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State Ministers’ Committee on Agricultural Marketing Reforms

A Committee of State Ministers, In-charge of Agricultural Marketing constituted by Ministry of Agriculture, on marketing reforms submitted its report on 2nd July, 2013 to the Government. The Committee recommended reforms of the agri marketing sector in the country including amendment of the State Agriculture Produce Market Committee (APMC) Acts on lines of Model Act.

The onus for bringing relevant amendments in the Agriculture Produce Market Committee (APMC) Acts lies with the Governments of States and Union Territories as agri marketing is a State subject.

Recommendations of the Committee

A. Reforms to Agriculture Markets

(i) The States should amend their APMC Acts on the lines of Model Act and the reforming States may also notify Rules, and States may complete the process early. In order to derive full benefits of reforms by small and marginal farmers, States may promote formation of Self Help Groups, Farmers/Commodity Interest Groups, etc;

(ii) The present system of Licensing of Traders/Commission Agents must be substituted with a modern and progressive system of Registration with open and transparent criteria for Registration;

(iii) The amended APMC Act and Rules should specify clearly the provisions for setting up of Private Wholesale Markets and Terminal Market Complex (TMC) for smooth development of infrastructure. The reformed States may come forward for development of Terminal Market Complex (TMC) at various locations in their States so that facilities of backward and forward linkages could be provided to the farmers and other entrepreneurs involved:

(iv) In order to simplify the procedure and promote private sector investment in development of Wholesale and Terminal Market Complex in the country, there should be a Unified Single Registration for main market (Hub) and the Collection Centers (Spokes). The Collection Centers may be treated as sub-yard under the Act to provide for a unified Registration system;

(v) The validity period of Unified Single Registration for private wholesale markets including Collection Centers should not be less than five years. It is desirable to keep it for 10 years or even more. The private agriculture markets should be given exemption on land ceiling for smooth development of market infrastructure in the country;

(vi) Professionals are required for efficient management of existing markets for which either CEO of the Market Committee may be appointed from outside the cadre or existing personnel may be given professional training to manage the APMCs efficiently;

(vii) There is a need for independent regulator for market operation for which the post of Director of Marketing as regulator may be separated from the post of Managing Director of State Agricultural Marketing Board as the Operator/Service provider and Director of Marketing should not draw salary and allowances from the State Agricultural Marketing Board. Thus, the role of service provider and regulator should be demarcated;

(viii) States may de-link the provisions of compulsory requirement of shop for registration of traders / market functionaries for increasing the competition;

(ix) The private markets should be treated at par with the existing APMCs and there should be simplified procedure for registration/ licensing. The requirement of the security and bank guarantee should be reasonable to facilitate entrepreneur for development of need based market infrastructure in the country. The minimum parameters for setting up of Private Market may be prescribed and farmers from any market area may come to sell their produce in the market of their choice. The developmental fee to be charged from private markets should be at par with APMCs and it should be deposited with respective State Government / Marketing Board which should be spent on infrastructure development outside the Mandi;

(x) Complete deregulation of markets in the States has actually increased transaction costs rather than reducing it, and it has not helped in attracting any investment from private sector. Therefore, there is a need for an appropriate legal and institutional structure with a developmental type of Regulation to ensure orderly functioning of agriculture markets and attract investment for infrastructure development in such States.

B. Promotion of Investment in Marketing Infrastructure Development

(xi) Under Essential Commodities Act, there is a need to have distinction between genuine service providers and black marketeers/hoarders to encourage investment and better service delivery to the farmers;

(xii) There should be a stable and long term National Policy on storage and movement of agricultural produce to achieve the objective of Unified National Market. It is recommended that Contract Farming Sponsors and Direct Marketing licensees may be exempted from the stock limits up to six months of their requirement in the interest of trade and facilitating long term investment.

(xiii) In order to reduce wastages, promote investment for development of marketing infrastructure and to ensure smooth movement of perishable horticultural produce across the country, States/Union Territories should waive off the market fee on fruit and vegetables and Government of India may also consider compensating the losses of revenue during initial period to the States on this account;

(xiv) Investment in marketing infrastructure under RKVY may be increased to minimum 10-15% of State RKVY spending in reformed States. Efforts should be made to encourage private investment in marketing infrastructure outside the APMCs also;

(xv) In order to enhance the private sector investment in marketing infrastructure development projects, there is a need to provide subsidy/Viability Gap Funding for such investments, being long gestation period projects and treat them “as infrastructure project” so as to attract FDI and ECB for their development;

(xvi) States may promote PPP Model for infrastructure development and exempt market fee on trade transaction taking place inside the private market yard. However, States can levy minimum user charges(in lieu of market fee) for developing general infrastructures like connecting/ rural roads, etc preferably not exceeding 0.5 % of the value of produce transacted for the use of any facilities created by the States/APMCs. State Governments should also explore the areas for private investments and PPP projects for market and marketing infrastructure development;

(xvii) The requirement of marketing infrastructure in the North-Eastern region and Hilly areas is different than rest of the country. Government of India should constitute a ‘corpus fund’ for development of marketing infrastructure in their areas. A separate agricultural marketing strategy for North Eastern Region and Hilly areas may be adopted;

C. Rationalization of Market Fee/ Commission Charges

(xviii) Market fee/cess including Rural Development Fund, Social Development Fund and Purchase tax, etc. should be maximum 2% of the value of the produce and the commission charges should be not more than 2% for food grains/oilseeds and 4% for fruit and vegetables;

(xix) It is necessary to link the mandi fee with the services and infrastructure being provided for transaction in agricultural commodities. If the direct marketing entrepreneur provides minimum specified infrastructure facility to the farmers, the concerned State/APMC should waive off market fee on such direct marketing;

(xx) If a person has already paid mandi fee in a State where it procures agriculture produce and brings the same to another State for processing, no mandi fee should be charged;

(xxi) Mandi fee should be levied on Primary Agricultural Produce only and not on Secondary Agriculture Produce (processed agricultural produce) like Besan, Maida and Ghee etc. However, user charges can be levied based on the use of infrastructure and services;

D. Contract Farming

(xxii) To encourage contracting parties and simplifying and rationalizing the registration process:

(a) District level authority may be set up for Registration of Contract Farming and no market fee should be levied under it. The APMC should not be the authority for registration / dispute settlement under Contract Farming; and

(b) The disputes may be settled within fifteen days and the decretal amount of appeal should not be more than 10 % of the amount of goods purchased under Contract Farming. Appeal should be disposed off within 15 days. No solvency certificate / Bank guarantee may be required from private sponsor/operator, if payment is made to the farmers on the same day of procurement of their produce;

(xxiii) States should promote small and marginal Farmers` Groups/Associations or their Company/Society to encourage Contract Farming in the States. Successful template of Contract Farming may be developed after studying the successful Models adopted in other countries;

E. Barrier Free Markets

(xxiv) There should be a provision for a single window Unified Single Registration for traders/market functionaries in the States to facilitate free trade.

(xxv) In order to move towards barrier free National market, market Fee/Cess may be levied only for first transaction between the farmer and trader and in subsequent sales between trader to trader/consumer, there may be only service charge related to services provided in the State and no market fee be levied for subsequent transaction;

(xxvi) In some of the States, there are check-gates for recovery of market fee, which hinder smooth movement of agricultural commodities and leads to wastages especially in perishables like fruit and vegetables. States should take Initiative to remove such physical barriers, if any;

(xxvii) States should notify the type of documents required for the producer-seller to be a farmer, so that his consignment is not halted at the check posts / barriers;

(xxviii) Proposed Agricultural Produce Inter-State Trade and Commerce (Development & Regulation), Bill may, to start with, be applied for a few perishable agriculture commodities and it may be expanded for other commodities depending upon the experience of its working;
F. Market Information System

(xxix) Efforts may be made to ensure proper and regular data entry in AGMARKNET nodes provided in the Regulated Markets in the State for the benefit of the farmers;

(xxx) In order to ensure transparent transactions of agriculture produce and to get best price for the produce, there is a need for electronic trading in the mandi which should be at least at District level;

G. Grading and Standardization

(xxxi) There is a need for grading of agricultural produce before it is sold to facilitate the farmers to fetch the prices commensurate with the quality. States should provide Directorate of Marketing and Inspection (DMI), necessary inputs such as name of commodity, quality parameters important for formulation of grade standards for producers’ level grading under Agricultural Produce (Grading & Marking) Act, 1937, which are relevant and specific to their State;

(xxxii) To promote the grading and testing of agricultural produce, States are required to take initiative for establishing grading units with trained manpower in the market to attend to work of grading and to promote private laboratories for testing agricultural produce on user-charge basis.

H. Other Recommendations

(xxxiii) “Final Report” of the Committee may be presented to the Govt. of India with the request to convene a National-level Conference on agriculture marketing at New Delhi under the Chairmanship of Union Agriculture Minister for consideration of the report;

(xxxiv) Organize Farmers’ Groups to enhance their bargaining power to improve price realization and shorten the food supply chain by introducing Direct Marketing/ Sourcing of agriculture produce directly from the farmers to the consumers and processors; and

(xxxv) Central Government need to have a more consistent stand in their import-export policy as any sudden switch-on and switch-off in policy impacts the farmers adversely.

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