Written by: Sumbul Mashhadi | Image: Economic Times
Until recently, I would chuckle at my mother bargaining with vegetable vendors for a mere ten Rupees on the price of a kilo of Tomatoes, but of late, I often find myself doing the same – only to chuckle again, but this time at the irony of it all. What has changed? Ordinarily, a vegetable vendor refusing to reduce the price would have been frustrating, making me question my competence as a desi adult.
But that was till I didn’t know any better. Fortunately (or unfortunately), now I do.
According to the Economic Survey of India 2018, the income of farmers in India has been stagnant since last three years. Add to this the rising farm debts, and it means families dependent on agriculture as their main source of livelihood keep getting entrenched deeper in poverty with every passing day. So much so, that 45 farmers commit suicides every day in the country. The Accidental Deaths & Suicides in India – 2010 Report by the National Crime Records Bureau, projects 15,964 farmer suicides in 2010 alone.
Let’s come back to tomatoes for the sake of perspective. A kilo costs Rs 45-50 per kilogram at Delhi’s Azadpur mandi. But, the same quantity will fetch their producers from neighbouring areas a mere Rs. 2 to Rs. 4.
Why does this happen?
The Government of India introduced the Agricultural Produce Market Committee (APMC) Act in 1963, ironically, with a focus on eliminating the exploitation of farmers by middlemen. The Act guarantees establishment of regulated markets or mandis, wherein farmers can sell their produce at a reasonable price and in a transparent manner. However, since agriculture is a state subject, the Act empowered state governments to prescribe the quantities and producers of commodities as they deemed fit, and designate markets and market areas where this regulated trade takes place.
With that, the very purpose of the act was made redundant, and arguably even counter-productive. Over time, illiterate or semi-literate farmers, who were not market savvy and cannot comprehend the multiplicity of taxes in place, found themselves at the disposal of a cartel of middlemen and agents who had licenses to operate in the mandis.
Over the years, a state monopoly was established over these markets since farmers are not allowed to sell their goods in the open market.
These entry and operational barriers prevent competent outsiders from accessing these markets, enabling middlemen to consolidate themselves further. As a result, an alternative market system does not exist and no encouragement is given to private entrepreneurs to invest in these markets.
How does the supply chain of agriculture work?
Farmers → Small Traders (Kachcha) → Larger Trader (Pakka) → Commission agent→ Wholesaler → Retailer → Consumer
In the absence of a direct link with the consumers, the farmers are at the mercy of the middlemen who occupy the entire space between the production and the ultimate sale of the produce. This makes middlemen very powerful and the farmers often find themselves at a disadvantage despite being the producers. Since there are only limited agents in an APMC, it’s profitable for them to form a cartel and deliberately increase the bids, pushing prices higher. Thus, de-linking the producers and consumers, deprives both – the farmers of better returns on their produce and, the end consumers of fair pricing on their purchase.
Over and above the license fee, even shop rents at these markets are quite high and that prevents healthy and necessary competition which is a prerequisite for maintaining quality and reasonable prices. At most places, only a group of village / urban elite operate in APMC. These high costs are usually passed down to the farmers, who end up having to separately pay commission, marketing fee, APMC cess, and at times even value added tax (VAT).
The Model legislation which came into being in 2003 to make APMCs more transparent has actually given rise to a conflict of interest, as the APMC, which is the operator, is also the regulatory authority.
There is reluctance on part of state governments to reform the APMC legislation, as it generates huge revenues. Some states have created additional entry barriers by prescribing either high license fees for setting up such markets or minimum distance between private markets and APMC markets.
These factors have led to a nationwide agrarian crisis over the least few years.
To provide relief to the farmers from this crisis, the newly elected Congress governments in states of Madhya Pradesh, Chhattisgarh and Rajasthan have announced waiving off all farm loans up to Rs. 2 lakh. Then, earlier this year, the Central government promised a dole of Rs. 6,000 per year in its interim budget to farmers who own less than 2 hectares of land. However, these stop gap solutions are not sustainable in an economy like India. The cyclical nature of deep rooted problems has proven time and again that band-aid solutions like a one time waiver or a meagre annual payouts don’t work.
Is there a sustainable solution to these systemic problems?
There may be. Increased autonomy in the supply chain to the farmer and higher emphasis on storage mechanisms.
A real life example of such an approach working is the success of dairy farming. Between 1970 and 2014, the share of livestock sector in the agricultural gross domestic product (AgGDP) increased from about 17% to approximately 29%, with livestock rearing playing an important role in ensuring food and income security of rural household (Birthal et al 2014). One of the major factors in the growth of the dairy sector in India was that this sector was granted higher autonomy in the supply chain compared to the agricultural sector.
Additionally, increased number of scientifically equipped and more hygienic storage facilities will help build a farmer’s ability to store their produce as per the demand. This will also enable farmers to manoeuvre market conditions and get the best price at the right time for their produce instead of being manipulated by market forces. The lack of proper or ample storage facilities can result in farmers having to sell their produce at the earliest to avoid crops being spoiled and the middlemen may exploit this harsh reality to their advantage.
In order to combat the exploitation of farmers, we need to take active policy action to increase farm productivity, post-harvest technology, and better storage facilities. If we want the consumer to pay less and the farmer to gain more the role of private sector role has to be enhanced by setting up private mandis where farmers can come and sell their crops directly. Concurrently, to ensure that farmers can fully utilise the benefits of this, entrepreneurship development should be encouraged along with better marketing skills to right the information asymmetry. You cannot be forcing a farmer to only sell in the government regulated markets.
All regulations put in place under the guise of ‘gareebi hatao’ (remove poverty) have only shackled to gareebi. Perhaps its time to try a different approach, one that empowers farmers by giving them better ownership of the fruits (or vegetables) of their labour.
About the Author:
Sumbul is a gender and agriculture rights activist and one of the founding members of the student led movement Pinjra Tod and Jamia Collective. One of her life’s dreams is to build sensitivity programs for Indian parents to help them be less controlling and intrusive in their children’s lives.