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Reports suggest that a debt restructuring plan is being prepared for power distribution companies (discoms) in seven states - Uttar Pradesh, Punjab, Rajasthan, Haryana, Andhra Pradesh, Tamil Nadu and Madhya Pradesh. According to some estimates, the combined outstanding debt for discoms is Rs 2 lakh crore. Discoms have been facing heavy losses. According to a Planning Commission Report, the cost of supplying electricity increased at a rate of 7.4 per cent annually between 1998-99 and 2009-10. The average tariff has also increased at an annual rate of 7.1 per cent over the same period. However, the report shows that the average tariff per unit of electricity has consistently been much lower than average cost of supply per unit. Between 2007-08 and 2011-12, the gap between average cost and average tariff per unit of electricity was between 20 and 30 per cent of costs.
Average cost and average tariff per unit of electricity (Rs per kWh)
|
Year |
Unit cost |
Average tariff per unit |
Gap between cost and tariff |
Gap as percentage of unit cost |
| 2007-08 |
4.04 |
3.06 |
0.98 |
24% |
| 2008-09 |
4.6 |
3.26 |
1.34 |
29% |
| 2009-10 |
4.76 |
3.33 |
1.43 |
30% |
| 2010-11 |
4.84 |
3.57 |
1.27 |
26% |
| 2011-12 |
4.87 |
3.8 |
1.07 |
22% |
Source: “Annual Report 2011-12 on the Working of State Power Utilities and Electricity Departments”, Planning Commission State discoms have been losing money due to higher costs than revenues, as well as high transmission and distribution (T&D) losses. The commercial losses for discoms in India (after including subsidies) increased from Rs 16,666 crore in 2007-08 to Rs 37,836 crore in 2011-12. Reports suggest that the restructuring plan being prepared will be worth Rs 1.2 lakh crore in short-term liabilities. Half of the proposed amount would be issued as bonds by the discoms, backed by a state government guarantee. Banks and financial institutions would reschedule the remaining Rs 60,000 crore of debt, with a moratorium of three years on payment of the principal amount. State governments that adopt the financial restructuring plan would not recover any loans given to discoms before they start showing profits. Under a proposed transition finance mechanism, the central government would reimburse 25 per cent of the principal amount of bonds to states that fully implement the plan. Also, states that achieve a reduction in T&D losses above a targeted level in three years may be given grants. Newspaper reports also suggest that states will have to prepare plans for eliminating the gap between the average cost and average tariff per unit of electricity.
Since March, 2020, there has been a consistent rise in the number of COVID-19 cases in India. As of May 18, 2020, there were 96,169 confirmed cases of the infectious disease, of which 3,029 persons died. To contain the spread of COVID-19 in India, the central government imposed a nation-wide lockdown on March 24 till April 14, now extended till May 31. To ensure continued supply of agriculture produce during the lockdown and control the spread of the disease, some states have amended their respective Agriculture Produce Marketing Committee (APMC) laws. This blog explains the manner in which agriculture marketing is regulated in India, steps taken by the centre for the agriculture sector during the COVID-19 crisis, and the recent amendments in the APMC laws that are being announced by various states.
How is agriculture marketing regulated in India?
Agriculture falls under the State List of the Constitution. Agriculture marketing in most states is regulated by APMCs established by state governments under the respective APMC Acts. The APMCs provide infrastructure for marketing of agricultural produce, regulate sale of such produce and collect market fees from such sale, and regulate competition in agricultural marketing. 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. The 2017 model Act aims to allow free competition, promote transparency, unify fragmented markets and facilitate flow of commodities, and encourage operation of multiple marketing channels. In November 2019, the 15th Finance Commission (Chair: Mr N. K. Singh) in its report provided that states which enact and implement all features of this Model Act will be eligible for certain financial incentives.
What steps were taken by the central government in light of COVID-19?
On April 2, the Ministry of Agriculture and Farmers’ Welfare launched new features of the electronic-National Agriculture Market (e-NAM) platform to strengthen agriculture marketing by reducing the need of farmers to physically come to wholesale mandis for selling their harvested produce. The e-NAM platform provides for contactless remote bidding and mobile-based any time payment for which traders do not need to either visit mandis or banks. This helps in ensuring social distancing and safety in the APMC markets to prevent the spread of COVID-19.
On April 4, 2020, the Ministry of Agriculture and Farmers’ Welfare issued an advisory to states for limiting the regulation under their APMC Acts. The advisory called for facilitating direct marketing of agricultural produce, enabling direct purchase of the produce from farmers, farmer producer organisations, cooperatives by bulk buyers, big retailers, and processors.
On May 15, 2020 the Union Finance Minister announced certain reforms for the agriculture sector of the country to reduce the impact of COVID-19 and the lockdown. Some of the major reforms include: (i) formulating a central law to ensure adequate choices to farmers to sell agricultural produce at attractive prices, barrier free inter-state trade, and framework for e-trading of agricultural produce, (ii) amending the Essential Commodities Act, 1955 to enable better price realisation for agricultural produce such as all cereals, pulses, oilseeds, onions, and potatoes, and (iii) creating a facilitative legal framework for contract farming, to enable farmers to engage directly with processors, large retailers, and exporters.
Which states have made changes to agriculture marketing laws?
The Uttar Pradesh Cabinet has approved an ordinance, and Madhya Pradesh, Gujarat, and Karnataka have promulgated ordinances, to relax regulatory aspects of their APMC laws. These Ordinances are summarised below:
Madhya Pradesh
On May 1, 2020, the Madhya Pradesh government promulgated the Madhya Pradesh Krishi Upaj Mandi (Amendment) Ordinance, 2020. The Ordinance amends the Madhya Pradesh Krishi Upaj Mandi Act, 1972. The 1972 Act regulates the establishment of an agricultural market and marketing of notified agricultural produce. The following amendments have been made under the Ordinance:
Market yards: The 1972 Act provides that in every market area, there should be a market yard, with one or more sub-market yards, for conducting all marketing activities such as assembling, grading, storage, sale, and purchase of the produce. The Ordinance removes this provision and specifies that in the state, there may be: (i) a principal market yard and sub-market yard managed by the APMC, (ii) a private market yard managed by a person holding a license (granted by the Director of Agriculture Marketing), and (iii) electronic trading platforms (where trading of notified produce is done electronically through internet).
Director of Agricultural Marketing: The Ordinance provides for the appointment of the Director of Agricultural Marketing by the state government. The Director will be responsible for regulating: (i) trading and connected activities for the notified agricultural produce, (ii) private market yards, and (iii) electronic trading platforms. He may also grant licenses for these activities.
Market fee: The Ordinance also provides that market fee for trading under licenses granted by the Director of Agricultural Marketing will be levied as prescribed by the state government.
Gujarat
On May 6, 2020, the Gujarat government promulgated the Gujarat Agricultural Produce Markets (Amendment) Ordinance, 2020. The Ordinance amends the Gujarat Agricultural Produce Markets Act, 1963. The amended Act is called the Gujarat Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 1963. Key amendments made under the Ordinance are as follows:
Regulation of livestock market: The Ordinance brings the regulation of marketing of livestock such as cow, buffalo, bullock, bull, and fish under the ambit of this Act.
Unified market area: The Ordinance provides that the state government may declare the whole state as one unified market area through a notification. This can be done with the purpose of regulation of marketing of notified agricultural produce.
Unified single licence: The Ordinance provides for the grant of a single unified trading license. The license will be valid across the state in any market area. Existing trade licenses must be converted into the single unified licenses within six months from the date of commencement of the Ordinance.
Markets for conducting trading: The Ordinance allows the state government to notify any place in the market area as the principal market yard, sub-market yard, market sub-yard, or farmer consumer market yard for the regulation of marketing of notified agricultural produce. Certain places in the market area can also be declared a private market yard, a private market sub-yard, or a private farmer-consumer market yard. The Ordinance adds that the notified agricultural produce may also be sold at other places to a licence holder, if especially permitted by a market committee.
Market sub-yards: The Ordinance provides that a market area should have market-sub yards (warehouse, storage towers, cold storage enclosure buildings or such other structure or place or locality). Further, it also provides that the owner of a warehouse, silo, cold storage or such other structure or place notified as market sub-yard, may collect a market fee on notified agricultural produce. He may also collect user charge on de-notified agricultural produce transacted at the market sub-yard. The rate of the fees should not exceed the rates notified by the state government. However, no market fee shall be collected from farmers.
E-trading: The Ordinance provides for the establishment and promotion of electronic trading (e-trading) platforms. It provides that a license granted by the Director of Agricultural Marketing is necessary to establish an e-trading platform. Further, it provides that applications on the e-trading platform shall be inter-operable with other e-platforms as per specifications and standards laid down by the Director. This has been done to evolve a unified National Agricultural Market and integrate various e-platforms.
Karnataka
On May 16, the Karnataka government promulgated the Karnataka Agricultural Produce Marketing (Regulation and Development) (Amendment) Ordinance, 2020. The Ordinance amends the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966. The 1966 Act regulates the buying and selling and the establishment of markets for agricultural produce throughout the state. Key amendments made under the Ordinance are as follows:
Markets for agricultural produce: The 1966 Act provides that no place except the market yard, market sub-yard, sub-market yard, private market yard, or farmer - consumer market yard shall be used for the trade of notified agricultural produce. The Ordinance substitutes this to provide that the market committee shall regulate the marketing of notified agricultural produce in the market yards, market sub-yards and submarket yards. Thus, the Act no longer bars any place for the trade of notified agricultural produce.
Penalty: The 1966 Act provides that whoever uses any place for purchase or sale of notified agricultural produce can be punished with imprisonment of up to six months, or a fine of up to Rs 5,000, or both. The Ordinance removes this penalty provision from the Act.
Uttar Pradesh
On May 6, the Uttar Pradesh Cabinet approved the Uttar Pradesh Krishi Utpadan Mandi (Amendment) Ordinance, 2020. According to the state’s press release, the Uttar Pradesh government has decided to remove 46 fruits and vegetables from the ambit of the Uttar Pradesh Krishi Utpadan Mandi Act, 1964. The 1964 Act provides for the regulation of sale and purchase of notified agricultural produce and for the establishment and control of agricultural markets in Uttar Pradesh.
Certain fruits and vegetables exempted from the provisions of the Act: These fruits and vegetables include mango, apple, carrot, banana, and ladies’ finger. The proposed amendment aims to facilitate the purchase of these products directly from farmers from their farms. Farmers will be allowed to sell these products at the APMC mandis as well, where they will not be charged the mandi fee. Only the user charge will be levied as prescribed by the state government. As per the state government, this will entail a loss of revenue of approximately Rs 125 crore per year to the APMCs.
License: Specific licenses can be procured to carry on trade at places other than APMC markets. This will encourage the treatment of warehouses, silos, and cold storages as mandis. The owners or managers of such establishments can charge the user fee for managing the mandi. Further, unified license can be used to trade at village level.
