india

Updated: Jan 27, 2020 01:18 IST

A ~2,000-crore fund to set up a chain of modern markets for farmers, announced in the Union Budget 2018-19, has largely gone unspent in what experts see as a sign of how overregulated agricultural markets have kept farmers chained to outdated policies.

These markets, essentially village-level bazaars, were meant to act as aggregation points for farm produce, where farmers and traders could transact freely with minimal rules. The aim was to provide an alternative to existing supply chains that are rigged by middlemen and, as a result, drive down farmers’ share of profits.

Data accessed by the HT shows that nearly two years since its announcement, only a negligible amount -- ~10.45 crore, or just 0.5% of the allocated money -- has been utilised. This amount has been spent on developing 376 of the proposed 22,000 markets. However, no facility is yet ready for use.

The Union budget 2018-19 allocated a dedicated ~2,000-crore fund known as the Agri-Market Infrastructure Fund (AMIF). Newly developed markets under the programme were to be known as Gramin Agricultural Markets or GRAMS.

A key feature of the new markets would be that these would be free from the control of Agricultural Produce Market Committees (APMCs) so that farmers and food traders could sell and buy freely.

Experts said they were not surprised that another effort to reform agricultural marketing was facing problems.

“Attempts to reform agricultural marketing have been fragmentary and therefore failed to give satisfactory results. One example is that the model Agricultural Produce Market Committee Act 2003 has not been universally adopted by all states. Traders and commission agents as well as locally influential people often have a vested interest in keeping a tight control over mandis,” said KS Mani, an economist with the Tamil Nadu Agricultural University.

Agricultural marketing in India is a complex system, with a mix of organised and unorganised markets. Farmers mainly sell in mandis, which are state-run market yards known as agricultural produce marketing committees or APMC. There are about 585 such highly regulated APMCs in 16 states and two Union Territories.

Ushered in the 1960s, APMC regulations require farmers to sell only to licenced middlemen in notified markets, usually in the same area as the farmer, rather than directly to buyers elsewhere.

These rules were originally meant to protect farmers from being forced into distress selling. Over time, they have spawned layers of intermediaries, spanning the farm-to-fork supply chain. This has resulted in a large “price spread” or the fragmentation of profit shares due to lots of middlemen, leaving farmers at a loss.

“Messy land titles, involvement of multiple departments and organisations at the state-level, title of ownership of land of existing markets [that are supposed to be upgraded] are some of practical hurdles that we have run into,” an official with knowledge of the matter said.

Such problems have hobbled reforms in “agricultural marketing”, a jargon for the country’s mandi system that controls buying and selling of farm produce. A lack of these reforms is likely to keep farmers poorer than they would have been in a free-trade system, experts say.

In 2016, PM Narendra Modi had declared his government would double farmers’ income -- in other words, raise incomes by 100% -- in six years by 2022-23.

“Without marketing reforms and removing significant trade barriers, how is it possible to double farmers’ income?” asked KS Mani.

India is currently a net exporter of agricultural products and, globally, the seventh largest exporter, according to the Food and Agricultural Organisation.

Yet, according to the government’s Doubling of Farmers’ Income Report, 2017, the average income of an agricultural household during July 2012 to June 2013 was as low as ~6,426 against an average monthly consumption expenditure of ~6,223. Farmers can profit when they have ready access to markets. According to the agriculture ministry’s guidelines issued for the now languishing Agri-Market Infrastructure Fund on March 9, 2019, the proposed upgraded markets would have “substantially enhanced market accessibility” for socially disadvantaged Scheduled Caste and Scheduled Tribe farmers. Some of the blame for the lack of progress must go to scheme’s design, experts said. The money for physical infrastructure was to have been utilised from the Mahatma Gandhi National Rural Employment Gurantee Scheme.

“States have shown a reluctance to increase their loan portfolio,” the official cited above said. The National Bank for Agriculture and Rural Development, which administers the ~2000 crore fund, did not officially respond to the HT’s queries addressed to chief general manager Sunil Kumar.