Marketing of agricultural produce and APMC Acts : Challenges and Unresolved issues

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The history of agriculture in India dates back to the Rigveda. Today, India ranks second worldwide in farm output.  Agriculture and allied sectors like forestry and fisheries accounted for 13.7% of the GDP (Gross Domestic Product) in 2013, about 50% of the total workforce. India exported $39 billion worth of agricultural products in 2013, making it the seventh largest agricultural exporter worldwide, and the sixth largest net exporter but even than, Why are our farmers forced to sucide ? Why are they not able to generate enough revenue ?

Agriculture sector in India is not well organised , the flow of revenue from market to the framers is not direct, which is the biggest cause of their poverty i.e, we buy pulses, vegetables, rice, wheat at very high rate but does that money reaches in the hands of farmers ? No, than who is getting profit out of these high rates ?

They are middlemen who buy the agriculural products from farmers early and stock them in the cold storages and warehouses  and sell them in the black market at very high prices. By stocking the material for long periods they create demand in the market due to which price of the groceries increases . The Indian farmer receives just 10 to 23% of the price the Indian consumer pays for exactly the same produce, the difference going to losses, inefficiencies and middlemen. Farmers in developed economies of Europe and the United States, in contrast, receive 64 to 81%

India has very poor rural roads affecting timely supply of inputs and timely transfer of outputs from Indian farms. Irrigation systems are inadequate leading to crop failures in some parts of the country because of lack of water. In other areas regional floods, poor seed quality and inefficient farming practices, lack of cold storage and harvest spoilage cause over 30% of farmer's produce going to waste, lack of organised retail and competing buyers thereby limiting Indian farmer's ability to sell the surplus and commercial crops.

If our farmers are supported well by the government through optimum infrastructure so that they are not forced to sell their product at low rate instead they have community warehouses where they can store their product and sell them as per their need, They get proper road connectivity, quality seeds and scientific guidance they will no longer reamain poor. To achieve the motto of  "Jai Jawan Jai Kisan "  government constituted APMC (Agricultural Producing Marketing Committee) Act in 1951 and created Regulatory Markets under this act.

Agricultural produce market committee (APMC) Act  :-

In India, agriculture is a “state subject” so wholesaling of agricultural produce is governed by the Agricultural Produce Marketing Acts of various State governments.The APMC Act empowers state governments to notify the commodities, and designate markets and market areas where the regulated trade takes place.

Markets are managed by the Market Committees constituted by the State Governments. Currently there are around 7,500 regulated markets in the country. Once an area is declared a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed freely to carry on wholesale marketing activities.  

APMC operate on two principles:-

  • Ensure that farmers are not exploited by intermediaries (and money lenders) who compel farmers to sell their produce at the farm gate for an extremely low price.
  • All food produce should first be brought to a market yard and then sold through auction.


  • Each state which operates APMC markets geographically divide the state and markets (mandis) are established at different places within the state.
  • Farmers are required to sell their produce via auction at the mandi in their region.
  • Traders require a license to operate within a mandi. Wholesale and retail traders (e.g. shopping mall owners) and food processing companies cannot buy produce directly from a farmer.

Set backs of  APMC Act :-

  1. Since no person or agency is allowed freely to carry on wholesale marketing activities the market shows monopolistic behaviour which deprives farmers from better customers, and consumers from original suppliers.
  2. Even after receiving the produce, some traders delay payment to farmers for weeks or months. If payment is made at the time of sale, then the trader may arbitrarily deduct some amount, on the excuse that he has not received payments from the other parties. 
  3. To avoid tax, some traders do not give sale slips to farmers. As a result, it is difficult for the farmer to prove his income to get loans from banks. On average, the farmer is able to receive barely 25% to 33% of the final retail price. Middlemen receive double commission (both from seller and buyer), thus making consumers pay for this spread. 
  4. Also middlemen do not pass the benefit to either side. During peak seasons, when they buy from farmers at low prices, they do not drastically reduce the prices to final consumers. Conversely, during lean seasons, when consumer prices are high, the farmers do not get higher returns on their produce.

Model APMC Act :-

Taking in to account of various setbacks of  APMC Act,  govt passed Model APMC Act in 2003 which has been adopted by 16 states till date. Salient features of this act are as follows:-

There is no compulsion for farmers to bring his produce to APMC Mandi. He can directly sell it to whomever he wants but the agriculturist who does not bring his produce to the market area for sale will not be eligible for election to the APMC.

Responsibilities of the Market Committees under APMC Act :-

  • Ensuring transparency in Pricing and Transactions which takes place in the market
  • Provide credit facilities to the farmers so that they don't face urgent finanical need to sale their produce at low prices
  • Ensures full payment for agricultural produce sold by farmers on the same day of sale
  • Promoting agricultural processing including activities for value addition in agricultural produce; 
  • The data like quantity brought and prices in the market should be made public. It is being done electronically in many APMCs
  •  Promote public private partnership in the management of agricultural markets.

The model act establishes ‘State Agricultural Produce Marketing Standards Bureau’ for Grading, Standardization and Quality Certification.

Contract Farming a new beginning under Model APMC Act :-

Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers. Sometimes it involves the buyer specifying the quality required and the price, with the farmer agreeing to deliver at a future date.

Contract farming is prevalent only in those states, where the APMC acts are favorable for private player e.g. Andhra Pradesh, Himachal Pradesh, Madhya Pradesh, Maharashtra who adopted the model APMC Act. 

Under the Model APMC Act 2003, a new chapter on ‘Contract Farming’ has been added to promote contract farming. The provisions under this chapter enable direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets. The provisions include:-

  • Compulsory registration of all contract farming sponsors ( Pepsico, Mahindra Shubhlabh, Himalaya Healthcare) 
  • The agreement between the buyer and farm producers should be proprly documented   
  • Resolution of disputes, if arises in such agrrements
  • Farmers are exempetd from levy of market fee on produce covered by contract farming agreements 
  • Providing indemnity to producers’ title/ possession over his land from any claim arising out of the agreement.
State Farm produce Area under contract farming (acres) Buyer company
Punjab Potato, Tomato, Chilli,Basmati, Maize, Soyabean 2200 Pepsico,Mahindra Shubhlabh, ITC
Karnataka Ashwagandha 700 Himalaya Healthcare
Madhya Pradesh Wheat 15,000 Hindustan Unilever

Survival is a challenge for Farmers in India

The average farm household makes Rs 6,426 per month and even this income comes as farm households do a mix of job. Over half of all agricultural households are indebted, and these are not small debts; the average loan amount outstanding for a farm household in India today is Rs. 47,000. For marginal farmers, making under Rs 4,000 per month, which doesn’t even cover their consumption, loans of over Rs 30,000 must be extremely heavy burdens.

A farm household needs to have at least 1 hectare of land to make ends meet every month. But over 65 per cent of households have less than one hectare of land, this means that two out of three farm households are simply not able to make ends meet.

In 2014, the National Crime Records Bureau of India reported 5,650 farmer suicides. The highest number of farmer suicides were recorded in 2004 when 18,241 farmers committed suicide. The farmers suicide rate in India has ranged between 1.4 to 1.8 per 100,000 total population, over a 10-year period through 2005.



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