Diluting the APMC, MSP regimes isn't a good idea

A general impression has been created by mainline economists that the main reason behind agrarian distress is the denial of freedom to farmers to sell to anyone, anywhere. This is essentially an argument seeking to demolish the massive procurement operations being undertaken for crops like wheat and paddy in regulated APMC (Agricultural Produce Market Committees) mandis. Minimum Support Price (MSP) too has been touted as a monopolistic price which deprives farmers of what the economists call as price discovery. Markets alone are being projected as the way forward to provide farmers with a better price.

For almost a decade now, serious attempts have been made to systematically dismantle the procurement structures, built assiduously over the years to achieve food security. Former Chief Minister of Punjab, Prakash Singh Badal, had a number of times said how in the name of liberalising farmer markets he was increasingly coming under pressure from economists and policy makers to dismantle the APMC market network. Capt Amarinder Singh’s government too has time and again appealed to the Centre not to phase out the one-ended crop procurement system which has provided farmers with income security. A high-powered committee had earlier recommended splitting the Food Corporation of India (FCI) and shifting its focus to food exports and commodity trading. Like the story of camel and tent, allowing private players in the APMC regulated markets is now being suggested by free-market evangelists to bring in competition.

Five weeks into the lockdown and all promises of markets being the saviour have come crashing down. It is only the surplus food reserves that have come in handy at these difficult times. Imagine, if the food reserves had been curtailed to meet the demand of only 20 per cent population as some economists had envisaged. Would the markets have stood up to meet the challenge? Also, take a look at the dairy industry, which has a sizeable private sector presence. At a time when the dairy prices have slumped following a crash in demand, and with private dairies refusing to buy any extra milk, it is only the cooperative milk dairies that are buying surplus milk to be converted into milk powder and cheese. Amul alone is procuring 50 lakh litres a day. So are state cooperatives like Verka in Punjab and Vita in Haryana. Maharashtra has been procuring 10 lakh litres of surplus milk every day at an assured price of Rs 25 per litres to offset the losses farmers are suffering. Kerala Cooperative Milk Marketing Federation is providing free milk to migrants as a solution to reduce the glut in procurement. Wonder why the private dairies couldn’t do the same.

Coming back to normal times, the idea of encouraging competition by liberalising the agricultural markets is the underlying objective of market reforms. But what remains unexplained is that why the private players should be only eyeing the well-laid out market infrastructure of the regulated APMC markets? Considering that only 6 per cent farmers receive MSP (as per the Shanta Kumar high-powdered committee) the remaining 94 per cent of India’s farmers are in any case dependent on markets. Instead of forcing amendments to the APMC Act seeking entry of private players, the best way to upset the strong cartels that operate in the APMC markets is to set up parallel private market networks in the areas where the regulated mandis do not exist. After all, 94 per cent farmers do not have access to regulated markets. Take the case of Bihar, which had revoked the APMC Act in 2006. The idea was to attract private sector investments in marketing infrastructure where efficient markets were expected to provide for better price discovery. Unfortunately, nothing like that happened. So much so that unscrupulous traders are illegally transporting quite a sizeable quantity of wheat and paddy after every harvest to Punjab and Haryana, which at least provide an assured MSP.  

In any case, there are less than 7,000 regulated APMC markets in India. What India needs is vast network of 42,000 markets if a mandi has to be provided in 5 kilometres radius. The opportunity therefore is huge, all it requires is the ability to take up the challenge and chart a promising direction by first investing in essential infrastructure like cold chains, storage, grading, transportation etc.

Now comes the issue of price discovery. If markets were so efficient, there is no reason why farmers should be committing suicide in such a large number. After all, as said earlier, since 94 per cent farmers are dependent on free markets, their economic conditions should have improved over the years. However, Economic Survey 2016 tells us that the average income of a farm family in 17 states of India, which means half the country, is less than Rs 20,000 a year. Even in America, from where we borrow the failed economic prescriptions for agriculture, markets have left farmers in the lurch. According to the Chief Economist of US Department of Agriculture real farm incomes have been on a decline since 1960s. What had saved farming all these years was the economic support through massive subsidies. Further, despite commodity trading and the dominance of multi-brand retail, the American Farm Bureau Federation in 2019 said that 91 per cent US farmers are bankrupt and 87 per cent farmers say they are left with no other alternative but to abandon farming.

While India is trying to hook agriculture to commodity futures, I wonder why in the US with the biggest commodity stock exchanges, farmers should be carrying a debt of $ 420 billion. If commodity trading hasn’t worked for US farmers (and for European farmers where direct income support is still in vogue) how it will be a panacea for Indian farmers has never been explained. In any case, at the time of global food crisis in 2007, when 37 countries had faced food riots several experts had pointed to commodity trading for being primarily responsible for food crisis the world encountered. While poor went hungry, agri business companies had made a killing on the exchange.  

The reason why India escaped the global food crisis was (and even now at the time of an ongoing lockdown) is because it had not linked its agriculture to the commodity trading system and at the same it had enough food stocks to tide over the crisis, thanks to APMC. Whether we like it or not, the fact remains that despite MSP not covering the cost of production for most crops, it is the only instrument that provides for price discovery. Dilute the MSP regime, and prices for agricultural commodities would register a fall. Any effort to dismantle the procurement system therefore is fraught with unforeseen dangers. The need is to improve the working of the APMC mandisrather than turning these redundant. #

Diluting the APMC, MSP regimes isn't a good idea. Hindu Business Line. May 12, 2020.
https://www.thehindubusinessline.com/opinion/diluting-the-apmc-msp-regimes-isnt-a-good-idea/article31556671.ece?fbclid=IwAR2zKSCsIqQ_YTcp1UkkkAsT-f3KHeIRWEHe4Y5YM6ReMCu15u1a3Tk-ZM4 

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No need to panic; India has enough food stocks to tide over Corona Virus crisis

People throng to malls in panic to stock essential items in wake of coronavirus outbreak. 

Pic: socialnews.xyz

As European Union sealed its borders in a desperate attempt to put the brakes on the ferocious spread of the corona virus pandemic, a young Indian student returning from Italy recounted how the battle for a loaf of bread has intensified in a country which is perhaps the worst hit by the spread of the deadly virus. An Indian NRI couple returning to America a few days ago, after spending two months of holidays in India, were shocked to find that the price of wheat atta they usually would buy for $ 10 a bag has now skyrocketed to $ 90.

As hordes of worried shoppers have been stockpiling supplies of food, toilet paper and other groceries day after day amidst corona virus scare in America, the US President Donald Trump had to step in to assure people that there is no shortage of food supplies and urged them to resist from panic buying. 

In India, while Prime Minister Narendra Modi has urged the people not to resort to panic buying the Supreme Court directs all states to ensure that the disbursement of nutritional food to children and lactating mother is not affected as a result of the closure of schools, Kerala has launched a programme for delivering mid-day ration to school children at their homes. Meanwhile, reports of consumers stocking food and other essential items in panic have poured in from across the country. With Punjab closing down the weekly vegetable market called Apni mandi, and with some experts pointing to community transmission of corona virus expected to happen, which means self-quarantine will become the norm in the days to come, the scramble for buying and storing essential food commodities has only heightened. My own neighbours have already stocked their monthly household requirement of wheat atta, rice, sugar, edible oil, onion and potato.

Although there is no shortage of food globally as well as nationally, panic buying of food items at a time of crisis is nothing unusual. As far as wheat, rice, sugar and pulses are concerned, there are enough stocks available within the country. In fact, for wheat and rice, the godowns are already overflowing with the surplus over the required emergency buffer being several times more. Against the requirement of 214 lakh-tonnes of wheat and rice at the beginning of the year on Jan 1, 2020, Food Corporation of India (FCI) had 565.11-lakh tonnes, which means roughly two and a half times more than the essential requirement for public distribution. With the new wheat arrivals expected from the first week of April, India has certainly nothing to worry on the foodgrain front. In addition, India already has a buffer stock of 30-lakh tonnes of sugar, which the government is planning to raise to 40-lakh tonnes this fiscal. In the cases of pulses, the Ministry of Food and Consumer Affairs has been trying since December to offload 8.47-lakh tonnes from its buffer stock of pulses.

The abundance of food stocks within the country at a time when national borders are closing for movement of people and also expected to hit international trade is certainly a big sigh of relief. This reminds me of the global food crisis in 2007 when food prices had soared globally, and food riots had erupted in 37 countries, including countries like Egypt. While people went hungry, food companies had raked in huge profits with the food commodity prices soaring in the Chicago Mercantile Exchange, the world’s biggest commodity trading market. The UN Human Rights Council had attributed commodity futures trading to be the primary reason behind the global food crisis. Nearly 75 per cent of the blame for the unprecedented rise in food prices was directly linked to the exploitative commodity prices that prevailed.

India had escaped the global food crisis primarily because it had enough food stocks and also it had not linked its agriculture to the international futures market.

With public memory being short, the corona virus pandemic has perhaps come knocking at the right time. For past several years, mainline economists and policy makers have been seeking the reversal of the food procurement system that is primarily responsible for building the food reserves so essential for ensuring household food security. With all eyes on dismantling the network of regulated mandis under the Agricultural Produce Market Committee (APMC) Act, the government is keen to gradually withdraw from the open-ended procurement of wheat and rice. The Prime Minister Office has already written a letter to the Punjab government asking why the open-ended procurement under which whatever quantity of wheat and rice farmers bring to the mandis the government is under obligation to procure at the Minimum Support Price (MSP), is not curtailed.

The basic objective being to liberalise the agricultural markets which, in turn means not learning enough from what led to the global food crisis. Any tinkering with the food procurement system built so assiduously over the years is certainly fraught with unforeseen dangers. More so in a country which has the worst child mortality in the world, with over 8.80-lakh children succumbing to malnutrition and related ailments every year, termed by the UNICEF as – burden of death – clearly shows the problem is not with surplus food the country has but with its (mis)management. More so, at a time when the country ranks 102 among 117 countries in the Global Hunger Index.

Therefore, the policy makers need to listen again and again to what Dr M S Swaminathan had once said: “Future belongs to nations with grains and not guns.”India cannot afford to go back to the days of ‘ship-to-mouth’ existence when food would come directly from the ships to feed the hungry. #

India has enough food stocks to tide over CoronaVirus crisis. Deccan Herald. Mar 20, 2020

https://www.deccanherald.com/opinion/panorama/india-has-enough-food-stocks-to-tide-over-coronavirus-crisis-815502.html 

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