An inter-ministerial panel for rural and agriculture sectors has identified trade barriers within the mandi system [mandi is state-run market yards known as agricultural produce marketing committees (APMCs)] that continue to hurt traders dealing in food commodities, which, in turn, affects farmers. The panel cites this as a major factor responsible for lower farm income.
Arguing that farmers need freer access to markets for selling their produce , it has recommended removal of the inter-state mandi tax [levy collected from traders when agri-products are sold from one state to another] and replacing it by a single pan-India mandi tax. It has also mooted a pan-India licence valid across all mandis [a total of 585 in 16 states and two union territories].
The panel has also proposed a warehousing network, where farmers could store their stocks longer to fetch better prices. They would be given a receipt for their stocks, which can be used for taking farm loans and selling by showing samples stored in the warehouses.
The government intends to use these recommendations for preparing for a fresh round of reforms in “agricultural marketing,” as part of its five-year agenda to turn around the distressed farm sector.
An overarching theme in these recommendations is to ensure a remunerative price to the farmers by enabling them to store the produce, removing restrictions [licensing as well as tax related] on inter-state movement and giving them more options to sell [say, electronic national agricultural markets, in short e-NAM] enabling seamless connectivity from plough-to-plate. What is new in all this?
This is already embedded in the two model laws viz. Agricultural Produce and Livestock Marketing [Promotion and Facilitation] Act, 2017 and Agricultural Produce and Livestock Contract Farming [Promotion & Facilitation] Act, 2018 enacted by Modi government in its first term. So, it is time to take stock of what has been done, identify the gaps and way forward.
At the outset, we need to take a look at the ‘mandi system’. Introduced way back in the 1960s, regulations under APMC require farmers to sell their produce only to ‘licensed’ middlemen or traders in ‘notified’ markets, usually in the same area where the farmer is located. They can’t sell directly to buyers elsewhere. The original intent was to protect farmers from being forced into distress selling. The strategy was apt under the prevailing circumstances when other avenues for selling were not available.
Today, with emergence of a host of alternatives viz. private marketing channels such as organized retail [including foreign retailers], electronic trading platform, direct procurement under contract farming, farmers producer organizations etc, this strategy has lost its relevance. In the current situation, farmers will stand to gain by way of realizing higher price from sale of produce and increasing income if only they are de-bonded from the APMC/mandi.
Modi – government recognized this and model legislation mentioned above aim precisely at enabling them avail of selling options outside the APMC/mandi such as private marketing yards, letting farmers sell on electronically linked national agricultural markets or e-NAM or directly from warehouses or cold storages across locations. But, much of this have remained on paper.
The much trumpeted e-NAM project has failed to deliver as hardly any inter-state trading happens on this platform. Apart from regulatory hurdles [multiple licenses for different states and even within the same state, licenses for designated area specific APMCs/mandi] and taxation hurdles [inter-state mandi taxes], the required infrastructure viz. necessary equipment and qualified technicians for conducting quality checks is lacking.
Agriculture being a state subject, much of the initiative lies with the state governments. Unfortunately, almost all of them except two viz. Bihar and Maharashtra have been missing in action.
Other than Bihar which abolished the APMC Act in 2006, in Maharashtra, on October 25 2018, Devendra Fadnavis government made amendments – vide an ordinance – to the Maharashtra Agricultural Produce Marketing [Development & Regulation] Act, 1963 to bring it in line with the Centre’s Model Agricultural Produce and Livestock Marketing [Promotion & Facilitation] Act, 2017.
As a result of these amendments, the entire state was declared as a single market instead of the earlier rule of notifying “market areas” where sale/purchase of farm commodities could take place. This meant that a trader now needed a single license enabling him/her purchase agricultural produce from any market in the state [or even directly from the farmers]. However, within a month of promulgating the ordinance, the relevant bill in this regard was withdrawn from the upper house after its passage in the lower house.
The developments in Maharashtra where BJP [same party which heads the government in the centre] is in power in collaboration with its partner Shiv Sena clearly demonstrates that a deeply entrenched nexus of politicians and licensed traders in APMCs/mandis is at work to ensure that they don’t face any competition from other platforms; that their monopoly remains intact and that the farmers continue to sell their produce only at notified mandis.
Considering that no state is willing to crack the whip on reforming the extant mandi system, the recommendations of the panel such as pan-India licence [that would make a trader eligible for doing business in any part of the country] and single pan-India mandi tax are anomalous. Unless the APMC act is dismantled in all the states, forget pan-India, we can’t move towards seamless marketing even within a state. Further, if the political masters are unwilling to withdraw the inter-state levies, we can’t have free flow of agri-produce across states.
With the shackle of archaic state laws, any reform measure advocated by the centre or policy liberalization such as FDI [foreign direct investment] in food retail or investment in infrastructure for handling and storage etc won’t help in getting farmers a better price and increasing their income. The state procurement agencies whom the government normally deploys for buying their produce at MSP [minimum support price] don’t have the wherewithal to handle the mammoth volumes. So, the only way forward is to unshackle the markets by dismantling APMCs.
Will the vested interests let this happen?