To create private markets, Maharashtra deregulates APMC Act

A typical mandi scene -- Pic courtesy Hindu Business Line

It is not unusual for wheat and paddy grown in adjoining areas of Uttar Pradesh to find its way into Haryana mandis. But at the peak of the paddy procurement season this year, a lot of paddy procured in Bihar has been transported all the way to be sold in Punjab and Haryana. As per news reports, more than 2.5-lakh bags of paddy from Bihar have been seized in a month-long drive conducted by the Punjab and Civil Supplies department. In addition, another 2-lakh bag of previous year’s rice meant for PDS supplies in Bihar have also been seized.

In neighbouring Haryana, more than 1.25-lakh bags of rice meant for PDS supplies in Bihar have been seized from Karnal and its adjoining areas in raids conducted during September and October. In an interesting development, The Tribune(Oct 26) reported Karnal district alone having purchased more than double the anticipated production even though the paddy procurement season was half way through. This was essentially because of a well-oiled nexus that exists between traders in Bihar, Uttar Pradesh and Haryana whereby cheaper paddy/rice purchased from as far as Bihar is made available for procurement at a higher price in Haryana.

The reason is simple. While Uttar Pradesh lacks a well-knit system of a mandis network under the Agricultural Produce Market Committee (APMC) Act, Bihar had revoked the APMC Act way back in 2006. In the absence of APMC mandis, farmers in Bihar are constrained to sell wheat and paddy in open market at prices that are far below the Minimum Support Price (MSP). That is why traders find it profitable to transport paddy (and also wheat) from a pretty long distance and that too after having incurred an additional transportation cost. While paddy sells at anything between Rs 800 to 900 per quintal for low quality grade, and a maximum of Rs 1,300 to Rs 1,500 per quintal for good quality in Bihar, paddy MSP for normal quality in Punjab and Haryana is substantially higher at Rs 1,750 per quintal.

While Bihar was the first State to have repealed the APMC Act, Maharashtra has now become the second State after Bihar to have amended the APMC Act. A few months after it had brought in a notification making it obligatory for the trade not to purchase agricultural commodities below the MSP, in a complete turnaround it has now promulgated an Ordinance on Oct 25 deregulating all produce, including foodgrains, oilseeds and flowers, from the APMC Act. The new directive allows farmers to sell their produce outside the regulated APMC markets in the State. Earlier too, in June 2016, it had passed an amendment deregulating fruits and vegetables from the APMC Act but there are no studies telling us whether the move has helped farmers in any way. We have only seen reports of farmers dumping veggies on the streets in the absence of market prices even covering the cost of production.   

“The first step is to pass an Ordinance. The rules will be notified within 15 days,” Sadabhau Khot, the state minister for agriculture and market reforms told a media channel, adding “the idea is to create private markets with similar facilities as APMCs, while ensuring healthy competition.” While I am not sure how much the APMC amendments will help Maharashtra farmers in price discovery, it will certainly be interesting to watch how soon the trade opens marketing channels to make available Maharashtra paddy for procurement in Punjab and Haryana. When Bihar revoked the APMC Act some 12 years ago, the expectations were the same. The basic idea was that removing the monopolistic control of APMC markets will allow private investments, motivate the corporate sector to undertake direct marketing and provide for more efficient markets. Nothing like this happened. In fact, Bihar has turned into a test case to know how best agriculture can be turned exploitative.

“The amendments have been made in accordance with the Centre’s Modal Agricultural Produce and Livestock Market Act 2017,” the minister stated. In fact, this is where the problem lies. The inter-ministerial task force (in 2002) that initially recommended the APMC Act to be amended did not ascertain the social fallout of withdrawing an assured market for small farmers but was driven by the industry’s prescription. Contract farming, direct marketing and public-private partnership is only aimed at dismantling an excellent social framework which so assiduously helped build food security. Even the Food and Agriculture Organisation of the UN has questioned the need to repeal the assured markets saying that its social determinants first need to be evaluated. The main argument that APMC mandishave become stronghold of cartels is certainly correct, but that’s an issue of failure of governance. Instead, dismantling the mandiinfrastructure and replacing it with still bigger cartels of private players under the PPP mode is not the way forward, and will only lead to making the available infrastructure for corporate agriculture. In other words, we are fast moving towards privatisation of profits and socialisation of costs.   

Nevertheless, deregulation of APMC Act in Maharashtra comes at a time when a few weeks back the Centre had committed to procure 25 per cent of the agricultural commodities for which a higher MSP is being announced. Although the rules have still to be notified, and the finer print is awaited, but it is quite obvious that the amendments will reduce the delivery of MSP to farmers. This is exactly what the FICCI and CII had been demanding for long, wrongly saying that a higher MSP comes in the way of farmers realising a much higher price. Punjab and Haryana face tremendous pressure to dismantle the existing APMC infrastructure. In fact, the Commission for Agricultural Costs and Prices (CACP) too had come out with a study some years back ranking the State’s as per their market friendliness. Incidentally, Bihar topped the market-friendly index, and Punjab, with its widespread network of mandis, purchase centres and rural connectivity was placed at the bottom.

At a time when only 6 per cent farmers get the benefit of MSP prices, and when 94 per cent farmers are in any way dependent on markets, how does a breakdown of a parsley available public sector market infrastructure lead to increasing competitiveness? Moreover, it leaves behind a huge cost for country’s food security. It was in 2007-08 that the then Agriculture Minister Sharad Pawar had allowed private companies to bypass APMC mandis and buy wheat directly from farmers. With pvt companies cornering as much wheat as possible, it resulted in such a massive shortfall in public procurement that the country had to eventually resort for nearly 8 million tonnes of wheat imports in two years, at roughly double the MSP that was being paid to domestic farmers.#

Tender Mercies in Open Markets. The Tribune. Nov 14, 2018
https://www.tribuneindia.com/news/comment/tender-mercies-of-open-markets/682538.html