Agri-market reforms are inevitable
January 24, 2021
Indian government after independence tried to organize the agriculture produce market by regularizing it in the form of APMCs. Agriculture Marketing being a state subject, most of the States enacted Agricultural Produce Markets Regulation (APMR) Acts during sixties and seventies and put these in operation. — Anil Javalekar
Indian Government has recently passed certain laws to reform the Agri-produce market system and farmers in certain pockets are protesting it. Indian Agri-market reforms have a long history right from British era and most of the time the reforms were within the established regulated market system. Recently the reforms crossed these limitations and went beyond regulated markets to allow farmers a choice of selling produce in either regulated markets lead by APMCs or to private traders outside the regulated markets. This cannot be said as major change as the private markets were there and private licensed traders were operating their business in regulated markets. The reforms are a continuation of this process which needs to be revived and new changes should be brought in based on experience. Thus, it is time to review the agriculture produce market system and understand the sequence of new reforms.
Historical perspective of Agri-produce market
Agriculture and farmers remained victims of political dictatorial ruling systems throughout the history. Most of the time it was in the form of direct loot of farm produce. Later, the loot was through exploitative revenue system. Farmers were rarely left surplus produce for selling in market and their farming was mainly for surviving. True, there were cash crops like cotton and sugarcane but their markets were localized with linkages with higher markets. The idea of organized regulated markets was to bring farmers to markets. As is known, British came here for trade and they thought it necessary to change the market system to their favour. Indian cotton was their initial target - they wanted the pure cotton as raw material to their cotton industry at cheap prices. The first legislation was the Berar Cotton and Grain Market Act of 1887, which empowered British Resident to declare any place in the assigned district a market for sale and purchase of agricultural produce and constitute a committee to supervise the regulated markets. Then came the Royal commission (1928) which recommended regulation of marketing practices and establishment of regulated markets. The intention was to eliminate malpractices in the disorganized market system.
After Independence APMC was thrust area
Indian government after independence tried to organize the agriculture produce market by regularizing it in the form of APMCs. Agriculture Marketing being a state subject, most of the States enacted Agricultural Produce Markets Regulation (APMR) Acts during sixties and seventies and put these in operation. All primary wholesale assembling markets were brought under the ambit of these Acts. Market yards and sub-yards were constructed and for each market area, an Agricultural Produce Market Committee (APMC) was constituted to frame the rules and enforce them. The basic objective was to ensure reasonable gain to the farmers by creating environment in markets for fair play of supply and demand forces, regulate market practices and attain transparency in transactions. Slowly, this market system became monopolistic and reforms were necessary. Amended Model APMC Act was suggested in 2003. Some states allowed trade of fruits and vegetables outside the APMC yards. Bihar scrapped the APMC structure in 2006 and allowed PACs to be the agent of reforms. In 2017, the central government released the model Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 so that states enact new legislation and bring comprehensive market reforms in the agriculture sector. The 2017 model Act aimed to allow free competition, promote transparency, unify fragmented markets, facilitate the flow of commodities, and encourage the operation of multiple marketing channels.
Farmers remained unhappy with APMCs
The farmers were not happy with APMC structure for various reasons like the markets were fragmented as the all-India average area served by a regulated market was 487.40 sq km, against the recommendation of a radius of 5 Km by the National Farmers Commission (2004); lack of infrastructure like the auction platform, drying yards, cold storage facilities, electronic weighbridges etc; high Incidence of Market Fee/Charges; monopoly of licensing of commission agents etc. Studies show that long supply chain (normally 5-6) incurs disproportionate marketing cost and affect the remunerative prices to the farmers. There was a demand to allow farmers to sell their produce outside the APMC mandis. These Market reforms were on agenda for last 20 or more years and finally found its place in 2020 in the form of new farm laws.
In between, the Government has implemented National Agriculture Market (e-NAM) scheme, an online virtual trading platform, to provide farmers with opportunity to directly sell their produce at remunerative prices through competitive online bidding system. 1000 wholesale regulated markets across 18 States and 3 Union Territories (UTs) were integrated with e-NAM platform. Tradable parameters for 175 commodities were promoted for trade in e-NAM platform. As on 31.08.2020, a total of 1.67 crore farmers, 1.44 lakh traders and 83,958 commission agents and 1722 Farmer Producer Organizations (FPOs) were registered on e-NAM platform. A total trade value of Rs. 1,04,313 crore was recorded on e-NAM platform. This is growing and expanding platform and can be said as successful.
Other initiatives towards reforms
Government of India has adopted market reforms to promote alternative marketing channels such as private markets, direct marketing, contract farming, development of Gramin Agriculture Market (GrAMs) closer to farm gates as well as development of integrated supply chain infrastructure. Government of India has also been promoting storage, cold storage, cold chain and other marketing and value addition infrastructure through its scheme of Agriculture Marketing Infrastructure (AMI), Mission for Integrated Development of Horticulture (MIDH), Rashtriya Krishi Vikas Yojana-Remunerative Approaches for Agriculture and Allied Sector Rejuvenation (RKVY-RAFTAAR) etc.
Direct market intervention
After independence, Indian government started intervening in the Agri-market so as to stabilise the market prices, ensure food security and support farmers with remunerative prices. Food corporation of India (FCI) was created mainly to maintain satisfactory level of buffer stock of food grains and ensure food security apart from supporting farmers by way of procurement at MSP declared by Government. It also ensured the supply of food grains to Public distribution system and intervene in the markets when markets are volatile. Another agency National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) was also established to helps farmers by procuring their produce like Food grains, Pulses, Oilseeds, Spices, Cotton, Tribal produce, Jute & Jute products, Eggs, Fresh Fruits & Vegetables through the established cooperative network all over the country with active involvement of marketing societies at mandi level. Nafed at the behest of Govt. of India also serves the consumers’ interests through supply of various essential items such as, Onions, Potatoes, Eggs etc. during scarce marketing situation or when the prices of such commodities rise abnormally. This apart, the interventions were also in the form of higher duties on farm produce and even ban on the import or export of certain Agri-produce whenever the domestic markets are volatile. With these policies, India is now comfortable with the stock of food grains. FCI is full of stock to its 70 % godown capacities which is sufficiently high compared to the requirement.
Further market reforms are inevitable
It is important to understand that with all reforms so far, Indian farmers are not happy as they are unable to meet their cost of production necessitating further Agri-market reforms.
1. The APMC structure and its system failed to protect the interest of farmers and found more inclined towards helping the interest of middlemen to monopolise the markets of agriculture produce. Therefore, it was necessary to make the APMC mandies competitive, transparent in their functioning and help minimise the cost to farmers. This apart, markets need to be nearer to farmgate and APMCs has limited scope in expanding its network. The opening of APMC to private sector and allowing farmers to sell produce outside the APMC structure was therefore inevitable.
2. Since the opening of economy in 1990s, the agriculture sector was waiting for reforms. Many reforms were discussed and recommended but due to various reasons could not be implemented. The market reforms were one and needed action. Opening of Market system at least domestically by allowing private sector was necessary. One nation one market was the right move.
3. Technical development and digital marketing are going to have a major share of marketing in the coming years. Online sale purchase needs to be smoothened. e-NAM platform is helping farmers to utilise the all-India market. It has reach to all corners of the country which neither APMC structure nor private sector could achieve. Market reforms that help farmers and traders interact with fair information can be beneficial to all.
4. Economy is expanding and consumers are served with various modes. Direct wholesale purchase from farmers outside the market yards at farmgate by Processors/ Exporters/ Bulk Retailers/ End user, etc will help all, the traders, consumers and farmers. This will reduce the waste also.
5. Trade is becoming more organized but farmers are not conversant with complexities of marketing system and has remained handicapped by many disabilities, forcing to sells their produce at hostile place and hostile price. Information therefore is the base of profitable trading. The wide media coverage and linking of mandies to e-NAM platform along with e-trading facilities gives enough information to farmers regarding the prices etc. and will help farmers make choice of suitable crops and better markets etc.
The reforms are a continuous process and timely reforms are important. India is a country of small farmers with small uneconomic holdings and their survival is important to Indian economy and, in the present circumstances, farmers cannot survive without government support through procurement at MSP. However, it should be remembered that the MSP system alone cannot help all farmers of India as it is available for limited crops nor the procurement of entire marketable surplus of all crops is possible with the best of institutional system as the storage and its maintenance is a costly affair. There is a need to search for alternate mode of compensating the loss on farming to farmers. It is necessary that farmers and farming systems adopt to technology driven market reforms that will open the markets and give farmers a choice to choose the best. qq
Anil Javalekar: NABARD retiree, Co-Editor of books: ‘India’s Perspective Policy on Agriculture’ and ‘Droughts and way Forward’. Regular contributor to Swadeshi Patrika (English and Hindi).