Is APMC Act the real problem? – UPSC GS3

Agriculture post-1991

• The priority post-1991 has been given to industry as well as services.
• Middle-class consumers have been favoured by at the expense of farmers.
• This neglect of agriculture resulted in an equally unprecedented gap between the standard of living in the rural and urban parts of the country.
• As a result, the urban/rural ratio, in terms of monthly per capita expenditures, has jumped from 1.84 to 2.42 between 2012 and 2018.
• This means that an average urban-dweller today can consume almost 2.5 times more than an average person in a village.

Reforms by the government

• Government has decided to liberalise India’s agriculture by amending the APMC Act and the Essential Commodities Act.
• Contract farming will also be introduced in such a way that the buyer can assure a price to the farmer at the time of sowing.

 APMC Act in the context of Shanta Kumar Committee report

• The argument against the APMC Act is that it does not allow the free market to function due to government intervention.
•  It denies farmers the opportunity to determine the prices of crops in the marketplace.
• In theory, this is a valid argument.
• But, Shanta Kumar Committee observed in 2015 that only 6 per cent of farmers get the Minimum Support Price (MSP).
• This is because of barriers to access for farmers as only 22 crops are procured under MSP.
• Infrastructure is also inadequate as there are only an estimated 7,000 APMC mandis across India.
• Procurement depends on the stocks required by the state.

Why the APMC Act is not the problem

1) Farm Pricing is the problem

• The living costs of farmers was considered while determining agricultural pricing by the Agricultural Prices Commission (APC).
• CACP that replaced the APC in 1985 added a 10 per cent mark-up over the MSP to account for entrepreneurial costs.
• Such practices have been gradually eroded post-1991.
• The problem, therefore, is not state intervention but the way the government deals with agriculture.

2) APMC Act helped India build up food stocks

• India managed to weather the 2008 global food crisis only because it had enough food stocks as Indian agriculture was not linked to the international futures market.
• This was possible due to the procurement done through the APMC Act.

3) APMC Act reformed already by States

• Since agriculture is a state subject, the Act has been modified in 17 states.
•  On the contrary, the condition of peasants has often been affected when the APMC Act has been diluted.
• Bihar is a case in point.
• The APMC Act was revoked in 2006 with the same rationale that further deregulation will attract private investment in infrastructure.
• Not only has that not materialised, but the existing APMC market infrastructure was also dismantled.

Reforms that Indian Agriculture needs

1) Subsidy Reforms

• Indian Agriculture is still too heavily subsidised in favour of the big players.
• In the Union Budget 2019-20, the allocation for the Ministry of Agriculture was Rs 1,30,485 crore and the fertiliser subsidy alone was estimated at Rs 79,996 crore.
• But these subsidies are concentrated on a few crops.
• Agriculture economist Bruno Dorin has shown, only three crops receive more than 60 per cent of the so-called “non-product-specific” support to agriculture — rice, wheat and sugarcane.
• This has led to environmental degradation like the depletion of groundwater levels and monocultures which are a threat to biodiversity.
• It has also led to the industrialisation of agriculture, that results in the strengthening of a handful of multinational companies, which supply chemical inputs.
• Liberalisation would only strengthen the role of large companies — including those in the agri-food sector.

2) Agriculture needs to be ecologically viable

• Structurally, farming needs to be made economically and ecologically viable in India.
• State intervention for better pricing, investments in water harvesting and an agroecological transition could ensure a more resilient system to weather shocks like the current one.
• The government could draw inspiration from the Andhra Pradesh Community Managed Farming model.
• It promotes agroecological principles with the use of locally-produced, ecologically-sustainable inputs focusing on soil health..
• Since the agro-ecological system of farming is more biodiverse in nature, it will make the system more resilient overall.
• It will provide a safety net for farmers in case of crop damage due to various factors such as climate change or droughts.

Conclusion