Maharashtra CM Fadnavis did well by dismantling APMC monopoly, but can he make it work now

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New Delhi | November 06, 2018 1:41 AM

The reason for this was simple, since the government created no other options for farmers to trade in, they had no option but to continue to bring their produce to Vashi and Azadpur.

Maharashtra chief minister Devendra Fadnavis

Maharashtra chief minister Devendra Fadnavis won a lot of praise when, early in his tenure, he delisted fruits and vegetables from the Vashi mandi, one of the biggest in the country along with Azadpur in Delhi; indeed, when the Central government was in control of the state during the phase of President’s rule, it did the same for the Azadpur mandi. Despite this, however, there was no material change and farmers continued to be at the mercy of arhatiyas that controlled the two mandis. The reason for this was simple, since the government created no other options for farmers to trade in, they had no option but to continue to bring their produce to Vashi and Azadpur.

Ideally, after delisting, states like Delhi and Maharashtra should have created several mandis in different parts of the city and ensured that these were not cartelised like Vashi and Azadpur. This, however, never happened, so while the APMC-delisting box got ticked early on, there was no difference to the lives of farmers. It is this that prime minister Modi can fix, by giving his chief ministers targets for setting up new mandis with free land, for instance, and mandis that aren’t too far away for farmers. Creating a pan-Indian market, in fact, requires more than even this. It requires, for instance, an organisation at one end to do the grading of produce and certifying it so that, when another party is buying the goods in another part of the country, it knows what quality to expect—and if the goods are not of the promised quality, the certifying organisation has to stand guarantee. There also needs to be an organisation that ensures smooth payments and a quick reversal in case of transactions gone bad. Once again, given the strength of organisations run by the government, creating this infrastructure can’t be too tough if the PM is committed to it.

It is only when the government, at the Centre and in the states, do this that India can hope to create a single—or as close to it—pan-Indian market where the prices are broadly similar. The only difference in prices, when this happens, will be the cost of transportation and possibly storage at various markets. And, if the government does not keep banning exports, the prices in local markets will be largely in sync with what they are in global markets. Right now, however, thanks to extremely fragmented markets, even prices within a state differ widely. So, for instance, maize costs `1,100 per quintal in Rajgarh in Madhya Pradesh right now but `1,332 in Neemuch in the same state; bajra costs `1,400 in Baran in Rajasthan but `1,637 in Jodhpur in the same state, moong costs `4,431 in Nagaur in Rajasthan but `5,250 in Jodhpur and groundnuts cost `3,575 in Sabarkantha in Gujarat versus `4,250 in Rajkot in the same state. Indeed, it is because of this large fragmentation of markets that, despite the Central government announcing very large hikes in the MSPs of various crops, their market prices remain way below the MSPs. If the BJP is to deliver on its promise to double the income of farmers, the only way it can do this is to ensure the creation of a pan-Indian market. Chief minister Devendra Fadnavis deserves full credit for what he has done so far, but if this is to translate into anything meaningful for farmers, he needs to do a lot more. As economists put it, what he has done so far was a necessary condition, but not a sufficient one.

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