Agricultural Sector and Marketing Reforms – eNAM, Model APMC Act, Eco Survey Reco, etc.

Lessons from Bihar’s abolition of its APMC system for farmers

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Agri marketing and related issue

The article analyses the results of complete abolition of APMC in Bihar in the context of current protest against the agri bills.

Context

  • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 has been a source of anger among farmers.
  • By allowing unregulated trading areas beyond APMC mandis, the law seeks to remove intermediaries from agricultural trade and raise price realization for farmers.

Excessive politicization of APMCs

  • APMC’s excessive politicization has resulted in cartelization and price-fixing.
  • For this reason, there have been several attempts at reforming their functioning.
  • Easier licensing norms, the removal of entry and exit barriers and computerization and transparency have been introduced in most APMC markets.
  • However, the Bihar government decided to abolish the APMC system altogether in 2006.

Analysing the impact of abolition of APMC in Bihar

  • It was hoped that abolition would ensure better prices for farmers of the state and attract large sums of private investment.
  • Before their abolition, Bihar had 95 market yards, of which 54 had infrastructure such as covered yards, godowns and administrative buildings, weighbridges, and processing as well as grading units.
  •  With no revenue to maintain it, that infrastructure is now in a dilapidated condition.
  •  A study by the National Council for Applied Economic Research reported increased volatility in grain prices after 2006.
  • Most of the farmers surveyed reported high storage costs at private warehouses.
  • Farmers this year in Bihar received lower price for maize compared to the farmers in states with APMC.

Lessons from Bihar

  • The Bihar experiment has important lessons for future marketing reforms in agriculture.
  • The benefits of these reforms will only accrue to farmers if they are accompanied by private investment in creating the physical infrastructure and institutional mechanisms needed to allow for greater participation of farmers.
  • The record of states on attracting private investment isn’t much better.

Conclusion

By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.

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