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Indian Agriculture.Explain various Act.



The  Indian Agricultural Produce Market Committee (APMC) Act regulates mandis (agricultural markets). States are geographically divided, and mandis are provided at different places within a state.

Farmers are compulsorily required to auction their  Indian agricultural produce at a mandi. Only licensed traders can purchase from the farmers at the mandi.

Objectives of Mandi System

  • Ensure high prices of Indian agricultural output to farmers: APMCs are required to ensure competition among traders. These traders operating at mandis are expected to purchase the output from farmer through auction.
  • Prevent exploitation of farmers: If a farmer attempts to sell the produce in the open market, he/ she may be forced to sell the output at low rates. On account of perishable nature of  Indian agricultural produce, the bargaining power of farmer would be low.

Problems with Old APMC Act

Indian Agriculture is a state subject. Thus, various states have passed different APMC acts to regulate agricultural markets. The problems faced on account of APMC laws are as follows:

  • Membership of APMC: State APMCs usually have 10-17 members. These members oversee the functioning of mandis. They are either elected or nominated by the state government on Indian agriculture as per the APMC acts of a particular state.

However, often regular elections are not held and APMCs function under bureaucratic control.

  • Exploitation by traders
  • Cheating with farmers: Traders often delay payments to the farmers. If payment is made in cash, traders arbitrarily deduct some amount from the payment.

The payment made to farmers is as low as one-third to one-fourth of the retail prices of agricultural produce. To avoid taxes, traders do not give sale slips to farmers. As a result, farmers do not possess any proof of sale of Indian agricultural produce.

  • Double commission: Middleman or trader charges commission from the farmer as well as the food processors, retailers, etc. On account of double commission, final consumer is also required to pay high prices for  Indian agricultural produce.
  • It is alleged that the middleman purchases of  Indian agricultural produce during the peak season from farmers at throw-away prices and sells to consumers during the lean season at very high prices.
  • Middlemen are expected to make value addition to agricultural produce. However, rarely they possess facilities to do sorting, grading, etc. of the  Indian agricultural produce.

As a result, post-harvest losses continue to be in the range of 18-40% for various Indian agricultural commodities.

  • Influence on price discovery: The APMC Act requires farmers to sell their produce through auction. However, no auction takes place in mandis. Even if an auction is held, traders have formed informal cartels and deliberately keep the prices low.

For food grains, minimum support price serves as the benchmark rate for the purchase of produce. However, for other Indian agricultural commodities such as fruits and vegetables, farmers rely on traders for the determination of prices.

  • Hoarding of agricultural produce: Sometimes traders engage in hoarding of Indian agricultural produce to secure high prices from the retailers.
  • Every transaction is subjected to market tax and mandi fee. Mandi fee is expected to be used for the development of mandi infrastructure such as sorting, grading, storage facility, etc. However, infrastructure development has been slow or negligible in mandis.
  • Issue of license to traders: Only licensed traders can purchase Indian  agricultural outputs from farmers. The requirement of license has been kept to ensure that only reliable persons purchase the output from the farmers. For instance, there are certain pre-conditions to secure license such as security deposit and ownership of shop/godown in a mandi.

The number of shops/godowns are very limited in a mandi. Often a trader purchases a shop/ godown at very high prices. Further, bribes are given to secure license. As a result, traders (also called commission agents) exploit farmers to recover their investment.


The Model APMC Act was published by the central government in 2003. This act was drafted in order to motivate states to bring reforms in their APMC acts. In between 2003 and 2015, 20 states have adopted some reforms suggested under the Model APMC Act.

There is tough resistance from traders against the Model APMC Act. Further, the state governments have limited options because open markets for Indian agriculture are not well developed.

Salient Features of Model APMC Act

  • The Model APMC Act permits farmers to sell agricultural produce even outside mandis. Or the same lines, food processors, retailers, etc. can purchase Indian agricultural produce directly from farmers.
  • This act also permits contract farming. Contract farming is an agreement under which a farmer is required to provide agreed quantities of a specific Indian agricultural product and the buyer gives guarantee in advance to purchase his output. In some cases, buyers even support the farmers with agricultural inputs and technology.
  • The act requires establishment of State Agricultural Produce Marketing Standards Bureau. It will have the responsibility of grading, standard assessment, and quality certification of  Indian agricultural produce, so that the quality produce can fetch higher prices.
  • The act permits public—private partnership (PPP) in the management and development of Indian agricultural markets, including facilities such as storage, processing, etc.
  • The act also provides for increase in the responsibility of APMC as follows:
  • Complete transparency in the pricing system and transactions taking place in mandis
  • Ensures payment to farmers on the same day (day on which they sell their Indian agricultural produce)
  • Promotes value addition in  Indian agricultural produce
  • Promotes PPP to develop mandi infrastructure
  • Publishes data at the mandi entrance about the arrivals of agricultural produce in mandi and the price of Indian agricultural produce

Additional Suggestions to Reform Model APMC Act

  • There are suggestions to exclude horticulture produce from mandis. Within mandis, there are no specific services for storage and processing of horticulture output, leading to high damages in horticultural output. Moreover, middlemen make high commission on horticulture output at the cost of consumers and farmers. Wastage of produce along with high commission leads to higher prices of  Indian agricultural produce.
  • E-auction of Indian agricultural produce should be promoted. All mandis should introduce an e-auction platform. E-auction will bring transparency in the determination of prices and would help traders from large geographical locations to participate in the auction.
  • Membership of mandis should be made open. Licence system should be abolished. Only a bank guarantee from traders shall be kept to ensure that the payment of farmers is not affected.

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