Farmers eye better prices as Bengal moves to cut the middleman

State will set up Krishak Bazars where farmers can to sell their produce directly to private retailers

Every Tuesday and Saturday, Nimtouri, a nondescript locality in the suburbs of Purba Medinipur, wakes up to life. In the dimly lit warehouses, transactions worth a few thousands of rupees take place as farmers from nearby and far-flung villages come here to sell their produce to traders, better known as middlemen. Unlike any other markets, however, there is no hue and cry over price discovery at Nimtouri.

Animesh Maity, a farmer in his 80s, has travelled more than 10 km to sell 2 kg of betel nut. Prices are ruling at an all-time high on low production. Maity does not expect much, though. With  wholesale prices at Rs 350-450 per kg, Maity gets to sell his produce at Rs 200. This is better than last year, an increase of Rs 50, yet far below the wholesale price.

Prices of betel leaf or paan, too, are high, with the wholesale price at Rs 10,000 for 10,000 leaves, up from Rs 6,000-7,000 last year. But Gopinath Pramanik, a farmer, makes only Rs 4,000-5,000. This means no profit for Pramanik for the second year in a row. In addition, the cost of farmhands has gone up from Rs 150 a day to Rs 300 in the past year. This year Pramanik decided to cultivate his field on his own.

Maity and Pramanik cannot sell outside the Nimtouri market because the unions controlled by middlemen thwart any such effort.

“There is absolutely no profit in farming, be it paan or paddy. We are not entitled to sell our produce outside the wholesale market as the trade unions do not allow it. On numerous occasions we were offered better prices, but if we are to live in this village, we can't sell our produce outside the union,” says Pramanik.

Hopes from the APMC Bill, 2014
Last month, the West Bengal government passed the West Bengal Agricultural Produce Marketing (Regulation) (Amendment) Bill, 2014. After numerous failed attempts to bring changes in the APMC Act by the earlier Left Front government, this marks a historic change in the agriculture marketing laws of West Bengal.

The Bill paves way for private players to buy directly from farmers and allows them to operate wholesale yards for a fee. The state also intends to set up Krishak Bazaars, on the basis of public private partnership, which will allow farmers to sell their produce directly to retailers.

“Companies involved in food processing will have the freedom to procure directly from farmers. Farmers can expect better realisation, faster payments, lower transaction costs (commissions) and advice on modern farming practices. Also, it will make APMC licences easier to obtain and allow for freer import and export of agricultural commodities. We expect the APMC fees to be reduced substantially,” said Mayank Jalan, managing director of Keventer Agro.

Ironically, the Trinamool Congress government had in 2012 passed a resolution against the entry of both domestic and foreign capital in retail.

“There is no change in our policy stance. At present, 92 per cent of markets are under private control. The amendment will generate some additional revenue for the government. Also, in the Krishak Bazaars, the prices will be determined by the farmers. It is not our concern who buys the produce, a retail company or a trader,” said Arup Roy, agricultural marketing minister of West Bengal.

What the Bill mean for farmers?
PepsiCo has been procuring potatoes from farmers in  West Bengal through a mechanism called collaborative farming, by which the company buys potatoes at pre-determined prices and quantities. The mechanism protects farmers from fluctuations in the market price.

Potato cultivation is risky. Suicide and distress sale are common in the growing season. The problem is poor infrastructure and marketing. With the cost of production at Rs 5 a kg, the rent for keeping 1 kg of potato in cold storage is Rs 2. Once the potatoes are sold to middlemen, it is a sophisticated trade in potato bonds. Potato bonds are simply paper slips marking the potatoes in the storages. These bonds change multiple hands, often at a premium. By the time the vegetable reaches markets, its price has almost tripled.

In years when potato prices are high, farmers collaborating with companies like PepsiCo suffer losses. This year, the price is ruling at Rs 450 per quintal at the farmer's level. Farmers in the PepsiCo project are receiving Rs 440 and Rs 400 per quintal, respectively, for two different varieties, according to Ramprasad Ghoshal, a farmer in Hooghly district of West Bengal.

“This year market prices are higher than what we are getting from PepsiCo. However, on several occasions, when prices of potatoes had fallen, we had profits despite a bad market,” says Ghoshal, a farmer involved with PepsiCo’s project.

The Bill is silent on contract farming. PepsiCo has been calling its potato procurement partnership farming rather than contract farming.

“Contract farming in a restricted manner will, most likely, be allowed for certain commodities,” added Jalan.

A change in the archaic AMPC law after years of deliberation will set the stage for change in the shrinking farms of West Bengal.