New Delhi: As the government blames hoarders for the recent spurt in food prices, the Finance Ministry's economic report card on Wednesday asked the Centre to use constitutional powers to end monopoly of wholesale markets and replace coercive state laws affecting the food market.
The state APMC (Agricultural Produce Marketing Committee) laws are a major hurdle to modernisation of the food economy as they have artificially created cartels of buyers who possess market power, the Economic Survey said, adding that high cost of intermediation have a cascading effect on prices.
"Parliament has the power to legislate a national market under the Constitution, which gives it the ability to legislate the freedom to buy and sell, for farmers and traders across state lines. This law can override state APMC laws and restrictions that have been placed on the farmer's right to sell food within and outside the state," the Survey said.
Under such a law, APMCs would become one among many trading venues in a competitive market. The Parliament can also legislate the creation of a Commission that monitors anti-competitive practices across the country.
"To create a national market the central government needs to use powers under the Union List and the Concurrent List of the Seventh Schedule of the Constitution to end the monopoly powers of the APMCs and replace other punitive and coercive state laws affecting the food market," the survey suggested.
With a spurt in prices of essential food items like onion and potato, the Centre has been asking states delist fruits and vegetables from APMC Act and has also decided to amend laws to make hoarding a non-bailable offence, among others.
The Model APMC Act 2003 is an inadequate solution as APMCs remain a non-level playing field, it said. Model law, which was circulated to all states for adoption, failed to address monopolistic and uncompetitive practices in inter- state trading of agricultural products.
Some states have introduced barriers to trade within the country through taxation and technical requirements.
The Essential Commodities Act 1955, an enabling Act which gives powers of intervention to states, is incompatible with an integrated competitive national market for food.
The Survey also suggested some measures that would facilitate the creation of a barrier-free national market.
These include permitting sale and purchase of all perishable commodities such as fruits and vegetables, in any market. This could later be extended to all agri produce.
The Survey also pitched for exemption of market fee on fruits and vegetables and reduction of the high incidence of commission charges on agricultural/horticultural produce.
"The key to investment and productivity growth on the farm is liberalization of agriculture...Farmers must have the same economic freedom, to buy and sell their produce, as do other producers," it said.
Noting there has been limited success in establishing efficient agricultural marketing practices in the country, the survey called for holistic reform of the 'farm-to-fork' supply chain to solve the persistent food inflation.
"The monopoly of government-regulated wholesale markets has prevented development of a competitive marketing system in the country," the survey said.
It further stated that there is a need to integrate and strengthen the internal agricultural marketing system in the context of liberalisation of trade in agri-items and for the domestic farming community to reap the benefits of new global market access opportunities.
The Survey highlighted that various committees and task forces of the government had recommended that control over agricultural markets by the state be eased to facilitate greater participation of the private sector for stimulating investments required for the development of agri-marketing.
"The APMC Act has not achieved the basic objective of setting up a network of physical markets," it observed.
The survey listed some successful initiatives in direct marketing, such as Apni Mandi in Punjab, Uzhavar Sandhai in Tamil Nadu, Shetkari Bazaar in Maharashtra, Hadaspur Vegetable Market in Pune, Rythu Bazar in Andhra Pradesh, Krushak Bazaar in Odisha, and Kisan Mandi in Rajasthan.
"Taking a cue from the success of direct marketing efforts of states, the APMC/other market infrastructure may be used to organize farmers markets. FPOs/self-help groups (SHGs) can be encouraged to organize farmers markets near urban centres, malls that have large open spaces," it suggested.
The survey also recommended the government to include 'facilitating organisation of farmers markets' under the permitted list of CSR activities under Companies Act 2013, to encourage companies engaged in agri-allied activities, food processing etc to take up this activity under CSR and also help in setting up supply chain infrastructure.
