Why Maharashtra CM Devendra Fadnavis must make new mandis work

By: |
August 23, 2016 6:23 AM

New mandis as critical as cutting commissions

Maharashtra chief minister Devendra Fadnavis going ahead with removing fruits and vegetables from the ambit of the APMC Act is a very big step in freeing up the state’s farmers, more so in the face of tremendous pressure from traders who even tried to rattle him by offering to give up their trading licenses. Indeed, it was precisely this pressure which ensured the chief minister backtracked last January, and the NCP–Congress in 2012 when it brought an ordinance to delist fruits and vegetables. Coupled with the fact that, according to the central government, that Walmart and others have evinced interest in the 100% FDI policy in the food processing sector—all goods sold have to be made-in-India—this means a Walmart can now enter into long-term contracts with farmers and buy their produce at the farm-gate instead of going to the Vashi mandi in Mumbai.

Delisting fruits and vegetables, as the Delhi experiment showed—this was done by the central government when the state was under President’s rule—is irrelevant unless accompanied by certain steps. Which is why, the daily stocks brought to the Azadpur mandi have not fallen after this—from 12,562 tonnes in FY14, these rose to 12,758 tonnes in FY15 and 13,300 tonnes in FY16. Learning from this example, the Maharashtra government has promised to set up several mandis not just in Mumbai but in other cities as well—how fast these new mandis are set up, and how much land is allotted to them is critical since a small mandi will not have the space to create the required storage infrastructure. While setting up alternative mandis is a good idea, as the experiment with private mandis in Maharashtra has shown, this will not bring down the 3-8% commissions charged by the arhatiyas—for essentially the few minutes it takes to close a deal—unless the state lowers the maximum commission a mandi can charge.

Also, in the case of a Walmart, it is axiomatically assumed that, once the delisting is done, it can buy directly from farmers—this needs to be specifically qualified and, more important, it needs to be clear that it does not need to pay the mandi taxes that can be quite high. If food processing, whether through local companies like Patanjali or foreign ones like Wal-Mart has to take off, the government also has to scrap the essential commodities act which allows, if need be, the state to prevent the movement of farm produce—on one occasion in the past, West Bengal stopped the movement of potatoes across the state’s boundaries. Stocking limits of the type that are present today, and which the central government has tightened from time to time over the last two years, also need to be scrapped since they play a big role in preventing a robust food processing market from developing. Though the results of the elections in Punjab are not clear, the BJP/NDA rules in such a large swathe of states, several of which are contiguous—starting from J&K in the north to Haryana and Punjab, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh and Chhattisgarh—it can very quickly change the rules of the game for farm trade by creating enough competition in the mandis and by lowering commissions and taxes. This is critical for delivering on both the BJP promises of raising agriculture profits by 50% and doubling farmer incomes.

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