Exploring solutions to deadlock on farm laws

Ch Radhika Rani | Updated on January 15, 2021

Strengthening Grameen Agriculture Markets under panchayat control and making them work like APMCs merit attention

The ongoing agitation by the farmers of Punjab, which is supported by other farm unions, is unparalleled in terms of the sheer number of people participating and the number of days it has been going on. The Supreme Court has asked the Centre to put on hold the new farm laws and address the issues raised by the farmers before actively operationalising them.

While the farmers need a better price for their products and ease in their transportation and marketing, the consumers need the food products at an affordable price. The role of the Central government in balancing these two needs is challenging, especially with agriculture being a State subject.

Considering this, there’s a need to explore alternative ways of strengthening agri-markets while allaying the fears of farmers’ organisations regarding State withdrawal and corporates capturing the markets.

The MSP (minimum support price) and procurement by government agencies have, to a large extent, been instrumental in stabilising the prices. Apart from paddy, wheat and cotton, some notified crops are being procured at MSP by State governments.

However, as per Situation Assessment Survey report of NSSO (latest being 2013, which highlights the need for updated data) the procurement by government agencies is limited — at around 27 per cent of paddy, 44 per cent of wheat and 16 per cent of cotton.

Also, farmers have only limited information about MSP and government procurement even for crops like paddy and wheat, whose procurement stands at around 32 per cent and 39 per cent respectively.

Support systems needed

Breaking the dependency of small farmers on local intermediaries and the vicious cycle of interlocking factor and product markets requires a host of support systems complementing each other. The new farm laws enable trading outside APMCs (Agricultural Produce Market Committees), as the access to APMCs for majority of farmers in the country is minimal.

The average distance between a village and an APMC is 480 km. In Budget 2018-19, the Centre had announced upgradation of the existing 22,000 rural ‘haats’ into Grameen Agricultural Markets (GrAMs) and electronically linking all the haats to e-NAM and exempting them from APMC regulations.

Strengthening the physical infrastructure of GrAMS using MGNREGS and other government schemes to make them function in line with APMCs and bringing them under the control of local panchayats is an alternative model to be tested in the field. This may dispel the fear of likely increase in private trading outside the markets. To encourage farmers to gradually bring better quality produce to the markets, the infrastructure for drying and grading should be introduced at GrAMS along with information on pricing and quality standards.

Farmers are in dire need of post-harvest liquidity to invest in their subsequent crops. Distress sales happen because of the lack of liquidity. There should be a system in every village where the farmers can pledge their produce and get loans to avoid distress sale. The warehousing capacity in the country is about 109 million tonnes, which is enough to meet only 30 per cent of the storage requirements. The Negotiable Warehouse Receipts (NWR) system of the Warehousing Development and Regulating Authority (WDRA) is aimed at helping farmers get better credit facilities and avoid distress sale.

Since warehousing is capital-intensive, construction of warehouses by private entrepreneurs has not been encouraging. States, through the ‘Cooperative Marketing Federation Limited’ (MARKFED) and local panchayats, should promote accredited storage structures of WDRA at the village level. This will enable the farmers to leverage these accredited warehouses when the prices for their products are too low, by getting institutional credit against their products pledged in the warehouses.

It must be noted that government procurement of paddy and wheat, despite the low scale, has helped maintain stability in the prices of these crops and support the small farmers. Recently, the Telangana Government announced that it will no longer procure farmers’ produce. The main reason cited is recurring losses to the State MARKFED.

This calls for maintenance of a revolving fund by State MARKFEDs, as being done by the Karnataka government which pays a floor price to the farmers which is over and above the MSP. In fact, the MSP should be the model price at which trading should be conducted in any mandi. MSP is announced for 23 crops and it makes no sense if it is not legally binding. In other words, the MSP should be made statutory.

The role of MARFED must be augmented by State governments to become an independent decision-making and implementing body. ‘Mission Antyodaya’, the flagship programme of the Ministry of Panchayati Raj, was started in 50,000 panchayats for cluster specific livelihood development. This mission should enable the panchayats that all the 22,000 GrAMs fall under support the strengthening of GrAMS and warehouse structures in the villages. All this calls for an integration of systems by the Central and State governments.

The writer is Head, Centre for Agrarian Studies, National Institute of Rural Development and Panchayati Raj, Hyderabad

Published on January 15, 2021

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