Thanks To Deregulation, Farmer Markets In Maharashtra Now Earn Rs 5 Crore Each Week
May 10th, 2017
In a report presented to the central planning agency, NITI Aayog, the Maharashtra government revealed that the turnover of 94 farmer markets across Maharashtra has touched Rs 5 crore per week with sales in the region of 800-1,000 tonnes.
According to NITI Aayog, this phenomenal increase in outputs and profits for farmers is thanks to the government’s move last July to take fruits and vegetables out of the purview of the Agriculture Produce Market Committee (APMC) Act. This deregulated the farmer market and gave more power and autonomy to farmers to sell their produce without the hassle of countless middlemen.
What is an APMC?
An agricultural produce market committee (APMC) is a marketing board established by a state government in India.
What is the APMC Act?
The 1970s saw the enforcement of the Agriculture Produce Marketing (Regulation) Act, through which APMCs were formed to ensure remunerative prices for farmers.
- Agricultural markets in most states of India are established and regulated under the states’ APMC Act.
- The whole geographical area of the state is divided into smaller market areas.
- These market areas are managed by “Market Committees” constituted by the respective state government.
- Only licensed market functionaries have the right to purchase from the farmer.
- This has led to to the creation of a long chain of intermediaries or middlemen, enabling a long chain between producers and buyers.
- APMCs are under the control of state governments. However, not all states have passed APMC-related laws. Some States have passed but neither framed rules nor notified it.
Why is the APMC market model tedious and a major loss-maker for farmers?
The APMC model is an epitome of the License Raj and Regulation Raj that hampers free trade and economic growth. This is a simple chain that the APMC system enforces (in reality, however, the chain is much longer and more complicated):
- Farmers sell their produce to licensed middlemen at the APMC mandis (markets).
- These middlemen resell the same produce to wholesalers in urban areas.
- Then the produce passes on to retailers from the wholesalers.
- Then the produce passes from retailers to the end-consumers.
It goes without saying that in the absence of market information, farmers do not get remunerative prices and the middlemen get the major share in profit. Therefore, there is wide gap between wholesale and retail prices with middlemen consuming the best of the pie. The people bearing the worst brunt of this extensive market regulation are the farmers.
Additionally, the APMC system has levied additional costs on farmers including
- market fee,
- transportation costs from the farm to the mandi, and
- fees paid to intermediaries as commissions.
Thus the market price which the farmer receives for his produce is significantly lower than the price at which his produce is sold to the retailer.
The Maharashtra government’s bold move
In July 2016, the Maharashtra state government removed fruits and vegetables from the purview of the APMCs, allowing growers to sell farm produce directly to consumers. This was partly done to avoid a farmer’s strike.
In the immediate aftermath of the state government’s move, many farmers benefited. Since then, many more have. One example is of a farmer who sold lady’s finger (bhindi) to consumers at Rs 40 to Rs 60/kg. According to him, the price he got at the APMC in the recent past was Rs 12 to 15/kg. That’s an increase in realisation of 300-400%. Furthermore, the benefit to the end consumers was becoming apparent as the prices of lady’s finger in local markets through the APMC chain of traders is Rs 120/kg. The end consumer saved 50% on the price of vegetables and fruits.
With middlemen out and market deregulation, farmers are earning more
Santosh Mane, a farmer from Junnar, told The Times of India, “For the first time, we are able to take home whatever we make. There is no need to give anyone commission or sell at low rates. Initially we were uncertain about the response and didn’t know if it was a good idea to incur additional transport costs and come to Mumbai to sell perishable goods like vegetables. But in the first two months itself we have been going back with an empty truck.”
Several farmer-run markets have sprung up across the state. Among the first farmer markets to be set up were those in Mumbai, the first being in the parking lot of Vidhan Bhavan within the government complex in south Mumbai.
Now, in less than a year, there are 93 of them in the state.
Farmer markets are now earning more than Rs 5 crore every week.
Following the success of this initiative, Maharashtra is reportedly mulling over the idea of delisting grains as well from the APMC Act.
The Logical Indian take
The Logical Indian community appreciates the Maharashtra government’s bold step in 2016, which has reaped impressive dividend so soon. Through deregulation, Maharashtra has given farmers a choice to decide where they want to sell their produce. The deregulation has also freed farmers from the iron grip and hassle of middlemen. Not to mention that the move has deregulated the farmer market, ensuring more profits for farmers and more efficiency of the economy.