go through licensed middlemen in regulated APMC mandis. While farmers could always technically sell to anybody anywhere, this freedom, however, had little meaning when buyers did not have the same flexibility to bypass the mandis. The very fact that one needed a mandi license to be able to transact — and multiple licenses were required across different APMC jurisdictions within the same state — automatically limited the universe of buyers for the farmer. The only beneficiaries of such an arrangement were the mandi intermediaries, who pocketed a commission on each purchase simply by virtue of being middlemen between farmers and buyers.

It is unlikely that the Maharashtra government’s move will eliminate middlemen or mandis. Not many farmers, after all, have the resources or reach to strike deals on their own with corporates or retailers. Most would continue to load their oranges and pomegranates on to trucks owned by village or mandi-level aggregators. Agro-processors and retail chains are unlikely to fan out and set up collection centres all over the countryside. The previous Congress-NCP government in Maharashtra had, in fact, issued some 200 direct marketing licences for purchase of not just fruits and vegetables, but all farm produce. But most of these licences are dormant and the value of purchases undertaken against these is a fraction of the trade happening in the APMC mandis. The big corporate buyers, in all probability, would continue to source predominantly from intermediaries. The mandis, too, will retain their relevance because it isn’t easy to replicate the infrastructure — market yards, purchase centres, link roads, etc — many of them have created in remote towns.

The reform that Maharashtra has now implemented is not about middlemen or mandis, but about dismantling monopolies. Corporates today are reluctant to deal with several thousands of fragmented producers. But if farmers were to increasingly resort to aggregating their own produce through cooperatives and self-help groups, the same corporates may see the transaction costs of direct purchases through these organisations falling to even below the commission fees being paid to mandi agents. A part of these savings they may well pass on to farmers. Such a process should be enabled, for which giving producers and buyers the option of transacting both inside and outside the mandi is a first step.

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