State-specific agri policy is the way forward

THE draft National Policy Framework on Agricultural Marketing, issued by the Union Government, has many flaws. Stakeholders claim that it has similarities with the three repealed farm laws. The draft proposal has been circulated at a time when the Supreme Court has already set up a committee on issues concerning farmers.

The document is being construed as an attempt to provoke farmer unions. Ostensibly, the draft is meant to resolve problems of marketing of agricultural produce and bring reforms through digitisation. It also aims to promote investment in market infrastructure, processing and farm exports.

However, a scrutiny of the draft shows that it lacks understanding of the agrarian crisis. The draft has not taken into consideration the bitter experiences of farmers with private companies. It reflects favouritism towards the private sector, allowing it to control agricultural trade, export, storage and agro-processing.

Agriculture and allied activities were included in the State List (List II) of the Constitution because these activities depend on local geographical conditions and other factors. These conditions differ among states as well as regions within the states. The framework for the policy needs to be state-specific. This is precisely why the Union Government’s crop insurance policy did not help farmers in Haryana. Punjab did not adopt that policy.

Similar is the case with this draft proposal. It is not suitable for states like Punjab and Haryana. In both states, the APMC (Agricultural Produce Market Committee) network is close to the norms, as suggested by the Swaminathan Commission, of having a coverage area of 80 sq km per market for agricultural produce. The two states can quickly achieve this aim by further strengthening and improving the APMC market system and involving farmers in agriculture marketing and processing to increase their income.

The draft allows agro-processing units, wholesale traders and exporters to purchase from other states and exempt them from market fees and taxes in the state of their location. This draft also allows buyers from these categories to have private markets and buy from the farmgate without payment of market fees and taxes. This move will create a shortage of funds for the development of rural infrastructure in the affected states. In short, the draft will weaken or destroy the APMC market network. By exempting private markets from taxes and fees, it will create conditions in which the markets of private companies will pay better prices to farmers and divert them away from APMC markets after some years. Once APMC markets and their infrastructure are thus weakened, these private companies will control the market and start paying low prices to the farmers.

Further, the draft, in the name of competition, proposes to establish monopoly of private markets in trading of agricultural produce. The scale of the recommendations of this draft is tilted heavily in favour of private markets, proposed to be established by large private companies.

After the abolition of APMC markets in Bihar, it has been seen that farmers are forced to sell their produce to private traders at 25-30 per cent less than the MSP. Punjab farmers, too, faced a similar situation when APMC markets did not exist in the state. The same woes are affecting farmers in those states where the APMC market system is weak or non-existent. Thus, the argument in the draft that private markets will increase competition in the purchase and sale of agricultural produce is baseless.

In APMC markets, public procurement agencies as well as private companies can buy agricultural produce and compete over prices. The establishment of private markets, as suggested in the draft, will create a two-market system, one exclusively for the private sector and another for public agencies, which will only create conditions in favour of big private companies.

The draft also ignores the market structure that big companies represent in Indian economy. Big players like Adanis, Ambanis, Mahindra and Mahindra, Tatas and PepsiCo, which are keen on establishing markets for agriculture produce, are part of an oligopoly. When such players enter the market with huge capital resources, they can dictate prices. Both medium and small farmers are bound to face losses in such a market structure. Going by farmers’ experiences at global as well as local levels, big players use their market power to earn huge profits.

This draft document has completely overlooked this past experience of Indian farmers, illustrated by the ordeal of sugarcane farmers from across India, who were not paid in the past four-five years after sale of their produce to sugar mills.

Punjab farmers, too, had a similar bitter experience with PepsiCo in 1989-90 and with other big companies, including Mahindra Shubhlabh, Rallis India (a Tata company) and Advanta Seeds in 2003-04. These firms either provided unsuitable seeds to farmers or did not provide any consultancy in case of non-germination of seeds. Nor did they buy contracted crops on time. Farmers suffered major losses and did not get any support from the government, politicians or the bureaucracy, causing them loss of credibility.

In recent years, Himachal’s apple growers have had similar bad experiences with private companies, which are only committed to maximising their profits. They lack social responsibility and represent a crude form of crony capitalism that grows on government doles and exploitation of smaller players, including farmers. Most of these problems can be easily resolved through state market regulations, intervention of public/cooperative entities and countervailing power of farmers’ organisations.

If this draft policy is not able to do so, it should be withdrawn. However, the draft’s rejection will not serve any purpose unless the states are able to offer an alternative that is suited to their needs.

Punjab already has a draft Agriculture Policy prepared by a state government-appointed committee. This draft can be discussed with farmers, politicians, experts, local traders and businessmen in the state. After consultations with all stakeholders, the draft policy for Punjab can be finalised and officially notified.

The draft should ensure regular elections to market committees for efficient functioning of APMC markets and that modernisation of these markets is undertaken. This would require upgradation of storage or silos and cold storage chains for perishable commodities. It should also be ensured that the funds collected by APMC markets through fees and charges are only used for the development of market infrastructure and not diverted for any other purpose by the state government.