Market Regulation and Reforms

Lallan RaiAsstt. Agricultural Marketing Adviser

Dte. Of Marketing and InspectionN.H.IV Faridabad

COSAMB General Body Meeting at Nainital 7-8th September, 2009

Regulated Markets - Background Challenges during 30s

Illiteracy was high among farmers. Asymmetry in market information. Lack of transport and communication infrastructure. Lack of Standard weights, Measures and Grading. High incidence of exploitation of farmers. History of establishment of Regulated Markets traces back

to1886 – First Karanja Cotton Market – Regulated. With the establishment of these Regulated Markets,

Britisher’s interest was fully served by getting good quality cotton at central place, thereafter, legacy continued.

Need of Market Regulation Objective was that State alone could protect farmers from

exploitation at the hand of traders. Democratically elected APMCs set up - as provided in Market

Legislations with the following Objectives: -Ensure proper method of sale; - Correct weighment of the produce; and - Prompt payment of sale proceeds and settlement of

disputes between buyers and sellers as per procedures laid down.

Concentration was confined to the Secondary Markets seldom visited by producers (Small farmers).

By now, almost all Secondary Markets have been brought under the ambit of Regulation.

Rural Primary Markets (RPMs), the focal point for small and marginal farmers remained out of the ambit of Regulation and development.

Agri-Markets in India

No of Regulated Wholesale Markets - 6507

No of Rural Primary Markets -- 20,868

(about 15% are regulated markets)

Total – 27375

Availability of Markets Area Served

Average area Served by a Market 116 sq. km

Av. Area Served by a Regulated market 435 sq. km

Area served per Regulated Market varies from 115 sq km in Punjab to 11215

sq km in Meghalaya

Recommendations by National Farmers Commission - Availability of Markets within 5 km radius

(approx. 80 sq km)

Progress of Regulation of Markets

Year1940 1950 1960 1970 1980 1990 2000 2009

Number of Markets73

286 715 2481

6052 6217 7127 7139

Review of Existing Legal and Administrative Framework

More than 27 Regulated Market Acts – differ in vital contents. Manner of notifying the commodities for regulation varies from State to

State. Membership of Market Committee ranges between 8 and 20. Constituents of the Market Committee – 33 Organizations are represented

on the Market Committee under different Acts. In majority of the Acts, Powers of Market Committee as such have not

been specified. Variation in Market Fee/ License charges. Broad variation in composition/constitution and functioning of State

Agricultural Marketing Boards. Demarcation of functions between DOM and SAMB – Vary. Complete vacuum about data on RPMs. Lack of Uniformity in recruitment and cadre management of

functionaries of APMCs/DOM/SAMBs.

Market density (2003)Source: World Bank Study

61010

131313

151516

1719202021

2324

282929

31 41

0 15 30 45

KerPunGoaHarBih

UtchlAPOriHPTN

IndiaWBMahKar

AsamGuj

ChhatJ&KUPMPRaj

GCA (000 ha)/wholesale market

Distance of Wholesale Markets (2005)

Source:- World Bank Report

16

11

20

12

14

8

6

9

3

6

0 5 10 15 20 25

TN

OR

MH

UP

All

Median Distance to Market, km

retail

w holesale

Market Infrastructure in Wholesale Markets

Source:- World Bank Report

0 20 40 60 80 100

Market area enclosed

Market has covered shops

Kutcha road in mkt yard

Paved/pucca road in mkt yard

Parking (all vehicles)

Parking (Trucks)

Drainage

Cold Storage

Warehouse

Drying area

Percent of Wholesale Markets

UP

MH

OR

TN

Sources of Price and Market Information by Trader

Source;- World Bank Report

0 10 20 30 40 50 60

Personal observation

Regular customers/ suppliers

Other traders

Intermediaries

Media

Electronic screen/board

Other

Frequency of responses,%

Tamil Nadu Orissa Maharashtra Uttar Pradesh

Agricultural Marketing Constraints Predominantly marginal or small farmers – Hence small marketable surpluses &

limited bargaining power.

Poor availability of markets & monopolistic tendencies of APMCs. Inadequate infrastructure in wholesale markets/ rural primary markets.

Lack of fair price discovery mechanism.

Multiple and exploitative intermediaries – low returns.

Fragmented supply chain, poor cold chain & high post-harvest losses.

Lack of cleaning, grading, packaging & quality certification facilities.

Limited access to market information and marketing opportunities available.

Reforms in agricultural Marketing

Necessary to :

Enable producers to undertake market-driven production planning.

Facilitate integration of farm production with domestic and global markets.

Attract massive investments needed for building post-harvest infrastructures.

Market Reforms initiatives Amendments in APMC Acts suggested by Expert Committee on Market Reforms constituted

by the Ministry of Agriculture (Report in June, 2001).

Expert Committee recommendations discussed in the National Conference of State Agriculture Marketing Ministers on 27.09.2002.

Standing Committee of State Agricultural Marketing Ministers constituted under the Chairmanship of Union MOS (A) met & resolved to implement reforms on 29.01.2003.

Committee headed by Additional Secretary (AM), GOI including State Representatives set up to draft a Model Law for Agri-Marketing.

Model APMR Act finalized on 09.09.2003 by the Committee and circulated to States by Central Government.

Model Rules based on the Model Act circulated to States by the Ministry in November, 2007.

NDC has resolved on 29th May, 2007 for completion of amendments in APMC Acts and notification of Rules thereunder by March, 2008.

Amendments Proposed in Model APMC Act

Allow establishment of Private or Cooperative markets/ Farmer-consumer markets/ Direct marketing.

Safeguard the interest of the farmers through provisions for Contract Farming.

Single point levy & payment of market fee/ Single point registration of functionaries.

Prohibition of Commission Agents for agriculturists and no deduction to be made towards commission .

PPP in management & extension activities/ Promotion of e-trading/ Electronic Spot Exchanges.

Encouraging professional management in APMCs.

Promotion of Grading & Standardization.

Progress of Market Reforms as on 31.08.09

Reforms in major areas done

Partial reforms done

Administrative actions initiated

No APMC Act

Provides for Reform

Status of APMC Act AmendmentsStates/ UTs having Amended Acts –

1. Andhra Pradesh (26.10.05)

2. Arunachal Pradesh (09.05.06)

3. Assam (19.01.07)

4. Chhattisgarh (10.02.06)

5. Goa (06.08.07)

6. Gujarat (01.05.07)

7. Himachal Pradesh (26.05.05)

8. Karnataka (16.08.07)

9. Madhya Pradesh (15.06.03)

10. Maharashtra (11.07.06)

11. Nagaland (08.09.05)

12. Orissa (17.05.06)

13. Rajasthan (18.11.05)

14. Sikkim (20.04.05)

15. Tripura (11.05.07) &

16. Jharkhand ( 06.12.2008)

Reportedly no Amendment Needed –

1. Tamil Nadu

States/ UTs with no APMC Act –

(1) Bihar (repealed w.e.f. 01.09.2006),

(2) Kerala, (3) Manipur and UTs of (4) Andaman & Nicobar Islands, (5) Dadra & Nagar Haveli, (6) Daman & Diu & (7) Lakshadweep

Partially Amended –

(1) Punjab/ (2) UT of Chandigarh (Only private markets & contract farming)

(3) Haryana (Only Contract Farming) &

(4) NCT of Delhi (Only Direct Marketing)

Amendment Bills under finalization –

(1) Uttarakhand, (2) U.P., (3) West Bengal, (4) NCT of Delhi & (5) Puducherry

Remaining States –

(1) Haryana, (2) J&K, (3) Meghalaya & (4) Mizoram

Desk Review of Market Reforms

Initiative for setting up of new market by any person, local authority or grower.

Setting up of Special Markets and Special Commodity Markets.

PPP in Market-led Extension activities.

To promote and encourage e-trading.

CEO shall be appointed by the Market Committee from the panel maintained by the Director/Board which may include professionals from open market.

Contract Farming Sponsor shall register himself with the Marketing Committee or with a prescribed officer in such a manner as may be prescribed.

Chhattisgarh, Goa, M.P. Nagaland, Sikkim, Tripura and Jharkhand.

Andhra Pradesh, Gujarat, Maharashtra, Karnataka, Nagaland, Sikkim, Tamil Nadu Tripura and Jharkhand.

Andhra Pradehsh, Himachal Pradesh, Karnataka, Nagaland and Sikkim.

Gujarat, H.P., Karnataka, Nagaland, Sikkim, Goa and Maharashtra (under Rule 5 license granted to Commodity Exchanges registered under FMC).

Nagaland, Sikkim.

Andhra Pradesh, Arunachal Pradesh, Assam, Goa, Himachal Pradesh, Karnataka, Haryana, Maharashtra, Madhya Pradesh, Nagaland, Orissa, Rajasthan, Chhattisgarh, Sikkim, Tripura and Jharkhand.

Conti......

Desk Review of Market Reforms The contract Farming Sponsor shall get the

contract farming agreement recorded with the prescribed officer.

No title, rights, ownership or possession shall be transferred or alienated or vest in the contract farming sponsor or his successor or his agent as a consequence arising out of contract farming agreement.

Dispute settlement mechanism.

Exemption of Market Fee on the sales to the contract farming sponsors taking place outside the market yard under the contract farming agreement.

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Karnataka, Haryana, Madhya Pradesh, Maharashtra, Nagaland, Orissa, Rajasthan, Sikkim, Tripura and Jharkhand.

Arunachal Pradesh, Assam, Goa, Haryana, Maharashtra, Nagaland, Orissa, Rajasthan, Sikkim, Tripura Jharkhand, Andhra Pradesh and Karnataka.

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Karnataka, Haryana, Madhya Pradesh, Maharashtra, Nagaland, Orissa, Rajasthan, Sikkim, Tripura Jharkhand and Himachal Pradesh.

Arunachal Pradesh, Goa, Karnataka (Reduced by 30%), Maharashtra, Nagaland, Orissa, Rajasthan, Sikkim, Tripura and Punjab (exempted under the Rules).

Conti…..

Desk Review of Market Reforms Specification of model agreement for

contract farming.

Single point levy of market fee.

Registration (not licensing) of market functionaries and single registration for trade / transaction in more than one market.

No commission agent shall act on behalf of agriculturist seller and no deduction to be made towards commission.

Establishment of private market yard and direct purchase from farmers.

Chhattisgarh, Gujarat, Goa (As may be prescribed), Karnataka (As may be prescribed, Maharashtra (Rules), Nagaland, Rajasthan, Sikkim, Tripura and Jharkhand.

Chhattisgarh, Gujarat, Goa, Himachal Pradesh, Madhya Pradesh, Nagaland, Sikkim, UT of Chandigarh, Punjab and Jharkhand.

Assam, Goa, Himachal Pradesh, Maharashtra, Nagaland, Sikkim, and Jharkhand.

Madhya Pradesh, Chhattisgarh, Nagaland and Sikkim.

Andhra Pradesh, Arunachal Pradesh, Assam, Gujarat, Goa, Himachal Pradesh, Karnataka, Madhya Pradesh (can be done under the by-laws), Maharashtra, Nagaland, Orissa (excluding for paddy / rice), Rajasthan, Sikkim, Tripura, Punjab (not for direct purchase), UT of Chandigarh (not for direct purchase) and Jharkhand.

Cont…

Desk Review of Market Reforms Establishment of consumer / farmer

market .

Power to grant exemption from market fee by the State Government.

Setting up of separate Market Extension Cell in the Board, establishment of State Agricultural Produce Marketing Standard Bureau.

Arunachal Pradesh, Assam, Gujarat, Goa, Himachal Pradesh, Karnataka, Madhya Pradesh (can be done under the by-laws), Maharashtra, Nagaland, Rajasthan, Sikkim, Tripura, Punjab (only enabling provision), UT of Chandigarh (only enabling provision) and Jharkhand.

Andhra Pradesh, Chhattisgarh, Gujarat, Goa, Madhya Pradesh, Maharashtra, Nagaland and Sikkim, Himachal Pradesh.

Nagaland, Sikkim and Karnataka.

Salient Features of Model Rules Model Rules Based on Existing Rules Chapter-III – Appointments, Composition and Elections to Market

Committee (Rule 5-12). Chapter-V – Conduct of Business, Powers and Duties of Market

Committee. (Rule14-38). Chapter-VII – Regulation of Trading (Rule 49-74). Chapter- VIII- Levy of Market Fees and its Collection (Rule 75-81). Chapter- X- Market Committee Fund, Budget and Accounts

(Rule 88-104). Chapter- XI- Constitution and Functioning of State Agricultural

Marketing Board (Rule 105-113). Chapter-XII –Capital Works of the Market Committee (Rule 114).

Salient Features of Model Rules Model Rules under New Provisions Chapter-IV – Special Market/Special Commodities Market (Rule13). Rule 15 – Powers and Duties of Market Committee. Rule 27 – Promotion of Grading Services. Chapter- VI - Contract Farming (Rule 39-48). Rule 75 (1) - Single Point Levy of Market Fees. Chapter IX – Establishment and Functioning of Private Market/ E-

Market, Consumer/Farmers Market and Direct Marketing (Rule 82 -87). Rule 113 – Establishment of Agricultural Produce Marketing

Standards Bureau.

Status of Amended APMC Rules Rules not notified in many States for

amended provisions - Notified only in Andhra Pradesh, Rajasthan, Maharashtra, Orissa, Himachal Pradesh, Karnataka, Madhya Pradesh (only for special license for more than one market) and Haryana (only for contract farming).

These amended Rules also vary in contents and coverage across States.

 

Essentials of Marketing Information

Marketing Research And Information Network (AGMARKNET)

Present Status Coverage - 3024 markets (46% of total about Agricultural Produce Wholesale Markets); ~ 300 commodities.

~ 1700 markets have started reporting data; ~700 markets reporting data on daily basis (Markets operate on daily / weekly/ bi-weekly/ seasonal basis)

Portal service includes country-wide information on commodity prices and arrivals, Grades and Standards, Commodity Profiles, Market Profiles, Atlas, Research Studies etc.

Dissemination in 10 local languages besides English.

Present delivery channels: Internet, Doordarshan, few newspapers, Kissan Call Centre (Toll free no. 1551), ~ 100 kiosks installed by IFFCO in rural areas;

Country-wide sensitization/awareness programmes being organized through MANAGE and SAMETIs; ATMAs; AGMARKNET Yatra organized in MP and being encouraged in other states.

Measurable outcome of the Project (Impact)

In short AGMARKNET initiative has achieved: • A national database comprising daily market information in respect of about 300

commodities and 2000 Varieties and more than 3000 markets to facilitate agricultural marketing research and planning.

• A unique single Window Service to access information needs of multiple stakeholders in respect of various markets spread across the country.

Information generated from the project is being used by Farmers, Exporters, traders, Agri-business firms, researchers, Banks, National Commodity Exchanges. Apart from farmers, user community includes prominent entities like World Bank, US Deptt. of Trade and Commerce, Reliance Industries, ITC, Cargill, PricewaterhouseCoopers, Harvard University, ICICI, HDFC, SBI, Yes Bank, M&M, MMTC, National Commodity Exchanges, IITs, IIMs, NCAER, IFFCO, Newspapers like Agri-Watch, NGOs like CHIRAG in Uttarankhand, Reuters, T.N. Agricultural University, IFPRI, etc.

AGMARKNET- Problems Specific to States

States with inadequate Computer Connectivity

& Data Reporting:

Bihar(35%,100%)

Gujarat(52% & 47%)

Haryana(61% & 57%)

J&K(63% & 34%)

Kerala(46% & 39%)

U.P. (64% & 40%)

West Bengal (76% & 63%)

States with inadequate Data Reporting:

Madhya Pradesh (49%)

Tamil Nadu (53%)

Arunachal (100%)

Mizoram (22%)

Nagaland (100%)

Sikkim ( 28%)

Rest NER States (<50%)

Marketing Research And Information Network (AGMARKNET)

Bottlenecks Remaining wholesale markets (about

3500) and Village markets (about 21,000), which cater to small and marginal farmers, not covered in the project due to limited resource

Low awareness level at grassroots Inadequate forward linkages for

delivering market information at the grassroots

Inconsistent reporting and data quality issues by some markets

localization of portal contents

Future Plans Wider dissemination by

collaborating with CSCs, FMC(display boards at markets), Mass Media Scheme of DAC, Newspaper agencies, telecom operators (for delivery through SMS)

Extensive publicity campaigns at grassroots

Dissemination in key local languages

Pursuing states for market level computerization to bring transparency in market functioning.

Issues for discussion NDC has resolved to Encourage development of Modern Markets by

completing the process of amending APMC Act and notifying Rules by March, 2008.

Some States have made only partial amendments- adversely affecting implementation of reform linked Schemes.

Rules have not been framed in majority of States- hindrance for new entrepreneurs to set up markets.

Regular information to DMI/COSAMB in any new interventions/improvements on market legislations brought out by States.

Clear demarcation of functions of DOM and SAMB. Strengthening the role of COSAMB for proper Coordination and sharing

of information relate to agricultural marketing with others. Regular Reporting of data at AGMARKNET.