Delisting fruits and vegetables from APMC Act in Congress-ruled states will not benefit farmers
Photo:MEETA AHLAWAT / SCECongress
vice-president Rahul Gandhi last December said fruits and vegetables
will become affordable if states allowed farmers to directly sell their
produce to consumers. He also directed the chief ministers in
Congress-ruled states to delist fruits and vegetables from the
Agriculture Produce Marketing Committee (APMC) Act. The Act makes it
mandatory for farmers to sell their produce
only to licensed merchants
at mandis set up by state agriculture marketing boards. Rahul Gandhi
said the delisting will eliminate these licensed merchants or middlemen
who raise the prices for profits. Agriculture experts, however, believe
the move will do more harm than good.
A Congress leader says on an average five middlemen are involved
between the farmer and the consumer. “The farmer sells his produce at a
nominal price, but the merchants keep on adding their commissions. As a
result, by the time it reaches the consumer, the prices are exorbitant,”
he claims.
On December 27 last year, Rahul Gandhi asked the 12 Congress-ruled
states—Manipur, Mizoram, Assam, Karnataka, Andhra Pradesh, Haryana,
Himachal Pradesh, Uttarakhand, Maharashtra, Arunachal Pradesh, Kerala
and Mizoram—to issue notifications for delisting fruits and vegetables
from the Act by January 15, 2014. While Uttarakhand, Assam, Arunachal
Pradesh, Meghalaya and Haryana issued the notification before the
deadline, the others are expected to do so shortly.
Tall claims
A senior official with the agriculture ministry says the price of
fruits and vegetables is unlikely to be affected since the decision of
delisting is limited to the Congress-ruled states and is not adopted by
major producers like Uttar Pradesh, Odisha, Gujarat and Punjab.
Sukhpal Singh, chairperson of the Center for Management in
Agriculture at IIM-Ahmedabad, says, “It cannot bring down the prices
substantially. Earlier, it was the merchants and the traders who decided
the price and now it would be corporates.”
Questions are also being raised on the practicality of the move
because several states in the past have unsuccessfully tried to
eliminate middlemen under different schemes. For example, in 1999,
Andhra Pradesh’s rythu bazaar (farmer’s market) was started to provide a
platform to farmers to sell their vegetables directly to consumers. The
model could not eliminate middlemen. “Even in these bazaars, it is
mostly the aggregators or agents who take farmer certificate and sells
under their name. The fact is that a group of farmers generally finds
somebody from the village and sell it to him and he gets a license to
operate in this bazaar. So the deal for farmers even in rythu bazaar is
the same,” says G V Ramajaneyulu of Centre for Sustainable Agriculture, a
non-profit in Andhra Pradesh.
Experts also fear the move will make the market chaotic. They say the
primary objective of the APMC Act was to regularise the market for
fruits and vegetables. In its absence, the agriculture marketing boards,
which are responsible for the mandis, will not be able to monitor the
quality of agricultural produce sold in the markets.
“We
don’t support the move of complete deregulation as it would have
repercussions. At present, the state government can at least monitor the
price at different levels, such as wholesale and retail. But in a free
market, no one will be able to monitor prices and quantity. Big
companies can hoard fruits and vegetables to escalate prices,” says the
agriculture ministry official. He adds the move will affect inter-state
trade. “For example, onions are primarily grown in Maharshtra. Now small
farmers in Maharshtra cannot bear the transportation cost to sell it
across India.”
“Around 50-60 per cent of vegetables and fruits are routed through
mandis. There are states like Punjab, Karnataka and Gujarat which have
highly regulated mandis where over 70 per cent of vegetables and fruits
are sold by the farmers because they have faith in the system,” says
Singh.
Experts and ministry officials unanimously believe that the Congress,
instead of deregulating the market, should improve the APMC Act. In its
recent report, government think tank Indian Council for Research and
International Economic Relations claims 15 to 25 per cent of the total
produce sold through the state mandis gets wasted due to multiple
intermediaries and poor infrastructure.
In this respect, the Centre had brought the model APMC Act, 2003, but
the states did not show much interest. The 2003 Act called for
public-private partnership in setting up of markets and recommended
separate markets for fruits, vegetables and flowers.
Not to benefit stakeholders
The move to delist fruits and vegetables from APMC Act will adversely affect both the state governments and farmers.
The state governments will lose out on the revenue they get through
the licence fees and mandi charges. Pranab Baruah, chief executive
officer, Assam state agriculture marketing board, says, “The move is not
going to affect Assam much because we don’t have big mandis like in
other states such as Uttar Pradesh and Gujarat.” Sources in agriculture
ministry say that Assam, which has freed 23 fruits and six vegetables
from the trade regulation, will lose out on Rs 10 crore annually because
of the move. They say Uttarakhand will lose out on Rs 8 crore and
Haryana will lose out on Rs 40 crore every year due to the delisting.
Experts also say small farmers will have little bargaining power if
they are forced to deal directly with the corporate. “If the farmers are
left to the market forces, they would be exploited. Instead, the state
governments should predetermine the minimum price for farmers and amend
APMC Act to ensure that more transactions happen inside the mandis,”
says Singh. He adds that farmers in Bihar, which repealed the Act in
2006, are facing a crisis because they do not know where to sell their
produce in the absence of the mandis. “The state government is planning
to bring back the Act with stricter provisions.”
Congress-ruled states will allow farmers to directly sell their fruits and vegetables to consumers ( Photo:KIRSTEN)The
argument seems valid when one considers that most of the farmers in the
country are small with less than two hectares of farmland. As per
government research body Indira Gandhi Institute of Development and
Research, small farmers contribute around 70 per cent of the total
production of vegetables and 55 per cent of fruits.
Singh warns the decision to remove traders and merchants will increase
the input cost for small farmers, who will now be responsible for the
storage and transportation of their perishable produce. “Small farmers
don’t have enough resources or quantity of produce that they would
travel 20-30 km or more in a day to sell their produce. Also, with the
free market, the farmers’ power to fight for prices will further
diminish as he does not have enough produce to bargain,” says
Ramajaneyulu. He suggests the state government should set up farmer
cooperatives or producer companies.
Pleasing the corporate lobbies?
Industry bodies Federation of Indian Chambers of Commerce and
Industry and Confederation of Indian Industry have been demanding
removal of fruits and vegetables from the APMC Act for a long time. They
believe the move will attract foreign direct investment in retail as
many private players are willing to make huge investments in food supply
chains.
Singh says the move will also help domestic players who will not have
to pay the licence fee to buy from the state-regulated mandis. The fee,
which varies from state to state, is between four and six per cent of
the cost of the produce procured from the mandis. “They are no more
liable to pay anything. If you think, the move will encourage industry
to have direct linkages with farmers, it’s not going to happen because
they won’t invest in the infrastructure. Industry prefers to use the
services of aggregators/merchants as it eases their procurement
process,” he says.
