A few years ago, when Modi was still a Chief Minister, a manager in a top jewellery store gave me an offer. You invest with me in multiples of 100 grams of gold, I give you 6% annual interest. Only catch? You give me a bar of 100 grams, I will give you 106 1 gram gold coins.
So, what's happening? India procures bar gold from Dubai. You pay 12% as import duty. Rather than paying the govt 12% tax, I will use your gold which is not doing anything - you will earn 6% on that as against paying locker charges and I will save 6%. Win-win for both of us.
Now, apply the same logic for APMC Act. Farmer sells for 400, the Mandi fellow sells for 900. Rather than buying for 900 from the Mandi fellow, the end user directly goes to the farmer and says, you sell at 400 and I buy at 900 through the Mandi.
Instead, let's bypass the Mandi. I will pay you 500, you get 100 more and I save 300. You may ask why I get 300 more. I can say, you get more than what you are getting and I will make a deal with another for the same price if you are not happy. But, I will still answer.
You sell wheat but I don't sell wheat. I sell wheat flour. Now, the manufacturing cost for me for a kilo flour is 50, taxes is 10 and my margin is 50. Now, because I am saving 300, my cost will be 35, taxes 8.
Even if I increase my margin to 55, you will get the wheat flour from me for 98 instead of 110 rupees. You are looking only at the 100 you are earning now but not the 12 rupees you will save on every kilo of flour you buy.
That's the crux of the argument. Eliminate the middleman and distribute his share - farmer gets some, buyer gets some and end user gets some. And naturally, the middleman is angry.
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