Ensure farmers get paid for produce as per MSP

Soon after the three ordinances were announced recently on what Agriculture Minister Narendra Singh Tomar termed as a ‘historic day for agriculture’, a section of the mainstream media was filled with a sense of elation. Now, farmers can finally breathe, screamed a headline. Hailing the long-pending agrarian reforms, another newspaper blared out that the freedom to the farmer to sell to anyone, anywhere, had finally released him from the clutches of mandis.

There is jubilation over the Central Government’s decision to finally bite the bullet, free farmers from the grasp of middlemen, who, as most of the city-bred believe, have willy-nilly been short-changing the farmers.

The dhoti-kurta-clad trader, not very literate, but a very smart player in his day-to-day dealings, has often been portrayed as a side villain in Bollywood films. Not only films, even the textbooks have painted him as a villain of the growth story. This is the image that has stayed with us. It remains embedded in our thinking.

Call him arhtiya, sahukar or a middleman, he is often dressed up in a dhoti-kurta or a kurta-pyjama. He also, at times, doubles up as a moneylender. Although the Webster dictionary describes a middleman as a dealer between the producer and the consumer, the average perception is in the negative, painting him more like an evil character.

This is far from true. Perhaps, a closer to an objective definition has been offered by agri-tech consultant and blogger Venky Ramachandran: “Middlemen offer hyper-local infrastructure to farmers to help them avail timely credit and inputs based on their contextual relationship-driven understanding of farmers’ cropping cycles.”

In fact, the relationship goes much beyond providing credit and inputs but also extends to procuring the marketable surplus, and often comes as a much needed respite at times of family emergencies.

Nevertheless, while the educated despise the traditionally dressed middleman, they have no such qualms about a middleman who comes dressed in a tie and suit. What has the dress sense to do with the like and dislike for the role a middleman plays is something for the psychologists to find out, but perhaps showing contempt for the local arhtiya comes in handy to replace the existing breed. Many glib talkers, highly educated, who write or call to seek advice on how they intend to bridge the gap between the farmer and the consumer by squeezing out the middleman never return when told what they plan to do is nothing different.

To illustrate, a start-up using digital technology to market agri-inputs is for all practical purposes a middleman. The fact that they use technology and often have app-based technological solutions, but in the end they may be a little different from a retailer, they are primarily trying to sell agri-inputs to farmers at a commission. Most of those who use the weather-based advisory to market specific pesticides and fertilisers to meet the timely needs are no different. In any case, whatever algorithms the start-ups may be using, and this can be true for big retailers or small enterprises, in the end, the effort is to reduce the margins and increase profits.

Then there is this category of start-ups whose claim to fame is to serve as an intermediary in the ‘farm-to-fork’ supply chains. Most of them work in the vegetable and horticulture supply chains, with direct delivery of fresh fruits and vegetables to consumers.

At best, these intermediaries can be called as the new battery of middlemen, replacing the humble street vendor and the neighbourhood retail vegetable shopkeeper. Only time will tell how much benefit farmers receive by way of higher prices that the farmer producer organisations (FPOs) promise, and whether they will be able to ensure minimum support price (MSP) to farmers. We know of two FPOs in Maharashtra which purchased gram from farmers at the MSP and had run into losses.

While there is no denying that the objective behind setting up start-ups and FPOs is laudable, claiming to bring in new technology in agriculture, the challenge remains on how to provide a higher price.

Take the case of moong. The MSP for moong for the 2020-21 marketing season is Rs 7,196 per quintal. The average market price in Madhya Pradesh markets has hovered around Rs 4,000 to Rs 4,500 per quintal. Any price above Rs 4,500 will be called a higher price. But will the new battery of middlemen be able to ensure that moong farmers are paid as per the MSP? If not, then why blame the arhtiya sitting in the mandi?

The excitement over the freedom to sell to anyone, anywhere, also seems to be overhyped. If the MSP is coming in the way of a better price discovery, the 70th Round report of the National Sample Survey Office (NSSO) had shown that between July 2012 and June 2013, a majority of crop harvests, except for sugarcane, was sold to the local private trader and a small proportion to the government agency/cooperative. For instance, 79 per cent of moong in the rabi 2013 marketing season was sold to private traders, 18 per cent in the mandi, and only three per cent to government agency. Similarly, for paddy, 64 per cent was sold to private traders, and only 17 per cent in the mandi, and six per cent to government agency. Did the private trade generally offer them a higher price? No.

If the bulk of marketing was happening with private trade and that too outside the mandi, as the NSSO report shows, it means the freedom to sell to anyone, anywhere, already existed. In any case, as I have repeatedly said, only six per cent farmers get the benefit of MSP, while the remaining 94 per cent are dependent on markets. The question, therefore, is not whether a farmer sells to the arhtiya or to the new battery of middlemen; that’s not true freedom. The biggest reforms would be when farmers get the freedom to sell to anyone, anywhere, at a price not below the MSP.