MARKETING  INFRASTRUCTURE  &  AGRICULTURAL 
 MARKETING  REFORMS
                                                                                             
                                                                                                                       



 NEED FOR REFORMS

                            Agriculture sector needs well functioning markets to drive growth, employment and economic prosperity in rural areas of the country.  In order to provide dynamism and efficiency into the marketing system, large investments are required for the development of post harvest and cold chain infrastructure nearer to the farmers’ field.  Projection of production and marketable surplus of various farm products was recently assessed by an Task Force set up by the Ministry of Agriculture which estimated that an investment of Rs.12,230 crore in next 10th Plan would be necessary for infrastructure development for agricultural marketing.  A major portion of this investment is expected from the private sector, for which an appropriate regulatory and policy environment is necessary. Alongside, enabling policies need to be put in place to encourage procurement of agricultural commodities directly from farmers’ field and to establish effective linkage between the farm production and the retail chain and food processing industries. Towards this end, the Inter-Ministerial Task Force on Agricultural Marketing Reforms constituted by this Ministry in its report of 28.06.2002 has made the following important recommendations:

i.        Promotion of competitive agricultural markets in private and cooperative sectors, direct marketing and contract farming programmes by amending the State Agricultural Produce Marketing Regulation Acts and to provide central assistance for the development of marketing infrastructure subject to such deregulation and reforms;

ii.      Progressive dismantling of controls and regulations under the Essential Commodities Act to remove all restrictions on production, supply, storage and movement of, and trade and commerce in respect of all agricultural commodities;

iii.    Substantial step up in flow of institutional credit to farmers for marketing of crops (pledge financing) to enhance their holding capacity to obtain remunerative price for their produce;

iv.   Expand availability of warehousing services in rural areas by introducing negotiable warehousing receipt system for agricultural commodities; and

v.     Allow futures trading in all agricultural commodities to improve price risk management and facilitate price discovery by amending the Forward Contracts (Regulation) Act, 1952;  

          The recommendations contained in these Reports were discussed with the State Governments at a National Conference on 27th September, 2002 and later by a Standing committee of State Ministers on 29th January, 2003.  In the Conference as well as the Standing Committee, State governments expressed the view that reforms in the agricultural marketing sector were necessary to move away from a regime of controls to one of regulation and competition.  In view of liberalization of trade and emergence of global markets, it was necessary to promote development of a competitive marketing infrastructure in the country and to bring about professionalism in the management of existing market yards and market fee structure.  While promoting the alternative marketing structure, however, Government needs to put in place adequate safeguards to avoid any exploitation of farmers by the private trade and industries.  For this, there was a need to formulate a model legislation on agricultural marketing.  

          The Ministry of Agriculture accordingly formulated a model law on agricultural marketing in consultation with the States Governments.  The draft model legislation provides for establishment of Private Markets/Yards, Direct Purchase Centres, Consumer/Farmers Markets for direct sale and promotion of Public Private Partnership in the management and development of agricultural markets in the country.  It also provides for separate constitution for Special Markets for Commodities like Onions, Fruits, vegetables, Flowers etc.  A separate Chapter has been included in the legislation to regulate and promote contract-farming arrangements in the country.  It provides for prohibition of commission agency in any transaction of agricultural commodities with the producers.  It redefines the role of present Agricultural Produce Market Committee to promote alternative marketing system, contract farming, direct marketing and farmers/consumers markets.  It also redefines the role of State Agricultural Marketing Boards to promote standardization, grading, quality certification, market led extension and training of farmers and market functionaries in marketing related areas.  Provision has also been made in the Act for constitution of State Agricultural Produce Marketing Standards Bureau for promotion of Grading, Standardization and Quality Certification of agricultural produce.  This would facilitate pledge financing, E-trading, direct purchasing, export, forward/future trading and introduction of negotiable warehousing receipt system in respect of agricultural commodities.