Agriculture market reforms are a must

Updated on: Jan 08, 2018
A farmer ploughs his paddy field in Kamalghat village, about 35 km (22 miles) of Agartala, capital of India's northeastern state of Tripura, February 1, 2010. Rising prosperity will increasingly put pressure on food supply in India and the country urgently needs to boost farm productivity, Prime Minister Manmohan Singh said on Monday. REUTERS/Jayanta Dey (INDIA - Tags: AGRICULTURE BUSINESS)

A farmer ploughs his paddy field in Kamalghat village, about 35 km (22 miles) of Agartala, capital of India's northeastern state of Tripura, February 1, 2010. Rising prosperity will increasingly put pressure on food supply in India and the country urgently needs to boost farm productivity, Prime Minister Manmohan Singh said on Monday. REUTERS/Jayanta Dey (INDIA - Tags: AGRICULTURE BUSINESS)

A worker holds a handful of onions while harvesting the crop on a farm near Chandwad, Maharashtra, India, on Wednesday, Oct. 23, 2013. Onion prices in India may extend a record rally as heavy monsoon rains delay harvests and worsen a shortage, potentially accelerating food inflation in Asias third-largest economy. Photographer: Kuni Takahashi/Bloomberg

A worker holds a handful of onions while harvesting the crop on a farm near Chandwad, Maharashtra, India, on Wednesday, Oct. 23, 2013. Onion prices in India may extend a record rally as heavy monsoon rains delay harvests and worsen a shortage, potentially accelerating food inflation in Asias third-largest economy. Photographer: Kuni Takahashi/Bloomberg

Farmers use cattle to plow Soya bean field at the outskirts of Bhopal, central India, Sunday July 29, 2001.  The monsoon has brought new hope to the region as more than 60 percent of Soya bean is produced in central part of India. (AP Photo/Prakash Hatvalne)

Farmers use cattle to plow Soya bean field at the outskirts of Bhopal, central India, Sunday July 29, 2001. The monsoon has brought new hope to the region as more than 60 percent of Soya bean is produced in central part of India. (AP Photo/Prakash Hatvalne)

Although food production has increased tremendously, farmers’ incomes have not been impacted positively

More than ever before, the country’s agricultural marketing sector is garnering attention and is the subject of an intense intellectual discourse. No sooner did the Centre pitch for restructuring agricultural marketing to double farm income by 2022 than voices of dissent began to be heard. Scathing criticism was directed towards farm expert and NITI Aayog member Ramesh Chand, who strongly underlined in a recent article that it is imperative to bring agriculture marketing into the Concurrent or Union list to benefit farmers. Why is there opposition to a a move that is expected to benefit farmers? Is there a flaw in the proposed reform?

Most States have welcomed the proposal to move agriculture marketing into either the Concurrent or Union list from the State list as this will guarantee remunerative prices to farmers. However, some major States continue to offer stiff resistance saying this will pave the way for the death of agriculture and is against the spirit of cooperative federalism.

The Committee on Doubling Farmers’ Income under the chairmanship of Ashok Dalwai, in its draft report, justifies the recommendation saying marketing has no boundaries; this necessitates a pan-India operation to meet the demand across the country. Besides, the committee has also recommended rolling out the model Agriculture Produce Marketing Committee (APMC) Act 2017 which would facilitate single-point levy of taxes, promote direct interface between farmers and end-users, and give freedom to farmers to sell their produce to whomsoever and wherever they get better prices. If States continue to oppose the proposed reforms which promise to allow farmers a wider choice of markets beyond the local mandi, the losers will be none other than the farmers themselves.

Why markets are important

The country’s food production has increased tremendously from just 51 million tonnes in 1950-51 to about 252 million tonnes in 2014-15. However, farm income did not grow much, as the Situation Assessment Survey of farmers’ households andthe Cost of Cultivation Survey data reveal. This was also highlighted by the National Commission on Farmers (NCF) headed by MS Swaminathan. The income realised from cultivation at current prices worked out to be only about ₹101 a day during 2012-13. Why is this so?

The National Commission on Agriculture (1976) as well as the NCF (2006) had categorically emphasised that higher output alone will not provide higher income to farmers unless it is well marketed. Recent incidents of farmers reportedly dumping their bumper produce of tomatoes and onions and emptying cans of milk into drains is clear evidence of it. Had the markets been integrated, the surplus produce would have been transferred to deficit regions. If market integration offers a viable solution to the paradox of plenty, isn’t it wise to hail such a reform rather than oppose it?

The state of agriculture market

Farmers’ participation in agriculture markets is equally worrisome. The Dalwai Committee on Doubling Farmers’ Income has pointed out that the share of farmers in consumer’s price is very low; it generally varies from 15 to 40 per cent. Studies conducted by the International Food Policy Research Institute and World Bank have confirmed this. The dominant role of middlemen among others is primarily responsible for farmers not realising a reasonable price for their produce, lowering farm income and profitability. This was recognised by the 12th Plan’s Working Group on Agriculture Marketing (2011).

The agriculture markets are crowded with middlemen and commission agents. As pointed out by Ramesh Chand, in Punjab, there are as many as 22,000 commission agents and innumerable middlemen in each market. According to Ashok Gulati, former chairman of the Commission for Agricultural Costs and Prices, commission agents in Delhi charge exorbitant fees ranging from 6 per cent to 15 per cent.

The Committee of State Ministers, in charge of Agricultural Marketing to Promote Reforms (2013) under the chairmanship of Harshvardhan Patil, has highlighted in its report that covered and open auction platforms exist only in two-thirds of the regulated markets; one-fourth have common drying yards. Cold storage units exist in less than one-tenth of the markets and grading facilities in less than one-third; electronic weigh-bridges are available only in a few markets. The report also added that the post-harvest losses of various commodities ranged from 6 to 18 per cent. Therefore, they have no choice but to demand higher minimum support price (MSP) and procurement.

Facilitating new thinking

It is time to concede that production and marketing should march together in order to benefit farmers and consumers. Farmers need to be empowered to decide when, where, to whom and at what price to sell. The intermediary culture needs to be scrapped completely. The seasonal spike in prices of perishable commodities that pushes up the food inflation cannot be addressed without market reforms.

Almost 40 per cent of all fruits and vegetables are lost annually in India between the grower and the consumer mainly due to lack of storage facilities, a weak transportation system and bad roads. Climate change is expected to make the situation worse. States alone cannot revamp the agricultural marketing sector, primarily due to paucity of funds and technology. Private investment on a massive scale needs to be invited to upgrade and build large storage and warehousing systems that are climate resilient. However, sweeping reforms will see light only when agricultural marketing is brought under the Concurrent or Union list with the consent of the States. The country will achieve food security only when the income of farmers is secured and doubled.

Narayanamoorthy is professor and head, Department of Economics and Rural Development, Alagappa University, Tamil Nadu. Alli is senior assistant professor, Department of Social Sciences, Vellore Institute of Technology, Tamil Nadu

Published on January 01, 2018
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