New Delhi, Dec. 27: The Congress-ruled states are pulling out vegetables and fruits from the list of farm produce traded under the stifling APMC or mandi act, opening up trade in these critical items with the hope of keeping their prices under check prior to next year’s Lok Sabha elections.
Several expert panels, including one headed by former chief economic adviser Kaushik Basu, had sought dismantling of the Agriculture Produce Marketing Committee Act (APMC), or mandi act, which forces farmers to sell only at designated mandis (markets) to a small clique of registered traders.
Ashok Gulati, chairman of the Commission on Agricultural Costs and Prices, had recommended in a recent paper that fruits and vegetables be taken off the list.
The mandi act restricts farm trade to a mere 5,000 traders all over the country and shuts out supermarkets from buying directly from the farmers at spot market rates.
At a meeting of chief ministers of states run by the party, the Congress decided to partially accept the recommendations by taking vegetables and fruits off the APMC list.
Officials said this could be done through executive notifications by the state; the rules can be tabled later as a subsidiary legislation.
In the run-up to elections in key states in November-December, prices of onions and other vegetables had soared, causing discontent, especially in urban areas.
Studies of vegetable prices at mandis and at points in the supply chain have shown that traders had raised prices astronomically around that time.
For example, on October 7, onions were sold by farmers at the Ahmednagar mandi, a catchment market for a major onion growing district of Maharashtra, for as low as Rs 5-10 a kg. However, mandi records between traders show that the same onion was sold for up to Rs 41.50 a kg on the same day.
This onion was then transported to consuming states, where a second round of price rise occurred. Onions bought at Ahmednagar on October 7 normally reach Azadpur market in Delhi by October 12.
On October 12, onions were sold at Azadpur for between Rs 27.50 and Rs 49.50 a kg. However retail prices on that date in the city stood at Rs 60-80 a kg.
Analysts feel the states’ decision will help in the future but may not have any effect at present as vegetable prices have fallen since the beginning of December.
Rajiv Babbar, a commodity market analyst, said, “In the long run this will be a good step … in the short run we won’t see much difference in prices … however staple foodgrains should also have been taken off …. Rice prices have been going up … opening up this market would also help.”
The average rise in food inflation has been 10.5 per cent between 2008-09 and 2013-14.
Experts and finance ministry officials have long been in favour of dismantling the APMC act as a way to rein in food inflation.
However, since this act was in the state’s domain, the central government could not do much.
The central government during the NDA period helped to dilute the Essential Commodities Act — a draconian weapon that states used to crack down on hoarders and profiteers, while allowing APMC acts passed by various states to continue.
In his paper, Gulati had also suggested that the Food Corporation of India hold open market operations to cool down rice and wheat prices.
However, the agriculture ministry has resisted Gulati’s suggestion even as other economists and commentators have supported it. Open market operation, or open sale, to bring down prices is part of the FCI’s mandate. The FCI buys, stores and sells foodgrains on behalf of the government.