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Bibek Debroy: Why we should move away from APMCs

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An agricultural policy cannot simply be a rice and wheat policy. Indeed, facilitated by free water, why should a state like Punjab grow a water-intensive crop like rice? Most people don’t know that even for rice and wheat, most procurement now takes place in states other than Punjab and Haryana.

Bibek Debroy: Why we should move away from APMCs
With limited word length of a column, let me focus on one of the three farm laws — the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020.
First, in the last agricultural census (2015-16), there were 146 million agricultural holdings (this number may have increased further because of fragmentation). Measured in terms of the operated area, most holdings are in Rajasthan, Maharashtra, Uttar Pradesh and Madhya Pradesh. Measured in terms of the number of holdings, most are in UP, Bihar, Maharashtra and MP. Eighty-six percent of holdings are small and marginal (less than two hectares). Only 0.6 percent are large (more than 10 hectares). Therefore, if we have farmer interests in mind, we should also listen to farmers from Rajasthan, Maharashtra, UP, MP and Bihar, and not only to those who have large holdings.
Second, the definition of ‘farmer’ is contingent on owning agricultural land. We might want to change it, but this the way it is today. In 2009, a committee (‘State Agrarian Relations and the Unfinished Task in Land Reforms’) told us cadastral surveys and land revenue records are in bad shape. Until there are surveys/re-surveys, we won’t have clear land titles and won’t know the ‘farmer’.
Computerisation of old survey records is pointless. There is a Digital Indian Land Records Modernization Programme (DILRMP), with a dashboard. In that, surveys/re-surveys have been conducted in 11.5 percent of the total villages. But that’s not been done in a single one of Punjab’s villages. Using the data, the NCAER works out land records and services index. In the 2020 rankings, MP, Odisha and Maharashtra are at the top. Punjab and Haryana are 16th and 18th respectively. In 2017, West Bengal abolished land revenue. With no revenue records and imperfect surveys, I wonder whether some states are serious about ‘farmer interests’.
Third, I am sceptical about the antecedents of APMC (Agricultural Produce Market Committee) Acts. Antecedents go back to 1897, and the intention was to supply cheap cotton to Lancashire and Manchester.
Historical research shows these did little to help farmers and was an indirect tax on farmers. Thereafter, the Royal Commission on Agriculture (1926) recommended the APMC Acts and following a 1931 Model Bill, some provinces passed such legislation. However, most states passed the APMC Acts in the period from the second half of the 1960s to the first half of 1980s. The number of regulated markets shot up from 146 in 1945 to 7,161 in 2001.
In other areas of economic policy-making, we are moving away from heavy-handed State intervention characterising the period from second-half of the 1960s to 1970s. Why not agriculture? By the way, the royal commission said market committees should not have licensed brokers as members. But all the APMC committees now have traders and commission agents as farmers. Indeed, mandi committees represent them more than farmers. For many mandi committees, elections have not been held for years.
Fourth, in the late 1960s, mandi fees were around one percent, and money collected was used, during the Green Revolution, to build infrastructure. The Economic Survey 2014-15 had some numbers, including all fees. For rice, it was 19.5 percent in Andhra Pradesh and 14.5 percent in Punjab. For wheat, it was 14.5 percent in Punjab and 11.5 percent in Haryana.
The farmer doesn’t get this, but the consumer has to pay. What is this money spent on, other than the obvious one of political funding? If reforms ensure choice to everyone, why shouldn’t farmers be free to sell through whatever channel they want, without having to mandatorily go through registered mandis? If mandis deliver services worth 10 percent and more, farmers will still go to mandis. But not through compulsion. Indeed, Bihar, Kerala, UP, MP, Gujarat and Karnataka clearly don’t want the APMCs. Either they didn’t have them ever (like Kerala), or they were repealed.
Fifth, other states have higher agricultural productivity (per hectare) than Punjab. Across crops, agricultural growth has been most wherever State intervention has been the least. It has been lowest for rice, wheat and sugarcane. That’s because there has been commercialisation and diversification of agriculture.
An agricultural policy cannot simply be a rice and wheat policy. Indeed, facilitated by free water, why should a state like Punjab grow a water-intensive crop like rice? Most people don’t know that even for rice and wheat, most procurement now takes place in states other than Punjab and Haryana.
These are the reasons why a large number of reports have advocated moving away from the APMC Acts — the National Commission on Agriculture (1976), the Task Force on Agricultural Marketing Norms (2001), the Millennium Study on Indian Farmers (2002), the Standing Committee of CMs (2002), the National Commission on Farmers (2004), the National Commission of Agriculture Ministers (2004) and many more. They should know.
Bibek Debroy is Chairman, Economic Advisory Council to the Prime Minister (EAC-PM), Government of India. Views are personal.
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