Tender mercies of open markets

IT is not unusual for wheat and paddy grown in adjoining areas of UP to find its way into Haryana mandis.

Tender mercies of open markets

BACKTRACKING: Maharashtra deregulated the APMC Act, even as the Centre promised help in procurement of produce for which higher MSP was announced.

Devinder Sharma

Devinder Sharma
Food & agriculture specialis

IT is not unusual for wheat and paddy grown in adjoining areas of UP to find its way into Haryana mandis. But at the peak of the paddy procurement season this year, a lot of paddy has been transported from Bihar to be sold in Punjab and Haryana. As per news reports, over 2.5 lakh bags of paddy from Bihar was seized in a month-long drive by the Punjab Food and Civil Supplies Department. In addition, another 2 lakh bag of previous year’s rice meant for PDS supplies in Bihar was seized.

In Haryana, more than 1.25 lakh bags of rice meant for PDS supplies in Bihar were seized from Karnal and adjoining areas in September and October. In an interesting development, The Tribune (Oct 26) reported Karnal district alone having purchased more than double the anticipated production even though the procurement season was half way through. This may be essentially because of a well-oiled nexus between traders in Bihar, UP and Haryana, whereby cheaper paddy/rice is made available for procurement at a higher price in Haryana.

The reason is simple. While UP lacks a well-knit mandi network under the Agricultural Produce Market Committee (APMC) Act, Bihar had revoked the Act in 2006, forcing its farmers to sell wheat and paddy in open market at prices far below the MSP. While paddy in Bihar sells at Rs 800-900 per quintal for low quality grade, and a maximum of Rs 1,300-1,500 per quintal for good quality, its MSP for normal quality in Punjab and Haryana is substantially higher at Rs 1,750 per quintal.

Maharashtra has now become the second state to have amended the Act. A few months after it had brought in a notification making it obligatory for traders not to purchase agricultural commodities below the MSP, it did a turnaround by promulgating an Ordinance deregulating all farm produce from the Act.

The new directive allows farmers to sell produce outside the regulated APMC markets in the state. In 2016, it had passed an amendment deregulating fruits and vegetables from the Act but there are no studies to tell us whether it helped farmers in any way. We have only seen reports of farmers dumping vegetables on the streets in the absence of market prices even covering the cost of production.  

‘The first step is to pass an Ordinance. The rules will be notified within 15 days,’ Sadabhau Khot, the state agriculture minister, told a media channel, adding ‘the idea is to create private markets with similar facilities as APMCs, while ensuring healthy competition.’While I am not sure how much the APMC amendments will help Maharashtra farmers in price discovery, it will certainly be interesting to watch how soon the trade opens channels to make available Maharashtra paddy for procurement in Punjab and Haryana. When Bihar revoked the Act some 12 years ago, the expectations were the same. The basic idea was that removing the monopolistic control of APMC markets will allow private investments, motivate the corporate sector to undertake direct marketing and provide for more efficient markets. Nothing happened. In fact, Bihar has turned into a test case to know how agriculture can be turned exploitative. 

‘The amendments have been made in accordance with the Centre’s Modal Agricultural Produce and Livestock Market Act 2017,’ the minister said. This is the problem. The inter-ministerial task force (in 2002) that initially recommended amendments to the Act did not ascertain the social fallout of withdrawing an assured market for small farmers and may have been driven by the industry’s prescription. Contract farming, direct marketing and PPP is aimed at dismantling a social framework which assiduously helped build food security. Even the UN’s Food and Agriculture Organisation has questioned the need to repeal assured markets, saying that its social determinants need to be evaluated.

The main argument that APMC mandis have become stronghold of cartels is correct, but that’s an issue of failure of governance. Instead, replacing mandi infrastructure with still bigger cartels of private players is not the way forward, and will only lead to making available infrastructure for corporate agriculture. We are fast moving towards privatisation of profits and socialisation of costs.  

Nevertheless, the deregulation of Act in Maharashtra comes at a time when a few weeks ago the Centre had committed to procure 25 per cent of the agricultural commodities for which a higher MSP is being announced. Although rules have still to be notified, it is obvious that the amendments will reduce MSP delivery. This is what the FICCI and CII had been demanding for long, wrongly saying that a higher MSP comes in the way of farmers realising a higher price. 

Punjab and Haryana face pressure to dismantle the existing APMC infrastructure. A Commission for Agricultural Costs and Prices (CACP) ranking on market friendliness had put Bihar on top and Punjab, with its widespread network of mandis, purchase centres and rural connectivity was placed at the bottom. At a time when only 6 per cent farmers get the MSP benefit, and the rest are dependent on markets, how does a breakdown of a sparsely available public sector market infrastructure lead to increasing competitiveness? 

Moreover, it leaves behind a huge cost for country’s food security. In 2007-08, then agriculture minister Sharad Pawar had allowed private companies to bypass APMC mandis and buy wheat directly from farmers. With private companies cornering as much wheat as possible, there was such a shortfall in public procurement that the country had to resort to nearly eight million tonne of wheat imports in two years, at roughly double the MSP that was being paid to domestic farmers.

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