The story of agriculture produce in India has been one of farmers mostly not getting their due, middlemen eating up a chunk of their profits and inadequate storage facilities resulting in big wastages.
The story of agriculture produce in India has been one of farmers mostly not getting their due, middlemen eating up a chunk of their profits and inadequate storage facilities resulting in big wastages. Although successive central governments have attempted to remedy this, few state governments have followed through with the policy changes. For instance, only a few states have taken fruits and vegetable out of the purview of APMC laws which is critical if farmers are to get better prices. In rewriting the APMC Act, the Centre is hoping to remedy the monopolistic nature of agricultural markets. If the states agree, most of the amendments proposed—a single unified market within a state, a single trading licence, allowing private wholesale market yards and farmer-consumer market yards to flourish and promoting e-trading—should ideally result in both the farmer and the buyers getting a better deal.
While the proper regulatory framework needs to be in place, what is more critical is the follow-up support from governments both at the Centre and in the states in creating the necessary infrastructure. The reason farmers sell their produce to aggregators, who then take it to the mandis in truckloads, is because it doesn’t make sense for them to incur the cost of transporting small lots of produce across long distances. Bulk producers, in turn, prefer to buy from the mandis where they can pick up sufficient quantities even if they’re paying more. The Azadpur mandi in Delhi, which sees a daily throughput of 8,000-9,000 tonnes, has remained the biggest market in the region with the arhatiyas holding sway despite APMC laws being changed. So, since it is hard to see the private sector bearing the cost of the necessary infrastructure, if the government wants new mandis to come up after the law is changed, it must come forward with financial support like, for instance, providing free land for new mandis.
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If the government is looking to improve the marketing of agri-produce and reduce wastage, it must re-think its stand on allowing 100% FDI in multi-brand retail or conditions for food-retail. Large logistics players are likely to invest in transport and storage facilities if large global retailers are permitted to operate in the F&B sector. The presence of big retailers in the food chain could also pave the way for more contract farming; a stable and sensible export policy, similarly, would reassure players as global markets offer large and predictable volumes. Since very high mandi taxes, such as the 14.5% one in Punjab, are a big barrier to trade, increased government procurement in states like Madhya Pradesh and Chhattisgarh (and now UP) can help break Punjab/Haryana’s stranglehold over procurement for ration shops—since 60% of the `13,000 crore of annual mandi taxes go to Punjab and Haryana, a reduction will both boost trading and increase farmer incomes.