Decision by Maharashtra Government
The Maharashtra government’s decision to promulgate an ordinance this week to exempt farmers from having to mandatorily sell their fruit and vegetable crop at mandis governed by a 1963 law on marketing farm produce, is a bold and laudable step against the powerful lobby of middlemen, who shut shop in protest, is even more commendable.
Problem with the present system
The problem with the present regime, under which produce has to be sold through Agricultural Produce Market Committees, is that farmers seldom benefit from price movements; traders rake in the upside that consumers are forced to shell out. When onion prices soar, for instance, it is usually traceable to APMC mandis in Nashik.
1. This reform could help check household food expenditure by cutting out high intermediary costs to an extent.
2. Farmer would be able to sell his output at larger prices in the open market.
1. If the Central government wants to double farmers’ incomes in five years (not an easy task even over a decade, going by official data from 2003 to 2013), several interventions are necessary, including better irrigation facilities, and the freedom to sell output where farmers get the best price. Fruits and vegetables are a good place to start dismantling monopolies of the sort that Indian industry was freed from 25 years ago.
2. Despite a substantially lower acreage than crops such as cereals and pulses, they contribute a quarter of farm sector incomes. Estimates vary, but there is no denying that a significant chunk of horticultural produce just rots. That wouldn’t be the case if farmers could sell easily to food processing units, or even directly to consumers via e-commerce channels.
3. Breaking the stranglehold of APMCs must be accompanied with easier access to credit and market information services, for which farmers often rely on their captive buyers; there also needs to be a greater push for cooperative groups so that marginal and small farmers have adequate negotiating heft in a free market.
4. Healthy competition among private traders and processing units, government procurement agencies and cooperative farmer-producer groups would improve price discovery from farm to fork.
5. Going ahead, Maharashtra and other States also need to back the Centre’s ambitious plan unveiled this April to create an e-National Agriculture Market for 25 major crops.
State of regulations requiring selling of horticultural produce in open market
Though seven States had already implemented the Centre’s June 2014 advisory to allow farmers to sell their horticultural produce anywhere instead of through APMCs, Maharashtra’s initiative is crucial as it has a larger agrarian economy with a greater impact on national food market dynamics.