Amending agri market law, but half-heartedly

Sukhpal Singh

The Punjab Agricultural Produce Markets (General) (Amendment) Rules, 2020, provide for special market yard, private market yard, producer market yard (kisan mandi) and producer consumer market yard (PCMY). The most important reforms are the permission to establish a private wholesale market and the direct payment to farmers, the latter driven by pressure from the Food Corporation of India (FCI), the Cotton Corporation of India (CCI) and the implementation of the Public Financial Management System (PFMS) by the Union Government.

As far as the setting up of a private wholesale market yard, which gives — for the first time — the choice of a public and a private mandi to the farmer-seller, is concerned, the law says, “The owner of a private market yard shall develop the yard in an area not less than 10 acres, by providing infrastructure facilities and amenities — and shall have a clear title with possession or leasehold rights by an agreement for a period of not less than 30 years. In any notified market area where the government and the private markets shall co-exist: ….Provided that the above yard can be established only for the business relating to fruits, vegetables, livestock and its products, wood, flowers and cannot be established within a radius of 5 km from the existing notified principal or sub-market yards.”

This restriction also applies to the other two markets — PCMY and kisan mandi. This provision shows that Punjab has protected its arhtiyas and traders (kacha and pucca arhtiyas, respectively) in the existing APMC (agricultural produce market committee) mandis as most of them deal in foodgrains and cotton and, that too, for the FCI and the CCI. By excluding these crops from the new market arrangements, this vested interest has been largely left untouched by the new law.

As per the new Act, the private market operator is to ensure the payment of sale proceeds and issuance of Form J to farmer or seller before lifting the produce on the day of the sale. The other good aspect of the amended Act is that not only individuals but also groups, Farmer Producer Organisations and Farmer Producer Companies can set up such markets, as has happened in Maharashtra. The licence fee for private market yard, PCMY, e-trading platform and kisan mandi would be Rs 5 lakh, Rs 2 lakh, Rs 5 lakh and Rs 2 lakh, respectively. Further, there is a bank guarantee of Rs 25 lakh, Rs 5 lakh and Rs 10 lakh for private market yard, e-trading platform and kisan mandi, respectively, with the same being 50 per cent of the above if the player is a government agency or a co-operative institution.

The direct purchase provision (another important channel permitted since 2003 by the model APMC Act) is extended to the existing licensees to facilitate direct purchase from producers with permission from the chairperson of the State Agricultural Marketing Board (SAMB) at any place within the notified area of the APMC. Such licensees have to pay Rs 10,000 fee to the board. Even pre-harvest contracts and contract farming have been brought under this provision: “Provided that if any licensee entered into a contract with a producer for standing crop of fruit and vegetable in the notified market area of the committee, such transaction shall be deemed sale and purchase of agricultural produce.” An important question which arises is: when the model Agriculture Produce and Livestock Marketing (APLM) Act, 2017, provides that the APMC would not regulate any transaction outside its market yard, how does this go with the model Act provision, the purpose of which was to curtail the powers of the APMCs?

On direct payment to farmers in Punjab, the Act says: “The kacha arhtiya or the buyer, as the case may be, shall make payment to the seller through electronic transfer after the weighment is over. If payment is not made by the kacha arhtiya or buyer, as the case may be, in the manner, as stated above, then the same shall be recovered by the market committee concerned from him as arrears of land revenue and the first lien shall be of the seller’s right and it shall be made to the seller concerned.” “Provided further that that the seller shall be at liberty to receive payment up to Rs 10,000 in cash in a calendar month for the agricultural produce sold by him during that month… Delivery of agricultural produce after sale shall not be made or taken unless and until the kacha arhtiya or, if the seller does not employ a kacha arhtiya, the buyer has given to the seller a sale voucher in Form J mentioning the payment mode and its authentication, the counterfoil of which shall be retained by the kacha arhtiya or the buyer, as the case may be. Provided that a licensee entered into a contract with a producer under sub-rule (1-A), shall issue sale voucher in Form J for the contract value of the agricultural produce.” This last provision shows that Punjab has retained contract farming provision within the APMC domain despite the model Act of 2017 recommending its exclusion and providing for a separate law on the lines of one attempted by Punjab in 2013 which was not needed then or even now and was never operationalised. The first quote in this paragraph clearly shows that the arhtiya would make the payment into the farmer’s account, and not necessarily the buyer, which means it is really not direct payment from buyers like the FCI, CCI or even large private corporate buyers who would still operate through commission agents. So, it is direct payment indirectly — a contradiction in terms!

Punjab has made a new provision in the amended APMC Act which states, “The board shall levy price stabilisation fund (PSF) on the sale of agricultural produce, which shall be collected by the market committee or the board, as the case may be, from producer or seller, buyer, kacha arhtiyas in all the markets notified under Sections 7 to 7-F at the rates notified by the state government from time to time. This fund shall not be utilised for the purpose other than the stabilisation of prices of specified agricultural produce by the state government.” Further, the owner of the private market yard, PCMY and kisan mandi shall pay as contribution to the board at the rate of 25% of the total collection of the user charges and shall deposit the same into the Marketing Development Fund (MDF) of the board during the first week of next month. In case of e-trading platform, the contribution to the MDF is at the rate of 25% of the total market fee collected from fruits and vegetables, 5% on livestock and 60% on all other items of agricultural produce. Though one may question its levy on all market participants, the provision of preventing its misuse is much needed, given previous experience.

Surprisingly, the amended Act mentions livestock produce only in the case of the MDF. It is surprising that Punjab has not found it questionable to include livestock in the APMC market domain when the nature and dynamics of the two markets are entirely different. More importantly, Punjab could have thought of abolishing the arhtiya system on the lines of what Madhya Pradesh did in 1985, but that is a tall order for Punjab, given the political economy of its agricultural markets.

The author is Professor and Chairperson, Centre for Management in Agriculture, IIM, Ahmedabad

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