Commodity Analysis

Mandis shut due to Covid-19: Farm-gate procurement is the need of the hour

Rajalakshmi Nirmal | Updated on April 05, 2020 Published on April 05, 2020

Maha FPC’s two-tier structure shows how traders and agri-processors can collect produce directly from farmers, bypassing APMCs

‘Farmers face lockdown heat’, ‘Farmers stranded with fruits and veggies’ and other similar newspaper headlines gained attention two weeks ago.

But on the evening of March 27, the Centre released an order saying mandis are exempt from the lockdown, bringing relief to lakhs of farmers harvesting their wheat, gram and other rabi crops across the country.

But, since the order, none of the big grain mandis are open. The reason is that traders have refused to turn up and Agricultural Produce Market Committee (APMC) and State Marketing Board heads have been racking their brains on how to control crowds and ensure social distancing once mandis are opened.

The task is easier said than done. In the beginning of the arrival season, there will be hundreds of farmers and traders inside a mandi everyday, besides the hamalis (loading/unloading labourers), the mandi staff and truck drivers. Regulating the crowd and ensuring social distancing will be practically impossible. However, with the number of positive Covid-19 cases rising by the day and spread of the virus being observed in rural India, the issue at hand is serious.

The only way out is decentralised procurement by bringing new market yards outside APMC that can split the crowd. Given the way State machineries have been functioning over the past five-plus decades, they will probably set up these new market yards as temporary arrangements without amending the APMC Act and bringing new players to compete with the existing APMC mandis.

Not many traders, corporate firms and institutions in the agri-processing sector, however, buy the idea of decentralised procurement.

BusinessLine spoke to many traders and corporate firms over the past week to get a pulse of the matter. They have many questions. “Where is the space for new yards?” “Even if you get one, who will bear the logistics cost?” “What is the guarantee that social distancing can be maintained in the new market yards?”

When the idea of procuring directly from farmers was pitched, they slammed it: It can’t work without arhatiyas (commission agents/traders), they said. “Without someone to take responsibility of moving the goods from the procurement point to us and without counter-party risk guarantee on quality, it won’t work.”

Here is an example of a successful FPC (farmer producer company) consortium in Maharashtra for the benefit of all those who doubt the idea of decentralised/direct procurement.

Procurement in full swing

Maha FPC is a consortium of 303 farmer producer companies with a total of two lakh-plus farmer shareholders. It started operations in September 2014.

After lots of hardships, it got notified as a State-level agency of the Maharashtra government for procurement of pulses and oilseeds (under the price support scheme) in 2019.

This FPC consortium has a direct marketing licence, too. It sells the produce of its farmer shareholders directly to traders and food processors, skipping the traditional commission agents network. Last year, the consortium entered into a joint venture with the National Agricultural Cooperative Marketing Federation (NAFED), helping it procure onion,s under the price stabilisation scheme, directly from the farm gate for the first time. In the current year, despite many APMC mandis remaining closed across Maharashtra for MSP operations, MAHA FPC’s operations have been in full swing.

The consortium started its procurement operations in mid-February. Since then, in about 50 days, it has procured 13,000 tonnes of tur from 17,000 farmers. The total number of farmers who registered online to give their produce at MSP to Maha FPC is 1 lakh-plus. This is a significant jump from a registration of 26,000 farmers last year, thanks to a drop in market prices and bumper production.

The consortium is procuring tur and chana through 125 member-FPCs, at 125 centres spread across 125 villages of member-shareholders.

The village-level procurement is being done systematically, maintaining social-distancing and hygiene norms. Every day, including the hamalis and the mandi staff, there are not more than five people. About 10-15 farmers are called upon each day to bring their produce: farmers are intimated on the date they need to bring their produce through an SMS.

How it is done

By having a digital system in place for village-level aggregation, Maha FPC is able to carry on the procurement process with minimum staff and lower turnout of farmers on a daily basis.

The consortium has shown that by bringing together farmers under an FPC structure, aggregation of produce can be done easily, and when monitoring systems are established for weighing and quality check, traders/agri-processors will be willing to procure directly from the farmer’s place.

Most food retailers/agri-processors have their processing plants or warehouses near the APMC mandi in Maharashtra. But given that the APMC mandi itself is many a time 30-40 kilometres away from villages, not all farmers who want to sell directly can take their produce that far. Here comes the question of who will bear the cost of transporting the produce. At Maha FPC, logistics is not an issue.

Yogesh Thorat, Chairman, Maha FPC, says: “We hold a direct marketing licence and sell pulses and soyabean directly to traders and processors. They do not mind procuring it from villages of our FPCs because farmers also agree to take some price cut. They know that if they had to hire trucks to transport the produce to the mandi, they will have to cough up extra, and now that’s not going to be there.”

So, that solves one problem. Next is how weighing and quality check is done? Is there a third party involved? No. This is where the two-tier structure of the Maha FPC helps.

Maha FPC is an independent entity with separate company registration and licence. It is neutral towards all stakeholders and is not inclined to support either the trader or the farmer producer companies.

It is equally accountable to the buyer — be it a private trader or the government when doing PSS (price support scheme) procurement — as also to their member FPCs.

Maha FPC has trained staff of its FPCs to do weighing, quality checks and other procurement operations.

The consortium has also put some checks and balances. It sends its field officers regularly to inspect operations at the FPCs. These officers supervise the activities and also cross-check quality by pulling out samples from different bags that have been procured. On weight, it reaffirms by weighing the loaded trucks and also weighing some sample bags from each truck.

If the buyer is a private trader/agri-processor, or for that matter a government agency, say NAFED, has an issue with the quality of a particular lot, Maha FPC conducts an inquiry, and, if the lot doesn’t meet the quality specifications of the buyer in terms of moisture or, say, foreign matter, it gives the buyer a provision to reject the lots or cut the rate accordingly.

Thorat says it has taken him over three years to establish the system but it is now a robust model. “There were, of course, many problems we faced initially. But that’s past now. We have put a system in place and there are rules for everyone in this system to follow. We have done capacity building of all the FPCs and they are now functioning efficiently.”

Every new thing is a challenge . But when someone does out-of-the-box thinking and puts a system in place to handle the challenges, trust gets built and people come in to support. Hope the same happens with the FPO model in the country.

Published on April 05, 2020

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