Commodity Regulators: Introduction to APMC and Its Functions

In a spot market, goods are sold for cash followed by immediate delivery and price settlement takes place on the spot while price determination is based on pure demand and supply forces. All APMC mandis are examples of a spot market. The APMC or the Agricultural Produce Market Committee is one of the regulators of the agricultural commodity markets, which was constituted as per APMC Acts for managing the agricultural markets. 

Most of the State Governments and Union Territories enacted legislations (Agricultural Produce Marketing (Regulation) Act (APMC Act) to provide for regulation of agricultural produce markets. Some of the rural primary markets have been brought under regulation over the years, in order to achieve an efficient system of buying and selling of agricultural commodities.  

There is a principal market for many of the regulated wholesale markets, featuring with large area and relatively better infrastructure. There are number of sub-yards that are attached to the principal market. The establishment of regulated markets has helped in creating orderly and transparent marketing conditions in primary assembling markets. In 2014-2015 there were about 2477 principal regulated market yards based on geography (the APMCs) and 4843 sub-market yards regulated by the respective APMCs. At the time of independence there were only 286 yards.  

APMC OBJECTIVES 

• Providing a sound environment for normal functioning of demand and supply forces.  

• Ensuring reasonable profit margins for growers or farmers.  

• Prevent market malpractices.  

• Promotion of market competition  

• Providing facilities necessary for a proper infrastructure 

• Ensuring that transactions are conducted in a transparent manner  

APMC RESPONSIBILITIES AND FUNCTIONS: 

• Ensuring transactions taking place in the market area 

• Focus on providing complete transparency in the pricing system   

• Ensuring payment for the agricultural produce that is sold by the farmers, on the same day 

• Promotion of public-private partnership in the management of agricultural markets.  

• Promotion of agricultural processing, apart from activities for value addition in the agricultural products.  

• Publicising data regarding arrivals of agricultural produce in addition to their rates, brought for sale in the market area.  

• Appointing the chief executive officer of the market committee amongst the professionals, chosen from the open market.  

Speaking about the governance of the APMCs, the mandis are managed by a board of director, which is under the supervision of the state marketing board or mandi board. The elected directors are generally representatives of the farmers but they are sometimes nominated the state governments. The operation and market administration done on a day-to-day basis are managed by the board with a nominal fee or cess it collects from the market participants.  

HOW APMC OPERATES: 

The APMC trades in two ways – Negotiated Trade and Auction Trade. In a negotiated trade the sellers approach traders for getting a price quote and this trade generally refers to a dealer market. Before arriving at a mutually accepted price the price is either accepted or negotiated. In an auction trade a commodity is sold through the open outcry method and it refers to an open auction market. Here local supply and demand determines the price of the produce. Auction is facilitated by an official from the APMC, or a professional auctioneer.  

Speaking about clearing of trades, the deals are cleared with buyers/sellers immediately after the transaction and the buyer has to conduct an inspection of his produce for quality and quantity, at the time when the trade is cleared with the seller. When the trading day ends then price paid and volumes are reported and the trader then pays the fees or cess.  

Farmers bring their produce from the fields to the nearest APMC for sale. Once the produce is brought, the traders then sell the goods to buyers. Since there are no long term storage facilities in the market yard the APMC permits traders to keep the produce in the yard overnight in case the produce is not sold on the same day. In this way APMC facilitates trade settlements and any dispute regarding produce quality that emerges after the delivery is between the trader and buyer/seller, once the trade settlement gets accomplished.  

The trader pays two types of fees – Basic Transaction fee which comprises a fraction of the value of the traded volumes. Second fee is in the form of taxes. The market fees may vary significantly across different states. Intermediaries such as commission agents, wholesalers, sub wholesalers, auctioneers, packers, graders and laborers are the other market participants, apart from regular buyers and sellers, who are involved in facilitating trades. For participating in the auction a buyer has a license issued by the APMC.