In spite of all the criticism against Agricultural Produce and Market Committees (APMC) and accusations that middlemen have benefitted more than farmers, it is indisputable that the system has survived and grown in the last 50 years. Like many other institutions, here too the solution lies in efficient management of available resources and a forward-looking human resource that manages the functioning. A visit to some of the APMC yards will illustrate that all is not bad.Often, APMCs are elected/nominated bodies where the governance structure and the management (operating structures) are merged by design. The expectation is that elected members are supposed to hold an “honorary position” yet devote their full time to the management of the market. This often affects the behavioural pattern of the elected body and some of them try to look at other avenues of income. If some of the APMCs in India have survived in pockets and are flourishing efficiently, then the problem certainly lies in execution failure.
The APMC was initially designed to regulate the local agricultural market with an assumption that this will automatically benefit the primary producers. In the current context, regulation is no more a priority but market efficiency with least hassle is the primary objective. Corporate forays, in all their dynamism, in spot market buying (in any particular geography) have not survived more than two years (though lots of case studies have been written).
As an alternative, if benefits have to accrue to the primary producers, then one needs a producers’ company (different from a co-operative). An amendment to this effect has already taken in the Companies Act on February 6, 2002. Therefore, one cannot dismiss the possibility of the creation of ‘producer companies’ as a utopian concept. Primarily, two functions can be ascribed to the producers’ companies: aggregation of local produce (leveraging on local mandi infrastructure) and information dissemination. It is undeniable that order and modernisation can only be enhanced through primary producers’ participation in a commercial entity where shareholder objectives are not conflicting. Moreover, innovative use of IT can provide better transparency and accountability at a local level.
The producers’ companies can have an elected board separated from the management. The appointment of merit-based professional managers will provide these producers’ companies with a better chance of success. The entire shareholding in such a company should be with the primary producers and producer organisation. The voting rights should be based on the amount of produce sold through the company rather than the number of shares held by individual shareholders. This will bring more transactions within the ambit of genuine transaction and discourage systemic evasion.
Member shareholders will initially receive only such value for the produce or products pooled and supplied as the directors may determine. The withheld amount may be disbursed later either in cash or in kind or by allotment of equity shares. The possibility that these producers’ companies entering into contracts with the entities having large raw material requirement will also protect the producers with the benefits of collective bargaining. On the other hand, it will also provide a low transaction cost for user companies. Middlemen can also be assimilated within the system by appointing them as redistributors for the producers’ companies.
Corporates can forget the ‘farmgate to fork’ dreams and focus better on the functions where they have competitive edge such as branding, retail packaging and distribution. This will compress the learning cost curve and help them in a focussed approach on areas of strength. In times of growing lobbying for a review of APMC Acts of the states in the name of ‘market modernisation’, producers’ companies can provide a strong alternative to protect the interest of the primary producers.
