Freeing farm markets

The Centre’s decision to issue a new model law liberalising marketing of farm produce is a long overdue measure that will not only give farmers a better deal but also help consumers with more stable prices of food items. On the macro front, stable food prices will mean less volatile inflation. While liberalised marketing rules are purportedly part of Prime Minister Narendra Modi’s plan to ensure doubling of farmers’ income by 2022, the key to its success lies in efficient adoption and implementation by State governments. Bringing down intra-State and inter-State barriers to free movement of agriculture and livestock produce is also essential to transform India into one common market. The Goods and Services Tax will do that for manufactured goods and services by September and the proposed Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act 2017, which replaces the Agricultural Produce Market Committee Acts 2003, can do the same for farm produce, although not to the same effect as many barriers will continue to remain. However, there is no economic rationale to deny farmers access to markets that are outside the State boundaries, particularly if the country wants to make efficient use of its natural resources such as water and adopt more scientific farming.

For the moment, the new model Act circulated by the Centre to the States for adoption, partially or entirely, proposes to reduce restrictions on sale of produce by farmers. Intra-State barriers on the movement of food are proposed to be reduced by allowing farmers to sell not just in designated mandis (as at present) but to any mandi in the State. The liberalised model law also proposes private wholesale markets, direct sale by farmers to bulk buyers and promotion of electronic trading. There is also a proposal to declare godowns and cold storages as market sub-yards to ensure there are markets within a five-kilometre radius for the farmer. All of this means that the farmers will have many more avenues to sell their produce, which in turn will increase competition among buyers and lead to better farm-gate prices for the farmers. The adoption of the new law will also reduce wastages of farm produce — a significant proportion of the horticultural produce (fruits and vegetables) perishes for want of timely picking, adequate market information and access, and cold chain infrastructure.

Many States have already declared their intention to adopt the new model law to make marketing of farm produce easier. If all 15 States governed by the BJP and its allies, which are also among the largest food producers, adopt the model law in the next few months, India would be moving irreversibly closer to creating a single market for agricultural produce, manufactured goods and services. It would also pressure other States to adopt the new agri-marketing law. The reforms would, however, remain on paper if the State governments fail to encourage the private sector to create the requisite infrastructure.

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