What Trade Freedom Did To Bihar’s Farmers

Context: In the context of new farm laws passed by Parliament, a reality checks into Bihar's experience of deregulation of agricultural market.

Bihar's agri-market deregulation experience: A preview

• Low price realization at the hands of local merchants: Average maize selling price in Bihar falls to half of support price.
  • For instance, farmers in Bihar sell maize at Rs.1000 compared to more than Rs.1800 in Punjab, Haryana or Madhya Pradesh.
• Information asymmetry: Farmers have no reliable information on market prices, forcing them to take what local merchants offer.
• No bargaining power: Farmers cannot bargain. They remain too small to be heard.
• Lack of regulatory oversight in agricultural trade: No mechanism to stop exploitation of farmers to ensure the realization of the market price.
• State of disrepair in agricultural marketing practices: No sorting, grading or auctioning, high deductions and charges etc
• Rigged system: In favour of traders who cheat on every possible parameter.
• Infrastructural despair: Taxes and fees collected by the regulated market committees not invested in marketing infrastructure.
  • "Despite the abolition of the APMC Act in 2006, private investment in the creation of new markets and the strengthening of facilities in existing ones did not take place in Bihar, leading to low market density," observed a 2019 report by the National Council for Applied Economic Research (NCAER).
• Biased state procurement: In Bihar, only influential and big farmers counting fewer than 5.5% of paddy farmers, sold their produce to government agencies, in contrast to over 97% in Punjab.
  • Due to lack of funds and delays in procurement, only a minuscule quantity of paddy grown in the area is procured.
  • For the 2019-20 Kharif season, paddy procurement in Bihar, despite being the highest in five years, was 22% of production. (92% for Punjab and 89% for Haryana).