Why is there chaos in the mandis?.
Recently, the eruption of massive farmers’ protests across India against the Farm Acts of the Union Government has shocked those in the seat of power in Delhi.
- The government has assured that because of the Farm Acts, many private markets will be established, middlemen would disappear, farmers would be free to sell to any buyer and farmgate prices would rise.
- The protesting farmers did not accept the claims made by the government and believe that farmgate prices would fall with the intensification of a corporate presence in agricultural markets.
- The farmers also believe that the government, ultimately, wants to phase out the Minimum Support Price (MSP) system.
- The farmers demanded the government that the mandi system in India and associated reforms must be passed only after deeper analysis.
Possible Advantages of Liberalized Mandis
- Barrier free trade outside the market yards: The barrier free trade outside the areas designated as market yards frees the farmers from the shackles of the mandis and restricting the power of the mandis
- Free up the farmers from the clutches of traders and moneylenders: The current Farm Bills seeks to permits the farmers to sell their produce to anyone and anywhere in India.
- The inability to get the right price for their farm produce has led to many a farmer being in a situation of financial distress and being exploited by the middlemen and moneylenders.
- Price information and market intelligence system for farmers’ produce: The Act has mandated the government to develop a price information and market intelligence system for farmers’ produce and disseminate it to them.
Challenges in Liberalizing Mandi System in India
- Numbers of Mandis in India are not enough: In 1976, there were 4,145 large markets in India, with the average area served at 775 sqkm.
- Farmers find it difficult to reach mandis: The small and marginal farmers, given their small marketable surplus, do not find it economical to bear the transport costs to take their harvests to mandis.
- The farmers end up selling their harvest to a village trader even if at a lower price.
- Even if private markets replace mandis, small and marginal farmers will continue to sell to traders in the village itself.
- Inadequate private investment in markets: The reason for poor private investment in markets is the presence of high transaction costs in produce collection and aggregation.
- When private players try to take over the role of mandis and the village trader, they incur considerable costs in opening collection centres and for salaries, grading, storage and transport.
Measures to be adopted for Liberalizing Mandi System
- India needs not less but more mandis: The number of mandis was to increase to at least 41,000 but there were only 6,630 mandis in 2019 with an average area served of 463 sqkm.
- The committee set up in 2017 by the government had recommended that India should have at least 10,130 mandis.
- Quality of existing mandis must be improved: The APMCs need internal reform to ease the entry of new players, reduce trader collusion and link them up with national e-trading platforms.
- The introduction of unified national licences for traders and a single point levy of market fees are also steps in the right direction.
- Focus on farm-to-fork mark-up price: The data shows that the difference between the price that the farmer gets and the price that the retailer sells at is as high as 65% in India as against 25% for a country like Indonesia.
- The proposed law permits the farmers to identify and sell to consumers of their choice be it food processing companies or restaurants or five star hotels etc.
Road Ahead
- The Liberalized agricultural sector along with a transparent and efficient agricultural market has been the focus agenda of agricultural experts for more than two decades and the reform of APMCs has been long overdue.
- By only attempting to shift trade away from APMC to non-APMC areas, without a regulatory framework, the new law is unlikely to ensure better price realization for farmers.
- The Government needs to invest time, energy and resources in developing and implementing a robust ecosystem for a liberalized agricultural market to succeed and sustain by itself.
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