 "Rahul Gandhi's incomplete agri homework")
Amol Totey, an orange grower in Maharashtra’s Amravati district, sold his stock of seven tonnes to Aditya Birla Retail at a price 20% higher than what he would have got in the local mandi (wholesale market). As part of the deal, he had to transport the entire stock to the retail chain’s Hyderabad distribution centre. “The price offered was Rs 32 a kg, including Rs 4 a kg for transport and other charges. I still ended with Rs 28 a kg for my produce, Rs 5 more than what I would have got if I had sold it at the Hyderabad mandi,” says Totey.
Totey is working president of the Orange Growers’ Association and is, therefore, familiar with the tricks of the trade. He claims his association has ensured that even small and marginal farmers get the full benefits of such schemes. “All they have to do is to inform us about their stock. We collect the produce of 3-4 farmers, do the packaging and supply the produce to big retail chains like Aditya Birla Retail, Safal and Reliance Fresh, so that middlemen are removed from the process and farmers get the best price for what they produce,” he explains.
The model of the association Totey represents is simple. It collects oranges from farmers, does the grading and packaging, and sells it to bulk users, cutting out middlemen from the supply chain. This is what Amul has been doing successfully with dairy farmers. As a result, for every rupee taken from consumers, Amul pays 80p back to dairy farmers.
This is very different from how regulated markets for agricultural commodities operate. These markets, the mandis, had come about following the Agriculture Produce Marketing Committee laws (APMC) of various state governments. APMC Acts have come for a fair bit of criticism for their trader-friendly approach, instead of the farmer-friendly one they were supposed to have.
Congress party vice-president Rahul Gandhi wants the current system to be changed. Following his instruction, starting January 15, party-ruled states have started delisting fruits and vegetables from the APMC Act ambit, so that farmers are able to sell their produce directly to consumers. Is it enough to achieve the twin objective of controlling food prices and ensuring a better return for producers?
Experts say till there is an institutional mechanism to ensure direct linkage of farmers with the market, keeping a few items off the purview of regulated markets will not achieve either of the two aims. On the contrary, some producers are not happy with this move at all. “If you keep fruits and vegetables out of mandis, where are we going to offload our produce?” asks B P Singh, secretary of the Muzaffarpur, Bihar-based Litchi Growers’ Association. Fruit and vegetable producers supplying to Navi Mumbai’s Vashi mandi, the second largest in the country, have the same demand, forcing the Maharashtra government to postpone the decision on delisting fruit and vegetables from their APMC ambit.
A large number of studies have established that mandis promote a culture of intermediaries. On an average, there are five or six of these between primary producer and consumer. The commission charged at all the layers total up to 60-75%. As a result, the primary producers get only 20-25% of the price a consumer is made to pay. The system, therefore, needs overhaul and several attempts have been made in the past. These include formulating a model APMC law, done by the Union government in 2003.
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What is the way out? Totey’s Orange Growers’ Association offers an answer. So impressed was then Union Agriculture Minister Ajit Singh with the model in 2002, claims Totey, that he wanted to replicate it for all commodities and through the country. The National Horticulture Board was asked to prepare a list of all such associations and offer them all assistance to ensure direct linkage of farmers with all commodity markets. “We did receive some assistance, some 10 years ago. But it is all gone now. We are back to square one, as nearly 90% of all our stock reaches the market through middlemen,” says B P Singh.
What is needed is an alternative model, not a piecemeal approach. “One way to modernise agri-marketing is by putting a system in place to ensure farmers register themselves either as a cooperative society or a company. Such a cooperative or a company will be able to deal directly with bulk users,” argues Ruchira Saini, senior assistant director (agriculture), Federation of Indian Chambers of Commerce and Industry. Asitava Sen, senior director, Rabobank India Group, offers a similar model. He says: “The APMC reforms are positive news for farmers and agribusiness. However, we need innovation and large investments from serious value chain players to scale up modern agri-marketing infrastructure. One possible route is producers’ organisations, supported by strong agribusiness companies, either in inputs or processing business or the government through public-private partnership. Direct linkages and integrated value chains are the only way to improve farmer income, as the dairy sector has demonstrated.”
What this model essentially advocates is that something like Orange Growers’ Association be converted into a cooperative society or a company that can take care of the input and marketing needs of farmers, And, big companies or government agencies can provide logistic support in terms of godowns, cold storages and transport infrastructure. Big investment, they argue, can come only when there is economy of scale, possible only when small and marginal farmers are represented by large bodies. “Given the fragmentation of land holding, it is difficult for any company or some other agency to procure directly from farmers. However, if farmers form a group which is registered, bulk users will find it easy to procure directly from them,” observes Saini.
Something like this has been done for dairy farmers. Can other farmers hope to get benefits from the same model?