Arun Jaitley battles inflation diluting APMC

People buy vegetables at a market in Allahabad on Monday.

Reuters report in Times of India said that the Government is targeting middlemen and hoarders in the food supply chain to curb inflation surge. Within 10 days of assuming office, Prime Minister Narendra Modi’s Government ensured that certain essential vegetable items are delinked from the Agricultural Produce Marketing Committees (APMCs). This, by itself, was a positive initiative, even as APMC players tried to create trouble becasuse their grip over food supplies started loosening. According to a July 3Indian Express report, “Traders protested the move and hinted at closure of APMC markets in protest.” Even as some States have already initiated steps to curb APMC influence, some are still hesitant since there are certain influence groups which are trying to curb these decontrolling exercises – mostly middlemen.

Even as Finance Minister Arun Jaitley said that the Government is going to take strict action against hoarders and all those who plan to create hurdles in the supply chain, agencies quoted him saying, “The Government is actively monitoring prices of 22 commodities. There has been a rise in prices of four to five commodities. Even though the rise is marginal, we do not want anyone to exploit the system.” The Finance Minister had earlier staid that the APMC dilution is a welcome move in curbing inflation as fear of poor monsoon looms large.

The APMC is an archaic law which is 50 years old. This law prohibits farmers from selling their produce outside the mandis, which are primarily Government-controlled mechanisms. It was brought in at a time when big landlords used to blackmail a farmer and force him to sell his produce to him. It was the landlord who used to earn maximum profit. Curbing these players was important at that juncture. However, restricting the farmer today from selling his goods to markets denies him better margins. If there is a rich harvest of onions in Maharashtra and there is big demand for the same in north India, it is the middleman who is earning profits, not the farmer.

This is why, while a customer buys onions at Rs 40 a kg in Delhi, the farmer in Nashik or Dhule gets Rs 5 at the most. The large margin gets distributed among the chain of middlemen. In most cases, the farmer doesn’t even have enough money to transport his produce back home and is forced to sell it off at whatever price he receives. In most cases, while the cost of vegetables and fruits keep surging and the end-buyer is paying a heavy price, the farmer doesn’t even manage to meet his cost of production. Many times, a frustrated farmer is forced to dump his goods on the roads and go back.

 

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