The waste of a resource that could help India cope
We follow the trail of fruits and vegetables from a the wholesale market in Vashi to street vendors in Mumbai.
If you ask any fruit and vegetable vendor on the streets of Mumbai – from a shopkeeper to a street hawker - where his supply comes from, the answer is usually the same and always accompanied by a surprised look, as if you should know, “Vashi” (of course).
Vashi is the wholesale market of Mumbai, the entry point for almost every agricultural produce - food grains, spices, fruits and vegetables - meant for the extended region of Metropolitan Mumbai.
It is located in Navi (New) Mumbai, a planned city established to decongest Mumbai in terms of both population and commercial activities. Built in 1977, under the provisions of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963, the Vashi APMC (Agricultural Produce Market Committee) market centralizes all produce entering Mumbai in one place before it spreads all around the metropolitan area through different distribution lines: markets, street vendors, restaurants, processing companies, malls and hotels. Vashi may be a wholesale market but all these lines represent a large variety of distinct customer profiles.
Maharashtra state (with Mumbai as its capital) has 306 APMCs with main markets and 598 sub markets, that streamline and regulate the marketing of agricultural and pisciculture commodities, from the same market area or any area thereof. A hierarchical and systematic board does the management of the produce through APMC.
The “APMC Acts provide that first sale in the notified agricultural commodities produced in the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., can be conducted only under the aegis of the APMC, through its licensed commission agents, and subject to payment of various taxes and fee.” (Abraham & Gaur, 2015). Thus, forcing the producers of agricultural products to do their first sale in these markets.
This law was amended in July 2016, deregulating the sale of fruits and vegetables, providing farmers with a legal framework to operate outside APMC markets without any licence; the objective was to ensure that the farmers get a fair price and the consumers get vegetables and fruits at a cheaper rate. The earlier law was too restrictive for small farmers who could not afford travelling long distances or pay a transport service to send their goods to the closest APMC, which sometimes, could be more than 100 Km away. The decision faced a lot of opposition from the traders (who organised strikes) but it prevailed.
In general, there are two categories of farmers in the APMC network: farmers who grow at their convenience to sell the surplus in the market, and the farmers employed in contract farming ventures, sponsored by investors.
To understand the functioning of the market from a contractor’s end, we interviewed Mr. Asif who works for a contractor (dealing exclusively in mangoes) in a managerial capacity. His family has been in the distribution business since 1912 – during the period of British colonialism; his father working in the fruits business before him.
Mr. Asif’s job consists of contracting farmers, giving them advance money for the year’s production and harvest, managing the movement and transfer of goods and making sure famers don’t default, which includes going on site to oversee things being done in the agreed upon way. At present, they have 120 contract farmers under them. He mentioned that every contractor and seller has to register in the APMC market and have a license to operate officially, with yearly renewal of the licence.
According to him, the main concern that most farmers and contractors have is the fluctuation of prices, which, mainly depends on the quality of the produce. For example, the current price was Rs. 1,000/crate for mangoes, but it could go up to Rs. 3,500/crate too, depending on the harvest and the supply-demand equation. In the last 10 years, the supply of produce has gone down to 40%, which had a huge impact on prices. From this, we can understand that the job of a contractor is not unlike an investor, if the harvest in a year drops, he loses money and if it booms, he gets the most profit.
On the other hand, farmers (esp. the small and marginal farmers with no alternative source of income) in every case are the worse-off stakeholders. If the harvest is good, they get returns but not much profit, if the harvest is low, they end up making losses and if the harvest fails, they have situation of bankruptcy. One thing we can assume is that the contract farmers are in a better situation than the independent farmers (of which small and medium farmers form the majority); as in the former case, the fall-out from low harvest is borne by the contractor but in the latter, the sum of all the losses is borne by the farmers.
We also interviewed a farmer in our research to shed light on travails of the small and marginal farmers. Since, the amendment of the law, she has been able to make periodic visits to Mumbai to sell her own produce directly in the market and earn a substantive income despite the travelling costs. On asking why she did not use the APMC channel, she replied with, ‘hum to chote kisan hai na didi, ghar chalane ke liye karte hain, truck mein bada saman jata hai’; impliying the lack of proper channels for the small and marginal farmers to sell their produce.
The previously established networks of small and marginal farmers could not keep on operating because of the APMC act, and disparities in access to the places of legal exchange started to create gaps and economic vulnerabilities. Its aim was creating solutions but the regulations became very restrictive creating a multiple-tier (which reduces the returning cost to farmers) and opaque marketing system (leaving enormous scope for malpractices) with several other lacunas. Why small marketplaces could not be created closer to produce-growing areas under the APMC system?
In our research we often heard talk about the unfair system of the APMC market. In the whole chain of stakeholders, there is a tremendous gap between the income of middlemen (the commissioning agent and the transaction agent) and investors or wholesale buyers and the returning cost of the produce to the farmer.
It is difficult to know exactly how much profit the contractor makes or how much Mr Asif earns himself, but we can assume that he is in a well-off situation to be working in this business for decades and the fact that all his children are well educated and in well-to-do jobs.
Middlemen receive double commission, from both seller and buyer. The buyer and the commission agent determine the final price during the auction and another transaction agent (charges 3% of the price as service charge) will deliver the payment only a week after the auction. Being the last one in the chain, the farmer usually does not have the knowledge of current prices in the market, and cannot claim the fair rate. The average that a farmer is able to receive is barely 25% to 33% of the end-price, sometimes even less.
The lack of transparency in the system is accountable for it, in part. The other factors are low awareness of farmers because of lack of knowledge and information generation, an updated database about the going prices, costs, etc. and, availability of platforms, portals or resources where the farmers can get informed. Thus, the APMC systemic structure- a highly centralised system- leaves much scope for the exploitation of farmers.
“The APMC system was introduced to prevent distress sale by farmers to their creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through the auctions in the APMC area. However, APMC Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk processor as the produce is required to be routed through these regulated markets. Over a period of time, these markets have acquired the status of restrictive and Monopolistic markets, harming the farmers rather than helping them to realise remunerative prices.” (Abraham & Gaur, 2015)
“Thus, the monopoly of Government regulated wholesale markets has prevented development of a competitive marketing system on a pan-India basis, providing no help to farmers in direct marketing, organizing retailing, a smooth raw material supply to agro-processing industries and adoption of innovative marketing system and technologies.” (Abraham & Gaur, 2015)
This, along with other external factors, has made agriculture a very unlucrative venture and an increasingly insecure one. The increasing cost of production, decreasing returns to the farmers, and lack of supporting infrastructure has led to the present plight of farmers. They become trapped in a vicious cycle of debt, helpless to come out of it without many available avenues for alternative incomes, forcing the men to migrate to cities for extra incomes while the women back home manage the farm. This whole scenario reflects an example of the fall-outs of urbanization, which tends to create economic and social gaps between rural areas and urban centres, leading to regional disparities at varying levels.
There is an urgent need for reforms in the APMC Acts with a revamped marketing system, which does not have too restrictive measures, has alternatives for different scale of farmers, and a transparent and accountable structure. On a larger scale, the agricultural industry, as a whole, also needs large-scale reforms with front-end and back-end infrastructure, connectivity, information generation and awareness available to producers. This will ensure profitable remunerations, and make it a lucrative venture, rewarding the hard work a farmer puts in to feed the nation.
Abraham, R. K., & Gaur, S. (2015, July 15). Agricultural Produce Market Committee (APMC) . Retrieved from Arthapedia: http://www.arthapedia.in/index.php%3Ftitle%3DAgricultural_Produce_Market_Committee_(APMC)
Ghadyalpatil, A. (2016, October 18). How Maharashtra is changing the way farmers sell their produce. Retrieved from Livemint: https://www.livemint.com/Politics/kejX5POEUKK1l7qz05c0VL/How-Maharashtra-is-changing-the-way-farmers-sell-their-produ.html
Maharashtra State Agricultural Marketing Board. (n.d.). Regulation. Retrieved from Maharashtra State Agricultural Marketing Board: https://www.msamb.com/APMC/Regulation
MAPMC. (n.d.). MAPMC. Retrieved from MAPMC: http://www.mumbaiapmc.org/index.html
Press Trust of India. (2016, July 13). Maha amends APMC Act, deregulates sale of vegetables, fruits. Retrieved from Business Standard News: https://www.business-standard.com/article/pti-stories/maha-amends-apmc-act-deregulates-sale-of-vegetables-fruits-116071300054_1.html
Singh, S. (2015, February 8). APMCs: The other side of the story. Retrieved from Business Line: https://www.thehindubusinessline.com/opinion/apmcs-the-other-side-of-the-story/article6871346.ece
 The purpose of the Act (like all other state APMC acts) is regulation of trading practices, increased market efficiency through reduction in market charges, elimination of superfluous intermediaries and protecting the interest of producer-seller. http://www.arthapedia.in/index.php%3Ftitle%3DAgricultural_Produce_Market_Committee_(APMC)
 Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government. http://www.arthapedia.in/index.php%3Ftitle%3DAgricultural_Produce_Market_Committee_(APMC)
 The end price does not account for the total cost of production other than the monetary investments leaving out costs such as opportunity cost, family labour, value of land, and time invested.
 As the produce travels from farm to consumer through multiple stakeholders and handlers, its retail price goes up by 50% over the negotiated price by the commission agent at the auction, but the farmers do not get the benefit of the price appreciation. The produce, handled at multiple levels, also suffers at least 25% damage.