Logistic constraints: Few takers among retail biggies for direct purchase from farmers

By Prabhudatta Mishra

The Centre’s April 4 directive to states, asking them to facilitate direct purchase of farm produce including grains, pulses and fruits and vegetables by big retailers, aggregators and food processors hasn’t produced any immediate results. Except Madhya Pradesh, no other state has so far acted upon the Centre’s advisory, leaving farmers, the intended beneficiaries of the move, high and dry.

Also, big FMCG companies like ITC which FE spoke to discounted the feasibility of the move to address the current plight of farmers. Transport facilities from fields to their warehouses are hard to set up by new players at this point of time and quickly enough to make a meaningful difference to farmers’ market access, they say.

The idea behind the Centre’s move was to unshackle the farmer community hit hard by the current lockdown from the fetters of the APMCs that control mandis. While most states have already de-listed fruits and vegetables from the purview of APMCs, these bodies are still in exclusive control of trade in most other crops.

Of course, a fair amount of direct buying from farmers had been happening even before the Centre’s order in some localities in Uttar Pradesh and Gujarat. The two states had even many months before the Centre’s latest directive, issued ‘unified licences’ to retail companies and bulk traders for ‘direct marketing’ of farm produce.

“The main challenge (for big retailers who now plan to get unified licences to purchase crops directly from farmers) is to set up the transport logistics between villages to the warehouses. Before the lockdown, farmers were bringing their crops to mandis using their own transport – either in tractors or carts. Traders used to collect the goods from the mandis and deliver at the doorsteps of the companies like us. Now, when there is a problem of availability of trucks and labour, setting up alternative logistics overnight may prove to be difficult,” said Rajnikant Rai, chief operating officer of ITC’s agri-business division.

“Since hiring people for setting up own network to purchase round the year at village levels costs higher, many companies prefer to buy from the (APMC) traders,” Rai said. Since this (creating own network for purchase) has just started, it will take time to be streamlined and for more companies to set up their own networks, he said. The labour shortage in this segment is around 60% at present.

Uttar Pradesh, where chief minister Yogi Adityanath himself is in charge of the agriculture department, had issued about 300 ‘unified licences’ to companies, bulk traders prior to the lockdown under an existing policy. This licence was meant to allow bulk buyers to directly purchase crops from farmers by setting up their own collection centres as well as from any mandi within the state, said Devesh Chaturvedi, state’s principal secretary, agriculture. “We have asked atta and dal mills to get the unified licences and start buying directly from farmers but this would commence in a large scale only after the lockdown is lifted,” he added.

Since wheat is the main rabi crop, private companies have been told by the UP government to ensure there are no distress sales by farmers of this crop. After the imposition of lockdown, the state has waived the mandi fee (about 2%) for farmers’ producers organisations (FPOs).

While ITC will start buying wheat from UP farmers in a few days, Adani Group and some bulk traders have already started buying the cereal directly from farmers from April 15 in Uttar Pradesh. Harvesting of wheat is 75% complete in the state’s western region, 35-40% in central and about 15% in eastern parts, traders said. Diversified FMCG major ITC has been one major purchaser of farm produce in Uttar Pradesh and Gujarat, but its purchases are yet to start for the standing rabi wheat crop as the lockdown has hit harvesting.

Fruits and vegetables are delisted from APMC in most of the states, including Delhi and Maharashtra, where two top mandis of these produce exist. Some of the companies like ITC, Adani and Pepsi purchase specific fruits and vegetables — orange, apple, potato — directly from farmers apart from buying through aggregators. However, the lockdown has slowed the pace of such purchases.

After the Centre’s advice, Madhya Pradesh has allowed traders to have free access to farmers’ produce without resort to mandis. “Even for the corporate sector, the registration fee for collection centres has been reduced to Rs 500/centre from Rs 10,000,” said Sandeep Yadav, managing director of MP Mandi Board.

Uttarakhand and Tamil Nadu have waived mandi fees during the lockdown. While Uttarakhand has done it only for fruits and vegetables, Tamil Nadu announced it for all crops. Some other states like Haryana and Odisha are also contemplating some measures for direct purchase without visiting mandis, official sources said.

States like Uttar Pradesh, Maharashtra, Andhra Pradesh, Rajasthan and Karnataka had, even before the lockdown, allowed FPOs to procure from anywhere outside the mandi purview if they sell it to consumers directly.

“Market interventions by the state governments need to be aligned with the one-nation-one-market concept by laying greater emphasis on long-term connectivity for agricultural produce, across states and geographies,” the Ashok Dalwai committee on doubling farmers’ income had said in its report. A unified licence and free access to farmers’ produce are major reforms required for achieving one-nation-one-market objective, it said.

The Centre earlier this month added two new features on the electronic national agriculture market (e-NAM) platform to make it more convenient for farmers to sell their produce at government-accredited warehouses and collection centres set up by FPOs. This will also help cut middlemen in the agri-value chain and break the monopoly of the mandi system.

“The progress (on direct sales to consumers by farmers) will take time since warehouses will be trained after which they will have to hold awareness campaign in villages to attract farmers into their premises for selling the produce. However, since FPOs have been already working on the ground, they can mobilise farmers faster,” a government official said. So far, Telangana (14 warehouses) and Andhra Pradesh (23 warehouses) have declared designated warehouses as deemed markets.