Right time to unleash major agriculture reforms

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Published: April 15, 2020 6:20 AM

States asked to relax the APMC Act to allow buyers to deal directly with farmers; good idea to make this permanent

While there is no support price structure in place for fruit and vegetables, market prices have fallen far below the MSPs for critical crops that are usually procured. While there is no support price structure in place for fruit and vegetables, market prices have fallen far below the MSPs for critical crops that are usually procured.

Given the massive rural distress, it is not surprising that the government is trying to do its best to ensure as smooth a rabi procurement as possible. While Prime Minister Modi hinted at lifting restrictions for procurement in his address to the nation, the central government has told state governments that they should allow farmers to sell their produce directly to customers during the lockdown period, and that the APMC Act shouldn’t apply to these sales. So, if the states agree, and farmers—through cooperatives, or farmer producer organisations (FPOs)—can sell directly under the plan, these buyers will no longer have to pay mandi tax (since they will not be availing of the mandi’s infrastructure), or go through arhatiyas and pay their commissions. In addition, the Centre has asked states to give government-owned warehouses—ideally, this should be extended to private ones as well—the status of a mandi, so that transactions can take place from there, according to a news report in The Economic Times. While just Tamil Nadu and Karnataka have agreed to relaxing the APMC Act during the lockdown, should the PM wish, it should be relatively easy to get BJP-ruled states to accept this, too. Apart from making it easier for farmers to dispose of stock as buyers will come to their farms instead of them having to take their crop to the mandi, this would ensure easier observation of social distancing, which would be difficult to impose in the mandi system that would be choked with the procurement season upon us. Ideally, in fact, the government should insist that all mandis have ‘sanitiser tunnels’ at all entry points.

Now that the Centre is experimenting with the idea anyway, it should just do it for keeps. No one is arguing for doing away with the APMC or the mandi, but as in the case of the 1991 reforms—another instance of converting a crisis into an opportunity—allow parallel marketing structures to come up and coexist. Ideally, the government should encourage banks to provide concessional finance for such transactions, and even give incentives for such purchases since, by virtue of eliminating the middleman, this will also boost farm incomes. Indeed, if accredited warehouses are used, warehouse receipts can be traded, and that will help inject much-needed liquidity into the system. And, to encourage staggered procurement, farmers can be given a token specifying when they need to bring their crop for sale, along with being given an incentive for storing the grain on the farm, or in their homes. While there is no support price structure in place for fruit and vegetables, market prices have fallen far below the MSPs for critical crops that are usually procured. Ideally, then, the government should ask private traders to also buy the crop at this rate, and give them the difference between the market price and the MSP; this payment can be made once they produce warehouse receipts from certified warehouses. Prime minister Modi has been known for his bold decisions, and should he choose to free up agriculture markets, this will also help him achieve his plan of doubling farmer incomes, without a commensurate rise in retail prices for the end consumer.

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