Reforms the farmer needs

The Indian Express     22nd May 2020     Save    
QEP Pocket Notes

ContextAgriculture marketing reforms announced by Government may not be enough. It will also require regulatory intervention with help of policies, investment and institutions.

The problems faced by farmers are: 

  1. Result of vested, monopolistic interests: can be addressed by regulatory intervention.
  2. Rooted in larger structural conditions that weaken the engagement in agricultural markets: to address this, there is a need of location-specific policies, well-directed investment, and well-functioning agricultural institutions.

Issues with APMC

  • Restricted option: farmers are forced to sell their produce only to licensed APMC traders.
  • Infrastructure: under-investment in the basic infrastructure required to create viable, primary wholesale markets within easy physical reach of farmers.
  • Insufficient Mandis: Doubling Farmers Income Report, 2017 estimates 3,500 additional wholesale markets are needed in addition to the current 6,676 principal and sub-market yards under APMCs.
  • Bureaucratic nightmare: to get a licence for new entrant.
  • Intermediaries: exploiting farmers in the name of catering needs.

Experiences of reforms in APMC by different States

  • Bihar: repealed APMC Act in 2006.
    • Did not spur competition: as Corporation tend to buy from large traders and not farmers.
    • Private markets have emerged: but are operated by local traders and commission agents.
    • Deteriorating infrastructure: along with proliferation of brokers.
  • Madhya Pradesh: Regulatory reform instead of repeal.
    • Gave license to ITC to set up procurement hub: not only pushed price competition but also upgraded the infrastructure.
    • But restricted to select commodities (and qualities), seasons and farms within ITC’s own commercial strategy.

Lesson learnt: Mandi’s have comparative advantage as permanent multi-buyer, multi-commodity market and need a regulatory architecture that enables both new and existing system to respond, adapt and compete.

What should be done?

  • New allocation: towards market infrastructure specially in remote regions with deep engagement of farmers and traders.
  • Regulatory reform: to remove conflict of interest and enable the entry of new buyers and facilitate the flow of trade within and outside the mandi system.
  • Intermediaries: Increasing competition for intermediaries is desirable but their elimination is misguided.
  • New, organised and technologically driven procurement and marketing system: to address the real constraints of farmers with respect to access to credit, inputs, transport and timely payments.

Way Forward

  • Regulatory reform to increase competition must not degenerate into re-regulation that unduly favours large-scale consolidation.
  • Recognise and strengthen diversity, dynamism, enterprise and resilience of India’s agricultural markets.
QEP Pocket Notes