There is also a point of view that Agricultural Produce Market Committees (APMCs) set up under the State…

Question

There is also a point of view that Agricultural Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.

Ghissu Editorial · Accepted Answer

The charge is only partly valid: APMC licence monopolies, layered fees and curbs on private trade widened the price spread and impeded market development, but food inflation was chiefly driven by MSP hikes, rural wages, protein demand and supply shocks. Bihar's 2006 repeal of its APMC Act produced no private markets.

**Introduction**

State APMC Acts of the 1960s and 1970s created regulated mandis to protect farmers from exploitative traders. By 2014, after years of high food inflation, critics argued that APMCs had become closed trading clubs, a charge only partly true.

**How APMCs Impeded Agriculture and Fed Inflation**

1. **Licence monopoly**: Compulsory first sale and scarce licences let a few commission agents dominate arrivals and corner produce such as onions.
2. **Layered fees**: Fees and commissions widen the price spread; farmers get about a third of the consumer rupee for tomatoes, onions and potatoes (RBI working paper, 2024).
3. **Fees not reinvested**: The CAG (Report No. 5 of 2025) found ₹392.28 crore of Uttar Pradesh mandi-fund interest diverted in 2016-21.
4. **Private investment blocked**: Direct buying and contract farming needed APMC permission, so the Model APMC Act 2003 was adopted slowly.

**Why APMCs Are Not the Whole Story**

SKETCH: fishbone | Drivers of Food Inflation
effect: Food inflation, 2009-13
- APMC price spread
- Rising MSP
- Higher rural wages
- Protein demand shift
- Drought and supply shocks
- Weak cold chain

1. **Price discovery**: Mandis gave open auctions and assured payment, sustaining Punjab-Haryana procurement.
2. **Abolition alone failed**: Bihar repealed its APMC Act in 2006, yet private markets did not emerge.
3. **Structural drivers**: MSP hikes, rising rural wages and a shift towards protein foods (Subir Gokarn, RBI, 2011) drove inflation more than mandi rules.
4. **Supply shocks**: The 2009 drought and the 2013 onion shortfall caused spikes that cartels amplified but did not create.

**Conclusion**

The charge is valid in part: APMCs widened the price spread and amplified spikes, but food inflation was chiefly structural. Reform, not abolition, through e-NAM and the Model APLM Act 2017, is the answer.

There is also a point of view that Agricultural Produce Market Committees (APMCs) set up under the State Acts have not only impeded the development of agriculture but also have been the cause of food inflation in India. Critically examine.

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