Liberalising Agriculture

State APMC laws are a major hurdle to modernization of the food economy. They have artificially created cartels of buyers who possess market power. APMCs remain a non-level playing field. In addition, some state governments have introduced barriers to trade within the country through taxation and technical requirements. The Essential Commodities Act 1955, an enabling Act which gives powers of intervention to state governments is incompatible with an integrated competitive national market for food.

Parliament has the power to legislate a national market under the Constitution, which gives it the ability to legislate the freedom to buy and sell, for farmers and traders, across state lines. This law can override state APMC laws and restrictions that have been placed on the farmer’s right to sell food within and outside the state. Under such a law, APMCs would become one among many trading venues in a competitive market. Further, under the Constitution, Parliament can legislate the creation of a Commission that monitors the country for anti-competitive practices.

Alongside the removal of conventional interventions in the food economy, there is a need to place a priority upon the three national-level public goods in the field of food: production of knowledge, financial regulation of futures trading, and information interventions that address the market failure in warehousing.