Signs of a weakening of the Agriculture Produce Marketing Committee (APMC) networks are now evident across major farm production centres in the country, heralding an era of unfettered market access and bolstered bargaining strength for farmers.
On June 5, the Centre promulgated three Ordinances reforming the country’s agriculture marketing, and their impact on the trade has been rather sudden and material: During the June 6-August 31 period, mandi arrivals of crops –- from fruits and vegetables to cereals and pulses – have dropped dramatically. The fall was up to 49% for fruits, 57% for vegetables and 45% for grains (see chart).
Of course, part of the decline can be attributed to the lockdown restrictions prevailing in large parts of the country and the crop damage or rotting of stored produce as in the case of onion, but the ceding of trade share by the once-all-powerful mandis indeed has much to do with the reforms. In many centres, particularly in states like Maharashtra and Uttar Pradesh, the farmer community, organised as farmer producer organisations/companies (FPOs/FPCs), and the small traders/aggregators are giving the APMC markets a miss. In Maharashtra, some FPOs, which FE spoke to, narrated how a definite shifting is taking place in agriculture marketing. There is also anecdotal evidence of aggregators and food processing firms buying directly from the farmers on a scale seen never before.
In Uttar Pradesh, the aggregate fall in mandi arrivals of all crops was 32% on year during June and 64% in July. The state has collected Rs 172 crore in mandi tax/cess revenue during June-July, a drop of 36% on year. The decline in arrival will likely continue in August as well and market watchers believe that it could be in the range of 65-70% in the month.
“We have closed our outlets inside the local mandi and have started sourcing 100% of our requirements directly from farmers. Traders are now approaching farmers at their villages and getting the crops delivered at mills,” said Atul Agarwal, MD of Saket Foods at Bahraich in Uttar Pradesh. Agarwal has already ordered machinery to add another rice plant to his existing three at Bahraich. “We are now looking for land to set up a food park within 20-km radius of Lucknow in which we will set up three units — solvent extraction plant, edible oil refinery and rice mill,” said Agarwal, who has also two pulses processing units.
“The traders who we deal with for purchase of raw materials like maize and jowar have now started directly purchasing from farmers/aggregators. The legal reforms have come as a big relief to us as we no longer have to re-route the maize from Bihar through the local mandi,” said Vijay Jain of Vikas Sortex Industries, a Kanpur-based cattle feed manufacturer. Since Bihar does not have APMC law, traders of other states used to route the stuff from Bihar via local mandis.
While pan-India arrivals have dropped in nine out of 11 field crops (grains, pulses etc) reviewed by FE during the period since the promulgation of the Ordinances, higher arrivals were reported for only groundnut and maize. The sharp drop in mandi arrivals of fruits and vegetables is largely due to the shift to alternative sales routes like corporate purchases and supplies to retailers by farmers. But the fall in demand due to closure of restaurants also contributed to the lower mandi arrivals of fruits and vegetables.
In Maharashtra, the traders have launched an open revolt against the APMC brass, refusing to pay the mandi taxes and opting for direct sales to bulk consumers outside the APMC ambit.
While most mandis in Maharashtra remained shut during the lockdown period, Jai Sardar Farmer Producer Company in the state’s Buldhana district reached out to farmers providing them an alternate marketing mechanism. Ashish Nafade who heads the FPC, said it procured some 300 tonnes of maize at market prices, 2,000 quintals of tur and 4,500 quintals of chana under the Price Stabilisation Scheme (PSS).
“Around 30 farmer groups are part of our FPC and through their 30 odd procurement centres are reached out nearly 1,500 farmers both at the purchase centres and at the farm gate level,” he said. The FPC also sold vegetables to housing societies in sizeable quantities, he said. The FPC has set up 1,500 tonnes of warehousing infrastructure and will soon run a pilot with Warehousing Registration and Development Authority to provide e-warehousing receipts to farmers. The FPC has set up two drying platforms for agri-produce, cleaning and grading facilities and an 80-tonne weighing bridge, Nafade said, adding that the plan is to get into online trading from the next season through tie-ups with NCDEX and registration on E-NAM as well.
Santosh Dedhe, chairman, Jaylaxmi Farmers Producer Company, Osmanabad, said his FPC has been active in the purchase of chana and tur from farmers and is also a part of the government’s PSS programme. Chetna Sinha, founder of Manndeshi Foundation, Mhaswad, Satara, a foundation which works with marginalised women farmers in Satara in Maharashtra said the Manndeshi FPO works with around 1,200 women farmers and is sourcing turmeric, rice, dal and vegetables from them.
Under a new central law on inter-state trade, farmers have the freedom to sell their produce in any market within and outside the state of their residence, without being hamstrung by the APMCs. No state levies will be imposed on trade outside the APMC mandis and the farmer is supposed to receive payment within three working days after deal. According to the new law, anyone having PAN card can trade, while the Centre reserves the right to lay down any new procedures, including mandatory prior registration.
Via another Ordinance on contract farming, farmers would get share of post-contract price surge, after they sign agreements of contract farming with private players. Also, they will have the cover of minimum guaranteed price if open market/mandi rates fall drastically. The two ordinances, along with another one through which the Essential Commodities Act has been amended easing stock holding restrictions on commodities, will together go a long way in unshackling the entire agriculture-to-food-processing-to-retailing value-chain and giving farmers the choice to sell their produce in any market across the country, analysts feel.
Though the UP government has decided to lower the total incidence of mandi tax and cesses to 1% from 2.5%, it is yet to issue the necessary order, said Rishi Kumar Bansal, a commission agent in Hathras, Uttar Pradesh. “The trade will substantially shift from mandis in the long run, but mandis will continue to co-exist. The large traders and processors will appoint commission agents to buy directly from farmers on their behalf, as they cannot set up infrastructure in every village,” Bansal said. The arrivals of maize and bajra in Hathras mandi have not been impacted, he said.
“Arrivals in the mandis are definitely low as it is turning out to be a losing proposition. Those traders who are purchasing from mandis still have to pay 2% mandi tax. As trade margins are revolving between 0.5%-1%, how will they (traders who used to trade via mandis) compete against those who are paying no tax,” asked Bharat Bhushan, chairman of the Lucknow Dal and Rice Millers Association.
During April pan-India arrivals of five key rabi crops dropped 18-80% y-o-y, but in June these crops (except masur) reported 16-80% surge (y-o-y) in arrivals. Clearly, the easing of lockdown curbs boosted arrivals. Various restrictions on during lockdown (March 24-May 31), were lifted in phases from June 1 easing public movement and expanding economic activities.
In the case of wheat, the arrivals at mandis during May-June this year was about 35% lower than the year-ago period, but it improved in June (when these usually recede) registering 22% higher than the year-ago period.
“As kharif maize prices were around MSP level (Rs 1,760 per quintal) during October-December last year, there was expectation of a further increase and farmers were holding the crops. Now that maize is ruling lower at about Rs 1,270 per quintal (June-August, 2020), the farmers resumed selling, out of compulsion,” said Basavraj Patil, an aggregator in Davangere district of Karnataka.
Curiously, some farmer leaders in the northern states of Punjab, Haryana, Rasjasthan, Madhya Pradesh and Uttar Pradesh have asked the government to roll back the three ordinances. “The government should tell how much farm-gate prices have increased after the promulgation of ordinances,” Sudhir Panwar, president of Kisan Jagriti Manch, said.
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