8.26      ndian    onom
           Such high taxes at the first level of trading           a cosy relationship with the licensed
           have significant cascading effects on                   commission agents who wield power by
           commodity prices, as the commodities                    exercising monopoly power within the
           passes through the supply chain. For rice,              notified area, at times by forming cartels.
           these charges can be as high as 14.5 per                The resistance to reforming APMCs is
           cent in Andhra Pradesh (excluding the                   perceived to be emanating from these
           state VAT) and close to 10 per cent in                  factors.
           Odisha and Punjab.                                  The scope of the Essential Commodities Act,
           Even the model APMC Act (described            1955 (EC Act) is much broader than the APMC
           below) treats the APMC as an arm of           Act. It empowers the central and state governments
           the state, and, the market fee, as the        concurrently to control production, supply and
           tax levied by the state, rather than fee      distribution of certain commodities, including
           charged for providing services. This is a     pricing, stock-holding and the period for which
           crucial provision which acts as a major       the stocks can be kept and to impose duties. The
           impediment to creating national common        APMC Act on the other hand, controls only the
           market in agricultural commodities.           first sale of the agricultural produce. Apart from
           Removal of this provision will pave           food-stuffs which are covered under the APMC
           the way for creating competition and a        Act, the commodities covered under the EC Act
           national common market for agricultural       generally are: drugs, fertilisers, textiles and coal.
           commodities.
           Moreover, though the market fee is
                                                         moDel APmc Act
           collected just like a tax, the revenue earned Since the State APMC Acts created fragment
           by the APMCs does not go to the state         markets for agricultural commodities and curtailed
           exchequer and hence does not require the      the freedom of farmers to sell their produce
           approval of the state legislature to utilise  other than through the commission agents and
           the funds thus collected. Thus, APMC          other functionaries licensed by the APMCs, the
           operations are independent of scrutiny.       Ministry of Agriculture (GoI) developed a Model
           The rate of commission charged by the         APMC Act, 2003 and has been pursuing the state
           licensed commission agents is exorbitant,     governments to modify their respective Acts
           because, unlike direct taxes, which are       along its line. The Model APMC Act provides the
           levied on net income, the commission is       following new things:
           charged on the entire value of the produce          (i) Direct sale of farm produce by the farmer
           sold. The license fee charged from various              to contract farming sponsors;
           market licensed operators is nominal,              (ii) Setting up ‘special markets’ for
           but the small number of licences granted                ‘specified agricultural commodities’—
           creates a premium, which is believed to be              mostly perishables;
           paid in cash.                                     (iii) Permits private persons, farmers and
           There is a perception that the positions in             consumers to establish new markets for
           the market committee (at the state level)               agricultural produce in any area;
           and the market board (which supervises            (iv) A single levy of market fee on the sale of
           the market committee) are occupied by                   notified agricultural commodities in any
           politically influential persons. They enjoy             market area;