DISCUSSION

Arthiyas in Punjabs
APMC Mandis
Inadequate Analysis and Solutions
Sukhpal Singh

A critique of Commission
Agent System: Significance in
Contemporary Agricultural
Economy of Punjab by Sukhpal
Singh and Shruti Bhogal
(EPW, 7 November 2015).

Sukhpal Singh, the author of this discussion,

bears no relationship to Sukhapal Singh,
author of Commission Agent System:
Significance in Contemporary Agricultural
Economy of Punjab.
Sukhpal Singh (sukhpal@iima.ac.in) is
with the Indian Institute of Management,
Ahmedabad.
Economic & Political Weekly

EPW

april 9, 2016

ingh and Bhogals article, Commission Agent System: Significance in

Contemporary Agricultural Economy of Punjab (EPW, 7 November 2015)
was timely and refreshing as agricultural
markets are not fully understood in
various debates about farmers issues in
India, especially in the context of Punjab.
They provide evidence on the extent and
magnitude of the presence of commission
agents in the states agricultural markets
and the interlocking of various markets
which take place due to the credit linkage these agents provide to farmers.
Singh and Bhogal use primary data to
estimate the number of commission
agents in the grain and cotton markets
(wholesale Agricultural Produce Market
Committee or APMC markets) of Punjab,
as also the volume of produce handled by
them and the commission these agents
earn. They dwell at length on the interlinkage of the credit, input and output
markets of the state and argue that it has
led to farmer indebtedness in the absence
of institutional credit which is inadequate and costlier due to higher transaction costs despite lower interest rate.
They point to the system of payment
for the farmer produce through the
commission agents as the root cause of
trouble for farmers. The authors observe that these agents who do unregistered and informal business of moneylending recover their loans through
this system of payment, though the
farmer produce is mostly bought by
state agencies like Food Corporation
of India and Cotton Corporation of
India (CCI). But, they throw no light on
the proportion of kachcha arthiyas
(commission agents) and that of pucca
arthiyas (wholesale traders) of farm
produce in the state. The two cannot be
vol lI no 15

seen as the same though they may

overlap to an extent.
Singh and Bhogal argue that commission agents charge high rate of interest
for loans and also charge commission
from farmers for facilitating the sale of
their produce. They are factually incorrect in stating that the farmers pay commission to such agents for selling their
produce. In a regulated market, no farmer pays any commission; it is only buyers
who pay commission to agents. If farmers are indeed paying commission in
Punjab, then one wonders about the kind
of mandi system and regulation practised by the state mandi board. A significant character of regulated markets anywhere in India is that farmers do not have
to pay commission; it is negligible in some
states, that too only for perishables.
The authors do not recommend the
abolition of commission agents in the
states grain markets (paddy, wheat and
cotton are three major crops of Punjab),
where most of the produce is bought by
state agencies, thereby making the role of
such agents irrelevant. Instead they say:
There is a need to get all the commission
agents registered so as to bring about transparency and effective regulation of the vast
rural credit market, especially in view of the
fact that about 36% of the farmer credit is
sourced through commission agents (p 62).

This is an undesirable recommendation,

as it would further perpetuate the presence and dominance of the agents in not
only produce markets but also credit and
input markets which are not competitive
due to the interlocking practised by these
entities. More progressive and meaningful solutions like abolition of the very
institution of commission agents are not
even discussed. This is surprising as
states like Madhya Pradesh (MP) could
have taken such steps as early as the 1980s
without any major protest (Krishnamurthy
2014). The abolition should be much
more feasible now as there are more
alternate agencies like farmer producer
companies (FPCs), primary agricultural
credit societies (PACSS) and co-ops or
agricultural start-ups that can facilitate
farmer produce handling in mandis or
outside. The PACsS already buy from
69

DISCUSSION

farmers at their doorstep in many states

like Bihar (seen by the author, first
hand) and MP, where payments are directly made into farmers bank accounts
by the PACsS (Krishnamurthy 2014).
Singh and Bhogal show no awareness
of Punjabs unamended Agricultural
Produce Markets (APM) Act and the
enactment of the Contract Farming Act
in the state a couple of years ago. They
fail to ask why the state has not amended the APM Act or why it has not operationalised the contract farming commission and its machinery. It is important to
realise that the agricultural marketing
reforms are not separated from the problems of the states agricultural marketing system and the plight of the farmers
in these markets. These are political
economy issues and have to be understood in such terms and resolved in that
light. One needs to decide the primary
stakeholder of the states agricultural
marketing system and the agricultural
sector and then propose solutions, without
taking the existing power play as given,
if long-term and sustainable solutions
are to be sought. The fragmented farmer
union movement in the state is also a
major hurdle in getting the institutions
right for small farmers (Singh 2012).

can be bought directly from farmers outside the mandi under an APMC licence.
Further, it is a fact that the commissions
are much higher in F&V markets due to
high value of produce and higher wastage
involved. But delisting of F&V produce
has nothing to do with the issues analysed by the authors as they only deal
with non-perishable produce markets.
Therefore, it is ironic that they have not
cared to separate the discussion on the
two issues. This will mislead readers
who are not familiar with nuances of the
APMC markets in India.
It is surprising that at a time when the
state should control less of markets in a
state like Punjab where it has caused
enough damage, Singh and Bhogal argue
for an enhanced role of the state. They
are unmindful of the new initiatives
like the FPCs, and unaware that mechanisms like direct purchase from farmers
and private wholesale markets could
provide a break from the past. The issue
of National Agricultural Market and

70

References
Krishnamurthy, M (2014): The Political Economy
of Agricultural Markets: Insights from Within
and Across Regions, IDFC Rural Development
Network, India Rural Development Report, New
Delhi: Orient Blackswan, Chapter 4.
Singh, S (2012): Institutional and Policy Aspects of
Punjab Agriculture: A Smallholder Perspective,
Economic & Political Weekly, 47 (4).

Review of Womens Studies

Different Markets
The biggest flaw in Singh and Bhogals
argument is that it begins with the issue
of delisting of fruits and vegetables
(F&V) from APM Act as suggested by the
union government in the past few years
but uses evidence from non-perishable
produce markets. They do not realise
that the two markets and their dynamics
are very different from each other even
though they may be under the same act.
Most of the perishable produce markets
are still unregulated; and those of
foodgrains and other produce are generally more regulated in bigger agricultural
states like Punjab.
The ill-conceived move to delist F&Vs
was based on the flawed logic that food
inflation is largely due to the delays and
wastages caused by the APMC rules. The
APMC made it mandatory for perishable
produce to pass through the mandis; it is
only a half-truth, as in most states under
the amended APMC Act, fresh produce

Punjabs stand on it, as it is going to

directly hurt the commission agents
(CA s), is not even mentioned by them.
The best bet for making CAs irrelevant
would be to diversify the farm sector of
the state as, when wheat and paddy or
cotton reduce in importance, the CAs as
well as the state would tend to wither
away on their own. But that is an argument which is daring to make as it
involves tying the farmers and their
unions to do things differently or to do
altogether different things. The old
beaten arguments and path would not
suffice for helping the distressed Punjabi
small farmer who is now on the verge
of collapse.

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