A good move

The proposal to remove fruits and vegetables from the purview of the agricultural produce marketing committee (APMC) Acts of states is a good move. Congress vice-president Rahul Gandhi has made the suggestion and it will be implemented by all Congress-ruled states very soon. Other states should also move forward on the matter because it is certain to have a beneficial impact on the prices of these agricultural commodities, which are a major contributing factor for inflation.

Food inflation, at 20 per cent, has been an important component of general inflation in the last many months, with vegetable price escalation recording over 90 per cent last November. Though the prices have shown a declining trend after the monsoon, the structural problems that cause the price rise are still present. Though the idea of delisting fruits and vegetables from the APMCs has been there for a long time there has been little action on it.

At present much of the trading of these farm commodities is limited to wholesale mandis controlled by the state. Only licensed traders can buy from the farmers and they often form a cartel and act as middlemen between the producers and the farmers. The prices are multiplied many times in the process, with farmers benefitting little and consumers paying high. When farmers have the freedom to sell their produce to retailers, processors or traders outside the mandis, the intermediate costs like mandi charges and profiteering can be avoided. It will also reduce the spoilage and wastage of many of the agricultural commodities which are perishable, by reducing the time span between the first stage of sale and the retail point. It is estimated that now these commodities pass through six or seven intermediaries. Big retailers who buy from the farmers will also be incentivised to better preserve the perishable produce through the setting up of cold chains and supply management systems.

The move to liberalise agricultural trade may have been prompted by political considerations, with inflation being seen as a major electoral issue. It will however take some time to bring in deregulation through changes in legislation, though January 15 has been set as a deadline for Congress-ruled states. But in the medium and long terms it will have a positive impact on inflation and help to curb practices like hoarding and blackmarketing. Consumer groups and organisations have welcomed the proposal. Earlier the new system is introduced, the better. 

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