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State Legislative Brief
GUJARAT, HIMACHAL PRADESH, KARNATAKA, MADHYA PRADESH, TAMIL NADU
Ordinances amending state agriculture produce marketing laws |
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Key Features
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Issues to Consider
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The central government has also issued an Ordinance, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020. This Ordinance allows any person who has a PAN card to purchase agricultural produce outside APMC Markets without any restriction or a fee or cess. |
Agriculture marketing in most states is regulated by the Agriculture Produce Marketing Committees (APMCs) established by state governments under their respective agricultural produce marketing laws.[1] Few states such as Bihar, Kerala, and Manipur do not have APMC markets. APMCs regulate the sale of agricultural produce through licensing, collect market fees from such sale, and provide infrastructure within their markets to facilitate marketing of such produce.
The Standing Committee on Agriculture (2018-19) observed that the APMC laws are not implemented in their true sense and need to be reformed urgently.[2] The Committee noted that the APMC laws are highly restrictive in promotion of multiple channels of marketing (such as private markets, direct sale to businesses and retail consumers, and online transactions) and competition in the system.2 In 2017, the central government released the model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 to provide states with a template to enact new legislation and bring comprehensive market reforms in the agriculture sector.[3] The 2017 model Act aims to allow restriction-free trade of agricultural produce and promotes competition by encouraging the operation of multiple channels of marketing.3
Based on the model Act, certain states have issued Ordinances to amend or replace the existing regulatory mechanism set up under their state APMC Acts. This note discusses the Ordinances issued by Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, and Tamil Nadu in this regard.[4],[5],[6],[7],[8] These Ordinances have been issued to provide for geographically restriction-free trade of agricultural produce and promote multiple channels for marketing of agriculture produce in these states.6,7,8
Key Features
We summarise below the main features of each of the five state Ordinances.
Gujarat
The Gujarat Agricultural Produce Markets (Amendment) Ordinance, 2020 was promulgated on May 6, 2020.6 It amends the Gujarat Agricultural Produce Markets Act, 1963.[9] It renames the Act as the Gujarat Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 1963. Key features include:
Himachal Pradesh
The Himachal Pradesh Agricultural Produce Marketing (Promotion and Facilitation) Ordinance, 2020 was promulgated on May 28, 2020.8 It seeks to replace the Himachal Pradesh Agricultural and Horticultural Produce Marketing (Development and Regulation) Act, 2005.[10] Key features include:
Karnataka
The Karnataka Agricultural Produce Marketing (Regulation and Development) (Amendment) Ordinance, 2020 was promulgated on May 16, 2020.4 It amends the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966.[11] It makes the following amendments to the Act:
Madhya Pradesh
The Madhya Pradesh Krishi Upaj Mandi (Amendment) Ordinance, 2020 was promulgated on May 1, 2020.5 It amends the Madhya Pradesh Krishi Upaj Mandi Act, 1972.[12] It makes the following amendments to the Act:
Tamil Nadu
The Tamil Nadu Agricultural Produce Marketing (Regulation) Second Amendment Ordinance, 2020 was promulgated on May 28, 2020.7 It amends the Tamil Nadu Agricultural Produce Marketing (Regulation) Act, 1987.[13] Some of the key amendments being made to the Act are:
Issues for consideration
Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, and Tamil Nadu have issued Ordinances to enable multiple channels of marketing for agriculture produce.4,5,6,7,8 We analyse some key issues with the APMC laws in these states.
System of licensing
The Standing Committee on Agriculture (2018-19) noted that state APMC Acts are highly restrictive in promotion of multiple marketing channels and competition in the system.1 Consequently, farmers are unable to sell produce at remunerative prices because of the lack of competition. Further, the Committee observed that APMC markets across the country are not working in the interest of farmers due to reasons such as: (i) limited traders in APMC markets thereby reducing competition, (ii) cartelisation of traders, and (iii) high deductions in the form of commission charges and market fees.1 The Committee suggested that states should reform their APMC Acts by introducing reforms such as enhancing the number of marketing platforms for farm produce and making the functioning of APMC markets democratic and transparent.
Accordingly, the Ordinances issued by Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, and Tamil Nadu remove certain geographical restrictions on the trade of agricultural produce and allow the trade of agricultural produce outside the state APMC markets. These five states now allow for: (i) setting up agricultural produce market in the private sector, (ii) direct marketing, and (iii) electronic trading (other than Tamil Nadu).1,4,5,6,7,8
However, some issues such as cartelisation of market functionaries may continue to prevail even after these Ordinances are enacted. The Committee of State Ministers on Agricultural Marketing Reforms (2013) had observed that the system of licensing is restrictive.[14] Traders, commission agents, and other market functionaries organise themselves into associations, which does not allow easy entry of new persons into markets and stifles competition. The practice of compulsory licensing of commission agents and traders in the regulated markets has led to the creation of monopolies for market functionaries.16 Several experts have recommended that licensing should be replaced by a one-time simple registration system.14,16 However, the Ordinances issued by Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, and Tamil Nadu require all market functionaries to obtain licences to trade in any agricultural produce.
Note that the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, promulgated by the central government in June 2020, provides that a buyer does not require any licence to trade in agricultural produce outside the state APMC markets (i.e., outside the market yards, warehouses etc. provided by the APMCs).[15] Under the Ordinance, any trader having a PAN card can directly buy produce from farmers anywhere outside the APMC markets.15 As the central law will prevail over the state law, traders will not require a license or will have to pay a fee or cess for such transactions outside APMC markets.
Status of infrastructure in APMC markets
The Himachal Pradesh, Karnataka, and Madhya Pradesh Ordinances/Acts provide that the respective state government will prescribe infrastructure requirements for private market yards, farmer-consumer market yards, and sub-market yards (such as warehouse, silos, and cold storage).8,11,12 The Tamil Nadu Act provides that the APMCs may construct infrastructural facilities in the notified market areas. However, the Acts or Ordinances for these states do not specify infrastructure standards for APMC markets, nor delegate them to the government.
The Gujarat Ordinance, on the other hand, provides that the Market Committee Fund shall be utilised for the development of common marketing infrastructure and the state government may make Rules regarding the infrastructure, services, and the manner for providing it.6
The Committee of State Ministers on Agricultural Marketing Reforms (2013) noted that the benefits available to farmers from regulated markets depends on the facilities available therein.14 The Standing Committee on Agriculture (2018-19) observed that infrastructure and other civic facilities in most APMC markets are in a bad shape.1 This causes inconveniences to farmers such as lack of storage for perishable items and inadequate weighing scales to determine prices. It also reduces the efficiency of the markets. Across the country, only 65% of markets have toilets, 38% have rest houses, 15% have a cold storage facility, and 49% have weighing facilities.1 Table 1 provides a percentage of markets that have various infrastructure and facilities.
Table 1: Percentage of APMC markets with various facilities (All India)
Type of facility |
Facility |
Markets where the facility existed (%) |
Market Facilities |
Godown |
83% |
Cold storage |
15 % |
|
Covered platform |
66% |
|
Grading facility |
22% |
|
Drying platform |
29% |
|
Weighing facility |
49 % |
|
Civic Facilities |
Drinking water |
76 % |
Toilet facility |
65 % |
|
Farmers’ Rest House |
38 % |
|
Canteen |
32 % |
|
Banking facility |
7% |
|
Internet cafe |
12 % |
Note: Data is from May 2015
Source: Report no. 62, Standing Committee on Agriculture, 2019; PRS.
Regulation of Gramin Haats
The Standing Committee on Agriculture (2018-19) observed that most farmers lack access to government procurement facilities and APMC markets.1 This is due to an insufficient number of APMC markets, long distances to the nearest APMC market, and lack of transportation facilities, among others.1 Table 2 gives details on average area covered by APMC markets in Gujarat, Himachal Pradesh, Karnataka, Madhya Pradesh, and Tamil Nadu.
Table 2: State-wise details of regulated markets
State |
Total Area (sq. km.) |
Total APMC markets |
Average area covered by one APMC (sq. km.) |
Gujarat |
1,96,024 |
400 |
490 |
Himachal Pradesh |
55,673 |
56 |
994 |
Karnataka |
1,91,791 |
513 |
374 |
Madhya Pradesh |
3,08,144 |
545 |
565 |
Tamil Nadu |
1,30,058 |
283 |
460 |
Source: Report no. 62, Standing Committee on Agriculture, 2019; PRS.
The Standing Committee on Agriculture (2018-19) observed that the average area served by an APMC market in the country is 496 sq. km. Further, it can be seen in Table 2 that the average area covered by one APMC market is 994 sq. km. in Himachal Pradesh and 565 sq. km. in Madhya Pradesh. This is much higher than the 80 sq. km. recommended by the National Commission on Farmers (Chair: Dr. M. S. Swaminathan) in 2006.1 The Standing Committee noted that there is a need of 41,000 markets in the country to meet the 80 sq. km. requirement. It recommended that the number of agriculture markets should be increased.
Further, it noted that Gramin Haats (small rural markets) can provide farmers direct access to consumers, require less transportation cost, and thus, may emerge as a viable alternative for agriculture marketing. The Standing Committee also recommended that Gramin Haats should be kept out of the ambit of the APMC Acts.1 However, the Gujarat and Himachal Pradesh Ordinances provide that the state government may bring such markets under the regulation of the Act (after consultations with local authorities who own and operate these markets).6,8 Further, the Madhya Pradesh Act covers Haat Bazaars under the ambit of its APMC Act.12
Tamil Nadu
Market fee for fruits and vegetables
The Tamil Nadu Ordinance or Act does not de-regulate fruits and vegetables or exempt them from market fee.7,13 However, various experts have recommended that fruits and vegetables should be taken out of the ambit of APMC Acts and market fees should not be levied on these commodities.1,14,[16]
The Committee on Agricultural Marketing Reforms (2013) had noted that there is a high wastage of fruits and vegetables due to lack of marketing infrastructure, absence of sufficient cold storage areas, and a dis-organised distribution system.14 In 2012-13, the extent of post-harvest losses was around 7% to 16% for fruits and around 7% to 12% for vegetables (around Rs 31,000 crore based on 2014 prices).[17] This is because fruits and vegetables are highly perishable items and delay in their sales impacts their quality and results in wastages and reduction in supplies (increasing their prices).[18] Exempting such items from the levies imposed by APMCs is expected to have a valuable effect on their prices.
Note that Gujarat has removed fruits and vegetables from the ambit of its APMC Act.[19] Similarly, Madhya Pradesh has put fruits and vegetables outside the ambit of market regulation when purchased or sold outside the notified market yard.19 Karnataka and Himachal Pradesh have exempted market fee on all fruits and vegetables (except apple in Himachal Pradesh).19
Note also that, the Farmers' Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020 promulgated by the central government prohibits states from levying any market fee, cess, or tax on farmers, traders, and electronic trading platforms for trading in agricultural produce outside the state APMC markets.15
[1] Report No. 62, Standing Committee on Agriculture, ‘Agriculture Marketing and Role of Weekly Gramin Haats’, Lok Sabha, January 3, 2019, http://164.100.47.193/lsscommittee/Agriculture/16_Agriculture_62.pdf.
[2] Report No. 8, Standing Committee on Agriculture (2019-20): Action taken by the government on the report ‘Agriculture Marketing and Role of Weekly Gramin Haats’, Lok Sabha, December 12, 2019, http://164.100.47.193/lsscommittee/Agriculture/17_Agriculture_8.pdf.
[3] Model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017, Ministry of Agriculture and Farmers’ Welfare, Government of India, April 2017, http://agricoop.gov.in/sites/default/files/APLM_ACT_2017_0.pdf.
[4] Karnataka Agricultural Produce Marketing (Regulation and Development) (Amendment) Ordinance, 2020, https://prsindia.org/files/bills_acts/bills_states/karnataka/2020/Karnataka%20APMC%20Regulation%20and%20Development%20Amendment_Ordinance%2020201.pdf.
[5] Madhya Pradesh Krishi Upaj Mandi (Sanshodhan) Ordinance, 2020, https://prsindia.org/files/bills_acts/bills_states/madhya-pradesh/2020/Madhya%20Pradesh%20Krishi%20Upaj%20Mandi%20(Sanshodhan)%20Ordinance,%202020.pdf.
[6] Gujarat Agricultural Produce Markets (Amendment) Ordinance, 2020, https://prsindia.org/files/bills_acts/bills_states/gujarat/2020/Gujarat%20APMC%20Ordinance%202020.pdf.
[7] Tamil Nadu Agricultural Produce Marketing (Regulation) Second Amendment Ordinance, 2020, https://prsindia.org/files/bills_acts/bills_states/tamil-nadu/2020/Tamil%20Nadu%20APMC%20Regulation%20Amendment_Ordinance%202020.pdf.
[8] Himachal Pradesh Agricultural Produce Marketing (Promotion and Facilitation) Ordinance, 2020, https://prsindia.org/files/bills_acts/bills_states/himachal-pradesh/2020/Ordinance%202%20of%202020.pdf.
[9] Gujarat Agricultural Produce Markets Act, 1963, https://www.informea.org/sites/default/files/legislation/IND170467.pdf.
[10] Himachal Pradesh Agricultural and Horticultural Produce Marketing (Development and Regulation) Act, 2005, https://himachal.nic.in/WriteReadData/l892s/10_l892s/THE%20HIMACHAL%20PRADESH%20AGRICULTURAL%20AND%20HORTICULTURAL%20PRODUCE%20MARKETING%20(DEVELOPMENT%20AND%20REGULATION)%20ACT,%202005-98148266.pdf.
[11] Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966, https://prsindia.org/files/bills_acts/acts_states/karnataka/1966/1966KR27.pdf.
[12] Madhya Pradesh Krishi Upaj Mandi Act, 1972, https://prsindia.org/files/bills_acts/acts_states/madhya-pradesh/1973/1973MP24.pdf.
[13] Tamil Nadu Agricultural Produce Marketing (Regulation) Act, 1987, https://prsindia.org/files/bills_acts/acts_states/tamil-nadu/1989/1989TN27.pdf.
[14] Report of Committee of State Ministers, In-charge of Agriculture Marketing to Promote Reforms, 2013, https://dmi.gov.in/Documents/stminprreform.pdf.
[15] Farmers' Produce Trade and Commerce (Promotion and Facilitation) Ordinance, 2020, https://www.prsindia.org/sites/default/files/bill_files/Produce%20Trade%20and%20Commerce.pdf.
[16] Agricultural Marketing and Farmer Friendly Reforms Across Indian States and UTs, Niti Aayog, October 2016, file:///C:/Users/Dell/Downloads/NITI%20Aayog's%20Assessment%20of%20Marketing%20Reforms%20in%20States%20(2016).pdf.
[17] Report No. 38, Standing Committee of Agriculture, “Demands for Grants (2017-18)”, Lok Sabha, March 2017, http://164.100.47.193/lsscommittee/Agriculture/16_Agriculture_38.pdf.
[18] Unstarred Question No. 3675, Lok Sabha, Ministry of Agriculture, August 5, 2014, http://loksabhaph.nic.in/Questions/QResult15.aspx?qref=3064&lsno=16.
[19] Starred Question No. 257, Lok Sabha, Ministry of Planning, August 2, 2017, http://164.100.47.194/loksabha/questions/QResult15.aspx?qref=56082&lsno=16.
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