Will delisting of fruit and vegetables from APMC help farmers without creating an alternative marketplace
First step of the reform is to change the law. It is an institutional and fundamental reform. It will send a message that the government is serious about reforms, and wants to break the monopoly of the archaic mandi system, which has become a place for high-rent seekers in collusion with the system. The fact that many others can enter the fray, creating competition for the existing licenceholders, will have a welcome effect in pushing the commissions of agents downwards, and will provide better services to buyers and sellers. This is like de-licensing a marketing system, enhancing market competition and moving towards getting the markets right.
Given that many states have not carried out reform or have enacted their own model APMC Act, what do you think the states should do to help farmers
The second step of the market reform is to create a better infrastructure for price discovery and marketing of produce. It starts with information dissemination, across space and time, for better price discovery. It can be done through spot or futures exchanges. Once the farmers and consumers have this information, they can take better decisions to sell and buy the produce in a manner that is most efficient for their business. But then the goods have to be moved or stored, and you need physical infrastructure, well planned market yards, sorting and grading facilities, etc. Availability of credit facilities to farmers, say through Kissan Credit Cards or through warehouse receipt systems, etc, would also be crucial to break the interlocking of output and credit markets. Instead of commission agents extending credit to farmers, which binds these farmers, alternative sources of accessing credit at reasonable rates are required.
States such as Bihar, Assam and Orissa have abolished APMC, yet private markets have not developed in these states. What could be reasons behind lack of investment by private sector in agricultural marketing
Some people feel that once the law is changed, people will rush in to invest. That may be true in some cases, but not in all. Businesses have to work out their calculations as to what benefits they will derive in lieu of the investment. The governments will have to evolve models that incentivise the private sector to invest.
The marketing models of a number of Southeast Asian countries, for example in Indonesia, was that the biggest retailer in Jakarta had invested at back end to create infrastructure at the village level. So, I would suggest that the states should emulate this type of a model for marketing fruit and vegetables in India, which will benefit farmers and consumers alike. The government can incentivise the formation of Farmer Producer Organisations to create such infrastructure, and have direct links with processors and retailers for their produce. That can unleash a revolution in Indias fruit and vegetables sector. We need to shift focus from being tonnage centric to farmer centric, and getting the markets right is one such important step in that direction.