Lack of cold chains ends in distress crop sale, exposure to price volatility
The lack of a national agricultural market is the biggest constraint in raising agricultural productivity, according to Siraj Hussain. “Market imperfections include no cold chain and price uncertainty. When production of crops is good due to a successful monsoon, prices crash, leading to misery for the farmer,” he says.
Agricultural markets in the country are regulated by state APMC (Agricultural Produce Marketing Committee) laws ever since the Atal Bihari Vajpayee-led NDA government released a model APMC Act in 2003 to be enacted by the states. Under these state acts, farmers are required to sell their produce at state-owned mandis protected by remunerative prices. The system fell into disarray due to shortcomings: APMC mandis levy a market fee on farmers, which makes it expensive for them to sell produce. Additionally, farmers have to arrange for their produce to be transported from their farms to the nearest mandi, adding to costs. In transporting grain from the farm to the store, several intermediaries are involved, who charge commissions. Again, mandis are often shut for lack of storage or, if open, have fortnight-long queues. Thus the farmer is forced to sell his produce at significantly lower prices to the trader compared to the competitive price he gets from the retailer.
The Act provides for selling produce directly through contract farming, permits private persons, farmers and consumers to establish agricultural markets, levies a single market fee on the sale of the commodity and replaces licences with registration of market agencies so they can operate in more than one market. But only 18 states and Union territories have implemented the reforms in the Model Act.
HOW TO FIX IT
The Economic Survey of 2014-15 recommended that a National Agricultural Market (NAM) be created as a national electronic platform for farmers to sell their produce. Such a market would enable farmers to receive a price for their produce and allow them to sell their produce anywhere in the country. In April 2016, the Modi government launched e-NAM to link 585 regulated agri-markets across eight states and integrated wholesale mandis in these areas to create a common platform.
Create infrastructure for agricultural markets. The reason why India does not have adequate agricultural markets is because, as Alagh points out, “there is no price-discovery mechanism; just some marginal and poor farmers selling
their produce on the highway for urban motorists is no replacement for an adequate market”. There is no way for the farmer to find out optimal pricing in the region or globally, he adds. “The price information available is months old and outdated when the farmer needs current price information. The Indian government and private sector need to set up smart agricultural towns, smart agricultural markets, smart villages, not merely smart cities to fix the lack of agricultural markets.”
Protect farmers against price fluctuations. Rural distress today is largely due to falling prices, especially of potatoes, corn and cotton. While falling prices have slashed farmers’ incomes substantially, the MSP (minimum support price) system is benefitting less than 10 per cent of the rural sector, says Hussain. Governments cannot control prices but can help build clauses to protect farmers.
Set up cold chains so that farmers can store excess produce and not sell them in distress. In a recent interview with india today, Union minister for food processing industries, Harsimrat Kaur Badal, said Rs 92,651 crore (at 2014 wholesale prices) worth of food is wasted in the country. She quoted a 2013 ICAR study that blamed the lack of short-term storage infrastructure, particularly at the farm level, and the lack of processing capacities in production catchments. “We’ve sanctioned 101 new cold chains and five food parks in the past three years,” she said. She is also putting in place infrastructure for three separate food grids—for fruits, vegetables and other cash crops—and working on a National Food Grid Development Authority, or NFGDA, which will help plan movement of food, establish
Laying siege Families of deceased farmers in Punjab seek compensation in 2014