A quiet revolution

One of the major impediments to growth in the farm sector were the APMC Acts. The Agricultural Produce Markets Act prescribes the setting up of mandis (Markets) for agricultural products. The Act prevents farmers from selling their produce directly to retailers. They have to go through regulated mandis and bear mandi charges. The Act restricts trade in agri-commodities to those who have paid market fees, have the necessary licenses, and permits. In other words, they first restrict the farmers marketing channels to state-regulated markets; they then charge multi-point market fees as well as sales taxes in some cases. The lack of adequate storage facilities at most markets makes the farmers bargaining abilities that much weaker in such market places.

The APMC acts have been in existence in all the major producing states of India. The Central Government had initiated agricultural reform measures. However, since Agriculture is a State subject, a lot more had to be done before Indian Agriculture was rid of the problems facing it. The private sector needs policy reforms that will allow it to make much larger investments in the sector, thus propelling the growth rate of agriculture sector. The center drafted a model APMC act in 2002, which the states were expected to implement. For a long time, the states dragged their feet on this. However, in last one year significant movement has happened on this.
a) States that have implemented the model laws in part or wholly – AP, HP, MP, Maharashtra, Punjab, Haryana, Gujarat, TN, Rajasthan, Chhatisgarh, Nagaland and Sikkim.
b) States that did not have APMC acts to start with – Kerala, Manipur, Daman&Diu, Dadra and Nagar Haveli, Arunachal Pradesh
c) West Bengal is yet to amend its laws, but its act was anyway not as restrictive as in most other states
d) UP and Karnataka are two major states yet to implement the changes
e) Bihar, has leap-frogged all other states and has scrapped the APMC Act.

The results have been instantaneous. Sample the following:
a) Metro Cash and Carry is investing heavily in wholesale of agricultural products in AP, WB and Maharashtra
b) Reliance Retail is expanding furiously in AP, Maharashtra and Gujarat and has plans to go to 700 cities within 5 years
c) ITC is wholesaling F&V and has set up stores in Hyderabad, Pune, Chandigarh and Kolkata. Further plans are being made
d) Bharti is aggressively building agricultural plans in Punjab

The impact is likely to be big and fast. Massive investments are coming up in all these states in the area of storage, transportation, cold chain, with corresponding multiplier effects in employment. Specialized services players are entering the fray (cold storages, refrigerated vans, etc.)

This could truly be a revolution in the making. So much so that I am surprised that newspapers seem to have missed the story altogether