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Benefits of Competition in the Agricultural Produce

Marketing Sector

NATIONAL SEMINAR
National Competition Policy and Economic
Growth of India

Thursday, 21
st
March, 2013, New Delhi
1
Structure of the Presentation
Background
Aim & Scope
APMC
Marketing Chain
Legal Analysis
Areas/Sources of Anti-Competitive Practices
Survey
Constraints Identified
Economic Benefits due to competition
Policy Recommendations
2
Background
Agriculture is one of the major driving forces of economic
growth

Market-mediated linkages of the agriculture sector

In India, the agriculture sector is diverse and supports a majority
of population for their livelihood

3
Aim

Promote effective adoption and implementation of principles
of National Competition Policy by advocating for legislative
changes


Scope

Review of existing Laws

Identification of competition distortions

Suggest reforms to induce competition in agricultural
marketing

4
Agriculture Produce Market Committee
Marketing Committee regulate agricultural marketing in
notified market area
Roles of Marketing Committees
Structural rigidities of APMCs lead to operational efficiency
Need for a APMC reform
5
FARMERS
Aratdars/Auction
Agents/commissi
on agents
PRODUCE
TRADERS
Retailers/Whol
esalers in the
vicinity of the
Regulated
markets
Aratdars in other
states / cities/
wholesale
markets
Consumers in
the vicinity of
the Regulated
markets
RETAILERS
Consumers
in other
states/cities
6
Marketing Chain
Brokers
Legal Analysis




Nuances of Agricultural Markets: Competition Perspective
Used to be perceived as an example of a perfectly competitive market
Buyer power could be a possible distorting factor

Review of some relevant Acts & Rules (Central and State Level)
Essential Commodity Act 1995 (Amended as on 2010)
Agriculture Produce (Grading and Marking) Act, 1937 (Amended as on
1986)
APMC Model Act 2003
The Maharashtra Agricultural Produce Marketing (Development and
Regulation) Act, 1963 (Amended as on 2010)
The Maharashtra Agricultural Produce Marketing (Development and
Regulation) Rules, 1967 (Amended as on 2010)
The West Bengal Agricultural Produce Marketing (Regulation) Act, 1972
(Amended as on 1981)
The West Bengal Agricultural Produce Marketing (Regulation) Rules, 1982
The West Bengal Cold Storage (Licensing and Regulation) Act, 1966

7
Areas/Sources of Anti-Competitive Practices
Maharashtra APMC
Lack of Competition in a Market Area: A rationale should be provided for
why more than one mandi cannot operate in a territorial market area
Grant of Licence: licence can be denied without any valid reason
National Integrated Produce Market:
sharing of market information may encourage price-sharing
arrangements
government organisations are exempt from bank guarantee
requirement; distortion of competitive neutrality

Tomato Specific
Vertical linkages thrive where over time abuse of dominance can occur
Collection centres - Cold storage transportation vans (reefer vans)
retailers/food processing outlets
Contract Farming
Model Contract Farming Agreement (Maharashtra APMC)
Should be vetted to ensure there are no provisions which could
give rise to exclusive arrangement

8
Areas/Sources of Anti-Competitive Practices
Favourable provisions for Farmers Cooperatives

Absence of justification for favouring farmers cooperatives
Maharashtra State Agricultural Marketing Board (Cold Storage
Subsidy Scheme)
Subsidy scheme is not applicable to all players: Applicable
to APMC, cooperative societies
West Bengal Cold Storage Licensing Order
Preference is given to the produce of farmers
cooperatives

9
Survey
Product Chosen: Tomatoes
Rationale - to capture a horticultural product which is highly perishable
India is the worlds second largest producer of tomatoes, but, it
imports more processed tomatoes than it exports
One third of our import of processed tomatoes is from China
[worth approximately 6.7 mn US dollars]
Limited cold storage and transportation facilities
Contract Farming is ideal for bulky, perishable commodities like
horticultural products
Saumitra Chaudhri Committee report
Perishable commodities should be de-notified from APMC Acts
Perishables should be exempted from cess so that farmers can sell their
produce in any place
States Chosen: Maharashtra and West Bengal
Rationale the states experiencing differing levels of implementation of
APMC reform


10
Survey
Product Profile in Maharashtra & West Bengal
West Bengal is 4
th
largest producing state
Maharashtra is 6
th
largest producer and harvesting period is throughout
the year


Stages of adoption of Model APMC
Revised their APMC legislation in line with the Model APMC
(Maharashtra)


Modified the Model APMC (West Bengal)
Is against including contract farming provisions
Interest of farmers who have undertaken joint cultivation
model have been protected
Has exempted market fees for fruits and vegetables
11
Constraints Identified
Structural and Behavioral rigidities
Auction System
Election system
Marketing linkages
Inadequate Infrastructure
Market Information system
12
Economic Benefits due to competition
Lines of improvement to build competitive structure:
- Technology
- Market linkage
- Financial assistance
Economic Benefits
- Increase in operational efficiency
- Removal of structural barriers
- Better remuneration to the producers

13
Policy Recommendations
Central Government Level

Competition Commission of India should monitor agreements
dealing with infrastructure and transportation service providers
Territory of operation of a service provider should be
identified
Vertical linkages between cold storage service providers and
transportation companies should be examined
Monitoring should extend to retailers, processors and
exporters

Farmers Cooperatives
Provisions which favour farmers cooperatives should be
amended

14
State Level
West Bengal Cold Storage Licensing Order: Preference for storage of
produce of farmers cooperatives should be removed

Maharashtra Cold Storage Subsidy Scheme: Should be made widely
applicable

Maharashtra APMC
Grant of Licences: Fees should be reduced ; Reason should be
provided for not granting a licence
National Integrated Produce Market: Instances where vertical
agreements such as exclusive supply agreements may be struck up
should be monitored
Contract Farming; drafting of agreements and their implementation
could be closely monitored by CCI, by the virtue of the powers
conferred to it under Section 3 of the Indian Competition Act

Policy Recommendations
15
Thank You
16

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