With the sustainability of the Agricultural Produce Marketing Committee (APMC) mandis facing an unforeseen challenge for the first time by the new farm legislation, the middlemen and politicians controlling those mandis can be largely held responsible for such a consequence.
In January, 2019 a parliamentary panel on agriculture which also had non-BJP political parties like Congress and Shiromani Akali Dal commented, “APMCs are hotbed of politics, corruption, monopoly. They are not working in the interest of farmers”. Ironically, these two political parties are now most vociferous against the current legislation attempting to free the farmers from the APMC monopsony.
The Arhatiya community, as the commission agents are called in Punjab and Haryana, is very strong in these two states. In these two states in which agricultural land is predominantly held by the large farmers, the agriculturists are far better off than the other parts of the country. Apart from these states, agriculture is no longer considered an economically viable way of livelihood. So the two states turning into the womb of agitation against the new farm laws need a little introspection.
Private traders buy through the Arhatiyas in these states who earn on an average 1.5-3 per cent in commission on the sales value. They are about a lakh in number, and have an informal alliance with another one lakh state government staff in the APMC mandis. The politicians including the legislators control agricultural marketing of these two states as members of the APMCs, forming a nexus with these Arhatiyas. As these politicians would lose a good source of income due to passing of new farm laws, they are patronizing the agitation in the name of poor farmers. This may rightly be construed more as an anti-central government stand than the proclaimed pro-farmer stand.
The APMC’s notable exclusions need mention. Kerala, Manipur, Mizoram and Sikkim along with the UTs like Andaman & Nicobar Islands, Lakshadweep, Daman & Diu, and Dadra and Nagar Haveli never had an APMC, law whereas Bihar repealed it in 2006. In 2013 vegetables and fruits were shifted out of APMCs. Since 2002, close to 69 to 73 per cent of the production left with the farmers was sold outside APMCs below the minimum support price (MSP). As per a NSSO report of 2016, only 36 per cent of the trading could be identified to take place in the regulated market.
The first of the three new legislations, The Farmers' Produce Trade and Commerce (Promotion and Facilitation) Act 2020, would only decriminalize such unofficial bulk trade. In fact, 22 states already allow direct procurement by private parties. The three new legislations were introduced at a time when the country is still in the grip of the current pandemic. During the lockdown, there was a noticeable disruption in the production and supply chains throughout the country, causing further distress for the people. It can be correlated therefore to the pre-existing drive for agriculture marketing reforms which propelled due to an increasing need for a hassle-free supply-chain during recent times. In end April, the union ministry of agriculture had already issued an advisory to the states to promote direct marketing without insisting on licensing procedure for the farm products.
The model APMC and contract law was framed by the union agriculture ministry in 2003, although it was finally released in 2007. The law was shared with the states because the states have the constitutional jurisdiction in respect of agricultural marketing except jute and cotton. The NDA government presented the model Agricultural Produce and Livestock Marketing Act in 2017. But that was only accepted by Arunachal Pradesh in full whereas Uttar Pradesh, Punjab and Chhattisgarh adopted a majority of the provisions. The law aimed at developing a state-level unified market with provisions like limiting regulation of APMC to within the physical premises of the mandi, declaring warehouses and cold storages as market sub-yards, etc. among others. The new law of 2020 will however give the farmers the right to sell their produce beyond a geographical region, theoretically at a price of their choice.
As per the economic survey data of 2014-15, 2477 principal regulated markets and 4843 sub market yards comprised a little above 7300 mandis in the country. The M S Swaminathan-chaired National Commission on Farmers, in its report in 2004, suggested that a regulated market should have a market area of about 80 sq km and be available to farmers within a radius of 5 km. However, the ground reality is different and disappointing. Except in Punjab, Haryana and the western part of Uttar Pradesh where APMCs are well maintained, farmers in other parts of the country mostly face trouble with the APMCs. They have to travel a long way to reach the APMC, starting in the morning from their distant villages. They also have to find adequate and suitable warehousing facilities with the APMCs, particularly for perishables. Only 15 per cent of the APMCs in the country which allow trade for both the main crops and vegetables have cold storage facilities. Then they have to wait for a long time to receive payments, incurring some additional expenditure.
Except for government procurement at MSP to supply for its public distribution system, the farmers face problems in realizing a justified price of their produces almost everywhere. The middlemen take the lion’s share of the marketable surplus. For example, the marginal farmers earn an unthinkably meagre 2.7 per cent of the marketable surplus in wheat, while the medium and large farmers receive a relatively decent yet still low 30 per cent of the same surplus. The middlemen operate in the APMCs by forming a cartel which the poor farmers are simply unable to match. The middlemen arrive and inspect the produce and then start a finger game among them, covering kerchief in their hand, each finger has a code representing a value. At the end of their secretly-coded operation, one of them is seen announcing the rate which the APMC officer notes in the books as the price. Thus APMC creates a situation of monopsony denoting presence of many sellers against such a cartel of buyers.
For the perishables, the farmers are exploited even more since they can’t go back home with the unsold produce. Potato farmers, particularly in the state of West Bengal, are found to sell 90 per cent of production to the middlemen within the same village who resell at the mandis. Potatoes are planted between October and December and harvested between January and March in the same land after harvesting the main kharif paddy. Potato cultivation adds the highest value to the cultivable land among all cash crops. The farmers don’t even have the initiative to reach the local mandi to earn more or a relatively distant APMC mandi for realizing a better price. As a result the gap between the resale price and farmgate price is quite large. The middlemen earn 50 to 71 per cent of this gap. The same story lies for tomato, which requires quicker cold storage facility than potato.
The story of poor farmer plight is unending under the APMC controlled mandis, even for government procurement. Let us take the case of paddy first. Its present MSP is rupees 1868 per quintal (64 kgs). Now, this support price stands for the common quality rice without any defect. With another MSP of rupees 1888 set for the grade A quality, all the other better qualities of rice are not subjected to the government procurement. Now even for common rice the middlemen in nexus with the government officials falsely point out some defect in the paddy brought over by the farmer at the APMC mandi. The farmer is compelled to accept price on an average 5 kg less per quintal for that. The same is discounted by the rice millers who are engaged by the state government for supplying rice to its ration shops after crushing the paddy in their mills. Now the question of broken rice and unbroken rice will arise. Usually 2 kg per quintal is quantified towards broken rice for which again a lower price is paid than the support price. Thus the small and marginal farmer gets a smaller share of the surplus even for government procurement.
Changes in the policy of Food Corporation of India (FCI) procurement, which is about 10 per cent of the total government procurement, are also on the cards. The FCI policy of giving preferences in procurement of two main produces, paddy and wheat from a select group of states like Punjab, Haryana, and Telangana has been criticised. The High level Committee formed for its restructuring recommended in 2015 to reduce its total procurement. The state government procurement, which is the remaining 90 per cent, stands as of now the only hope for the APMCs which henceforth have to live mainly with the government procurement. With passing of the new law, states will now be prohibited from levying any market fees or cess outside the APMC areas.
The new law provides for FCI procurement from its own warehouse which would not invite any APMC fees. The state government revenue will reduce following lesser operation in the APMCs. So if earnings of the state governments reduce, it will also affect their procurement capacity in the long run. Thus the APMCs, so long nurtured by the state governments mainly as their arms, are under real threat from the new central law unless they can prove their worth by offering locational proximity to the farmers with adequate storage facilities. The central government should also note that the farmers need greater access to reliable and transparent private markets after introduction of the new law. The e-NAM, a pan-India electronic trading portal for agricultural produces launched in April 2016 has to play a far greater role in the coming days to include private markets too as far as practicable. The Modi government's novel scheme to create a unified national market can't be a supplement with the existing APMC mandis only.
(Views are personal)
*The author is Professor of Commerce, Vidyasagar University, Midnapore