Nothing is challenging or problematic for those farmers who are well-educated, technologically-updated, well-informed about markets and possess large landholdings and huge resources. I mean, they can practice vertical farming or hydroponics to increase their incomes, adopt plasticulture to prevent their crops from pests, hailstorms and diseases, and sell their crops wherever they want. Reforms, primarily, are required for those cultivators who don’t come in above category.
As we have seen in part 2 and part 3 of this series how our disorganized marketing system is making reforms in all other segments of farming fruitless. It is not beneficial for both producers and consumers.
As far as marketing of agricultural produce is concerned, any extreme measure in order to bring reforms in the marketing system is going to be a setback. Bihar repealed the APMC Act in 2006 hoping that it would pave the way for private investment in marketing infrastructure and thereby lead to a better price discovery mechanism. Unfortunately, it didn’t work as no investment came, and it only resulted in loss of revenue for the state government.
Revising the law rather than outrightly repealing is recommended. Since the Act makes the sale and purchase of agricultural produce compulsory for farmers as well as traders, it is against producers’ right to sell. It also creates barriers to the entry and exit of traders. So, liberalization, up to a certain extent, has to be the moving force, without a doubt.
Same is the case with Essential Commodities Act (ECA) which is another hurdle in farmer getting remunerative price. It was established to ensure the delivery of certain commodities or products, the supply of which if obstructed owing to hoarding or black-marketing would affect the normal life of the people. The list of items under the Act includes drugs, fertilizers, pulses and edible oils, and petroleum and petroleum products. The union cabinet has recently given its approval to amend the Essential Commodities Act (ECA), which is a step in the right direction.
Common narrative in the popular discourse remains that producers are forced to sell their produce only to licensed APMC traders. It would be surprising to know that even today most of the farmers sell their produce to small-scale and largely unlicensed traders and intermediaries. The reality is that we have shortage of APMC markets in the country, Dalwai committee reported.
It is imperative for the government to create a large network of mandis. To meet the norms of National Commission of Farmers, India needs 41,000 markets. Dalwai committee recommended that there needs to be at least one gramin haat in each Panchayat. It also suggested modernizing gramin haats under the GrAM scheme.
What states usually do, to make it happen, is repealing the entire structure and pave the way for private investment. But that doesn’t ensure a better marketing system. Devinder Sharma, a food policy analyst, talks about opening up parallel private market network. It will upset strong cartels leading to better price discovery, he argues.
Many states have taken steps to address the above mentioned issues. Maharashtra, West Bengal, Andhra Pradesh and some other states deregulated fruits and vegetable trade, allowed private markets, introduced a unified trading license and a single-point levy of market fee. Tamil Nadu, in fact, abolished market fee.
Direct marketing system has also been adopted by some states like Uzhavar Sandhai of Tamil Nadu, Rythu Bazaar of Andhra Pradesh and Raitha Santhe of Karnataka. But despite bringing these reforms, the situation is far from satisfactory owing to infrastructural challenges.
We have seen in part 5 of this series that creating necessary infrastructure, wherever possible in the value chain, is the need of the hour. Needless to mention, it includes infrastructure in APMC markets too. It is to be noted that just 15 per cent of the APMC markets have cold storage facilities. Weighing facilities are available in only 49 per cent of the markets. As I said earlier, if infrastructure is created as per our requirements, half of the work is already done.
Another area of marketing reforms includes a legal framework on contract farming, based on a pre-harvest agreement (or forward contracts) between the buyers (such as food processing units and exporters) and producers (farmers or farmer organizations). It will secure incomes of farmers besides enabling private investments.
Also, to make sure farmers are not exploited in the new system, a strong and effective network of Farmer Producer Organizations (FPOs) needs to be created to enhance the bargaining power of farmers. The report of ‘Doubling of Farmer’s Income (DFI)’ has recommended formation of 7,000 FPOs by 2022 towards convergence of efforts for doubling the farmers’ income.
As far as MSP regime is concerned, diluting or dismantling it, in any way, is not a good idea. Time and again, open-ended procurement by government agencies, and resulting excess stocks of food grains and the associated problem of insufficient storage system, has made policymakers worry. However, Devinder Sharma argues that it is only the surplus food reserves that have come in handy at these difficult times.
While an increase in MSP is recommended at times, it is not the only thing required from the government. There are also issues like small agriculture surplus, distance to procurement centre, delay in payment, insufficient crop coverage, cumbersome bureaucratic procedure, and lackluster infrastructure, of course. At the same time, FCI should outsource its stocking operations to various other agencies like Central Warehousing Corporation, State Warehousing Corporation, and private sector under Private Entrepreneurship Guarantee Scheme.
Moreover, enhancement of Negotiable Warehouse Receipts System is needed, through which farmers can deposit their produce to the registered warehouse and get about 80% advance from the banks against their produce valued at MSP.
The sad part is that structural issues don’t let reforms to succeed. There have always been instances of collusion and corruption in the functioning of APMC. I have always believed, if we get rid of political interference and bureaucratization, there is no economic goal which can’t be achieved.
If I take example of cooperatives in India, most of them, including AMUL, succeeded because of overcoming bureaucratic hurdles. Those cooperatives, operating in rural areas, are largely ineffective because of excessive bureaucratization. Majority of cooperatives consist of members in their boards seeking private gains. The situation is no different in APMC committees.
Structural issues just don’t include officials, bureaucracy, and political system. We know our lands are getting fragmented but therein lies a deeply ingrained problem, land dispute among families is one such problem. Narrow self-interests are being fulfilled at the cost of land. Blaming government will not solve the problem. As I said earlier, it is more about farming than farmers. It is more about the land than landowners. It is a mutual relationship. You take care of land and it will take care of you.
Read the other parts of the story, beginning with part 1 here.