Back to the future in the mandi again

The Modi government’s fresh initiative at APMC reform is limited in ambition and is unlikely to serve its purported beneficiaries: the farmers

AGRICULTURAL MARKET REFORMS

SOMETIME IN August 2006, I made a presentation on reforming Madhya Pradesh’s (MP) agricultural produce market committee (APMC) law at a meeting of the state Cabinet. For over 45 minutes, I played out slide after slide along with data, showing how the monopoly of Apmc-controlled mandis was depriving farmers from realising the full value of their produce. I quoted instances of farmers being physically prevented — including by APMC staff deployed at checkpoints along highways — from taking their produce to even neighbouring districts within the state. How can there be political union without economic union, I argued.

I, then, proposed changes to the APMC Act, to end the monopoly of official mandis, allow competition through private sectorpromoted market yards and give farmers greater choice in sale of their produce. The Cabinet members heard me out in grim silence, before a senior minister spoke: “All that these bureaucrats want is to bring MNCS into our market and pave the way for a second edition of the East India Company.” There were nods and murmurs of agreement from some of his colleagues. The Chief Minister ultimately intervened and suggested that I rework the proposal and bring it back for discussion later. I never got the chance for it in my next three years as agriculture secretary of MP!

Reading through the draft model APMC Act, 2016 of the present government at the Centre, I was reminded of the above episode of over a decade ago. Many of the ideas in the draft have, in fact, been kicking around since this century’s start, without finding traction with the states. The political economy of agriculture marketing in the country, too, hasn’t changed much during this period to inspire hope. It is significant that a recent NITI Aayog report on doubling farmers’ incomes by 2022 has flagged agricultural market liberalisation as a key intervention for achieving this goal announced by the Prime Minister. But if the latest draft is meant to serve as a roadmap towards that — by expanding farmers’ selling choices to realise better prices — then I must say it disappoints. Let me highlight just three aspects that make the new draft Act’s provisions far too restrictive.

First, the draft pitches for treating an entire state as a single market area. This can probably be seen as a major reform, given that the existing APMC laws – including those of Uttar Pradesh, MP, Rajasthan and Maharashtra – carve out hundreds of market areas within the same state. But it begs the question: Why just a state? Why not the entire country? After all, if in livestock products, such as milk, eggs, broiler and mutton, India is treated as a single unified market, why not the same for wheat, paddy, pulses, oilseeds or fresh fruits and vegetables (F&V)? It’s unclear whether those tasked with drafting the new model Act attempted to push the envelope and make a case with the states to support a single national market for all farm produce.

The second limited reform proposed in the draft is the removal of F&V from the purview of mandatory trading in APMC market yards. Well, if the experience with such ‘de-listing’ in Delhi and Maharashtra is any indication, it isn’t a happy one. Stiff opposition from the APMC authorities and traders has ensured that more than a year after Maharashtra’s announcement of that decision, the rules specifying the new practices, including who is eligible to buy from farmers (why this requirement at all!), are still to be notified. In the interim, we have seen tomato and onion prices hitting rock bottom.

Simply ending the compulsion to bring F&V to mandis does not give wider choice to farmers or attract private investment in alternate marketing facilities. A complementary set of supporting policies — including making available land for setting up new produce markets and incentives for investment — is essential if the loop is to be closed. None of the states that have officially delisted F&V from their APMC Acts have undertaken these follow-up measures. The result is that farmers continue to bring fresh produce to the same old mandis, sell to the same traders and pay high transaction costs without the benefit of fair price discovery.

Finally, there’s no point pushing APMC reform or talking about new-generation private mandis and direct buying by corporate, processors etc, if the draconian provisions of the Essential Commodities Act (ECA) remain on the statute. The seriousness of this government’s intentions would have been reinforced had a parallel amendment to remove agricultural commodities from the ECA’S purview been mooted. Sounds too radical? Well, the previous NDA government under Atal Bihari Vajpayee actually did just that in 2003. The result: Multinationals — yes, the dreaded MNCS, from Cargill, Bunge and Louis Dreyfus to the Australian Wheat Board — entered India’s primary market and bought cereals at competitive prices. Big grain producers like UP saw vigorous purchasing and farmers benefitting from higher prices. There was talk of MNCS even making India a major hub for agri-commodity exports.

Unfortunately, that major reform was reversed by the UPA in 2007. With stockholding limits back and the ECA’S harsh provisions being enforced all over again, there were renewed restraints on the private sector in direct procurement, warehousing, marketing and exporting of produce sold by farmers. Since the government could not possibly have bought all the grain coming into the markets, the ultimate victim of the private sector’s exit has been the farmer.

Without addressing the entire marketing ecosystem, the new draft model APMC law, with all its good intentions, could well follow the path of its earlier 2003 avatar. This one, too, will be cherry picked by the states. While that may lead to incremental changes, any game-changing reform in agrimarketing is unlikely to be on the horizon any time soon.

(The writer, a former IAS officer, is promoting an agricultural marketing start-up and is also affiliated as visiting senior fellow at ICRIER, New Delhi)