Spare APMC Act, here's how the Centre can quickly lower food prices

While the APMC Act is a problem, scrapping it does not solve the problem of high food prices.

K Yatish Rajawat July 02, 2014 17:55:18 IST
Spare APMC Act, here's how the Centre can quickly lower food prices

The Finance Minister Arun Jaitley has called a meeting of the state chief ministers to work out means and mechanisms to control prices in essential commodities. Traders have been creating scare that prices of onion and potatoes will go up.

The meeting itself is a good pro-active step as a drought like situation is emerging in the country and more than perishables, hoarding of even grains is expected, driving prices up. One of the proposals to be discussed at the meeting is to scrap the APMC Act. While the APMC Act is a problem, scrapping it does not solve the problem of price rise. The agenda of the meeting also includes creating a 'national market' though what it means is unclear, as most perishables are consumed in a radius of 200 km to 500 km. Though onions can travel longer distances as they are not perishables. Inter-state movement will also be discussed. But the meeting tomorrow will only be fruitful if there are concrete proposals with the central government.

There are systemic issues at play here, prominent among them is the transparency of the commodity market. The APMC Act does not help as it builds a supply chain that is further obfuscates the supply, demand and stock situation. Neither the government nor the farmer has any visibility of the price formation. There is only one section in the APMC Act that is responsible for creating this distortion.This section has found a place even in the amended APMC Act, passed by several states. This section limits the sale by a farmer directly to consumers to 40 kgs in some states.

As a result the only location that a farmer can sell is the local mandi, where the prices are set by arthiyas who have been in the business for years. These traders/ arthiyas are also the traditional support base for BJP, especially in small towns and cities. They are a crucial cog in the BJP support base. Therefore, expecting a diktat like the one given by Ram Vilas Paswan, Union Minister of Consumer Affairs, Food & Public Distribution, that serious action will be taken against hoarders will not be pursued in BJP ruled states.

The state government will not or cannot move aggressively against hoarders and scrapping APMC is not the solution. Besides, the centre cannot scrap or amend the APMC as it is a state subject and needs legislative approval. This is not an immediate solution. The solution lies in an interesting Act passed by the UPA- 2 government, which is The Street Vendors (Protection of livelihood and regulation of street vending) Act, 2014. This was one of the last Acts notified by the previous government in March 2014. Unfortunately, Congress never used this accomplishment during its campaigning, though it affects a wide range of population.

What the Street Vendors Act does is that it recognizes the street vendor as a businessman, and the same recognition needs to be given to farmers. Once a farmer is recognized as a legitimate vendor and given the same right he will be allowed to bring his produce directly into the city, and sell it to consumer and the draconian part of the APMC Act will not apply. This will remove the middle layer and give the transparency to the producer about the prices. The farmer will also be able to judge and plant crops based on actual consumer prices. Hoarding will reduce as farmers will be selling directly.

New ways also need to be adopted by the state and city administration to help control prices. For instance, small cities can choose to allocate large parking lots in markets to farmer markets, on the days that the market is shut. In larger cities malls with multi-level parking can be asked to convert their parking into farmers market. Farmers' market is an accepted model the world over, in which cities and government across the world give consumers access to farmers. Even large cities like New York and others have well established farmers' market.

Technology can also play a role. A successful model in Hoshangbad district of Madhya Pradesh, gives farmers alerts about prices, stocks and supply expected on a daily basis. The model works on sending this information via a sms alert. It has worked well in preventing overflow of supply and helped farmers discover better prices. If the farmer knows that supply is low on a particular day in the mandi it will ensure better pricing for the farmer and harvesting on demand.

K Yatish Rajawat is the founder Editor in Chief of Business Bhaskar India's first hindi language business newspaper, and the former Managing Editor of Dainik Bhaskar group, he tweets @yatishrajawat

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