India is a country of farmers. For the last seven decades, agriculture has remained a thrust area for Indian policy makers and a huge amount of public money has been spent in ameliorating the condition of farmers. Society has remained sympathetic to the needs of the farmers. However, the plight of the farmers has not improved. What has gone wrong? What should be done?
For the last many decades, trade in farm produce has been a monopoly of state-run Agricultural Produce Marketing Committees [APMC]. APMC are poorly managed, not able to upgrade themselves technologically and in due course created a vested interest which thrives on exploitation of farmers. It could not create the requisite infrastructure, could not expand the market, could not develop export markets etc. It is time to look for an alternative.
The Parliament has issued the Farming Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 to promote barrier-free inter-state and intra-state trade and commerce outside the physical premises of markets notified under State Agricultural Produce Marketing legislations. It aims to create an alternate market opportunity for the farmers outside state-run APMC yards. It is a historic step in unlocking the vastly regulated agricultural markets in the country.
The Act provides for freedom to farmers, farm producer organisations as well as anyone who buys farmers’ produce for (i) wholesale trade, (ii) retail, (iii) end-use, (iv) value addition, (v) processing, (vi) manufacturing, (vii) export, or (viii) consumption, to engage in such intra-state or inter-state trade. Such freedom will result in development for agricultural infrastructure like logistics and storage, growth in food processing industry and export of Indian food produce. The bill also permits the electronic trading of farmers’ produce in the specified trade area. An electronic trading and transaction platform may be set up to facilitate the direct and online buying and selling of farmers’ produce through electronic devices and internet for physical delivery of the farmers’ produce.
It is expected that “the freedom to produce, hold, move, distribute and supply will lead to harnessing economies of scale, efficiency and attract private sector/foreign direct investment into the agriculture sector. It will help drive up investment in cold storages and modernisation of the food supply chain. It will reduce wastages of farm products and result in better income to the farmers. To protect the interest of farmers, it is provided that a person transacting with a farmer will be required to make payments to the farmer on the same day. In case of any dispute, an easier settlement and dispute resolution process has been devised with a sub-divisional magistrate as adjudicator.
One of the striking features of the proposed bill is that it does not interfere with the activities of APMC. All the rights and processes of APMC remain as it is. The bill just provides for an additional way and platform to market farm produce to the farmers. Thus, essentially the bill ends the monopoly of APMC in trading in farm goods. Still, wherever APMC will provide better services to the farmers, farmers will flock to them and they can keep on providing trading services to farmers. Poorly managed APMC may not survive for the right reasons and for the benefit of the farmers. A poorly managed APMC exploits the farmers in numerous ways. There have been numerous complaints against APMC for not weighing the produce properly, not grading the produce properly, buying farm produce at cheaper prices from farmers exploiting their monopoly and then selling the same products at higher prices to FCI and other consumers. No action could have been taken by the farmer because of their monopoly.
There have been reports of protest against the new Act for numerous reasons. One is fear of entry of organized private corporations. We can see that workers/labourers working with organized private corporations are far better off than workers working in the farm sector or in the unorganized sector. So, why do we fear the entry of private organized players in any sector? Further, there is no compulsion on the farmers to deal with private players. If one does not like dealing with private players, the existing arrangement of APMC continues as it is.
Another rumour raised in protest is that it ends Minimum Support Prices [MSP]. Nothing can be farther than truth. MSP provisions have remained as it is. The National Food Security Act (NFSA) provides a legal basis for the public distribution system (PDS). The NFSA made access to the PDS a right, entitling every person belonging to a “priority household” to receive food grains at subsidised price. Thus, Government needs to procure foodgrains. MSP is fixed as per the recommendation of Commission for Agricultural Cost and Prices, and there has been no change in this mandate.
No development or growth is possible without expanding the market. A history of economic growth is essentially growth of the market. When there was public sector monopoly in aviation or telecom, very few people were using aviation or telecom services. Introduction of private players in the area resulted in huge expansion of the market leading to revenue for the government, jobs for people and better services to consumers. Though the existence of public enterprises is not opposed by anyone, the monopoly of any public enterprises needs to be eliminated from every area possible. History shows us that any type of monopoly is restrictive of growth and development. Ironically, a monopoly stunts the growth of the very same people it promises to protect. Monopoly is the very antithesis of growth and prosperity and monopolies in various areas ought to be identified and eliminated.
Conditions for farmers cannot be improved without improving the market of farm goods. Farm sector has done exceptionally well in creating a market for farm goods where the APMC monopoly was not applicable, for example dairy, fishery, prawns etc. In these sectors individual farmers are working, farmers cooperatives are working and even private sector players are working. The experience has been good for farmers as well as consumers. There is no reason to think that model cannot be replicated for other farms products like food grains, vegetables or fruits.
Every year we see farmers throwing their products on the road because of depressed prices in the mandis. The Mandi system could not create the requisite infrastructure of cold storages and warehouses. Further, demand of farm products cannot be increased without development of the food processing industry. Monopolised farm trade through APMC increases the cost of raw materials for the food processors making them unviable. The Act will permit farmers to sell their products directly to the food processing industry, thus eliminating the middlemen from the trade resulting in better prices to the farmers.
The law provides for electronic trading in farm products. It will link directly the farmers from one region to the consumption centres, with better logistics to transport the goods. Thus, if onion prices are depressed in onion producing regions, warehouses in non producing regions can buy directly from the farmers to be kept in cold storages. Real time trades on farm goods through electronic mode will save farmers from depressed prices which happens almost every year in harvesting season.
The middlemen, arhatiyas and hammals of APMC are the obvious losers of the new law. Their anger against the changes is understandable. On the face of it, it looks a challenge to them as their monopoly is being taken away. But, it shall also create an opportunity for those among them who are willing to adopt the latest technology, improve efficiency and transparency with farmers.
Agriculture plays a very important role in Indian economy. It is a source of livelihood to a vast population of the country. Keeping such a vast population on state agency monopoly has not resulted in either expansion of the market for food products or betterment of the position of farmers. The steps taken through these bills are bold one and ought to be welcomed. Similar provisions in other countries have resulted in economic benefits to farmers and consumers alike.
Monopoly in any form is detestable. Rather than providing any benefit to the society, invariably it results in abuse. It restricts economic activity and innovations. Ending APMC monopoly is a welcome step. Further, restricting the farmers to sell their products to buyers of their choice cannot be justified on any ground. The new law has given this choice to farmers- sell your products to anybody, in any mandy, on the internet, anywhere- wherever you get the best prices. Farmers are intelligent enough to exercise their choices intelligently.
Article Written By Rajesh Kumar
Author is an Advocate
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