New acts make selling outside APMCs risky for farmers: Prof Sukhpal Singh

Sukhpal Singh, a professor at the Centre for Management in Agriculture at IIM Ahmedabad, says that the new Acts not only bypass mandis, but make it riskier for farmers to sell to anyone

The Centre's three new farm Acts have created a massive furore in several parts of the country with farmers alleging that the Acts will lead to gradual withering of the regulated markets or APMCs and collapse of the MSP system in place in several states. In an exclusive with Business Standard, Sukhpal Singh, a professor at the Centre for Management in Agriculture at IIM Ahmedabad and one of the most well-known experts in the field, says that the new Acts not only bypass mandis, but make it riskier for farmers to sell to anyone armed with just a PAN card than is the case now. He also explains why the current structure of APMCs is not ideal.

Edited excerpts:

We all know that APMCs have long ceased to be ideal market places and a lot of problems have cropped up in them over the years. What according to you have been the main drawbacks in APMCs or regulated mandis?

APMCs are, by principle, supposed to be democratically elected multi-stakeholder representative bodies and in many major agricultural states like Karnataka, Gujarat and Maharashtra they still are with elections fought vigorously every few years. 

Only Punjab is a defaulter where elections to APMCs have not been held for decades and all positions are filled by nominations.

The major problems lie mainly in not following the prescribed practices like open auctions in most fruit and vegetable APMC markets and even in some grain markets in many states and charging of excessive fee from buyers, especially when the state buys large part of the produce in some cases.

Further, there is lack of facilities in APMCS with only 15% having cold storages, 22% having grading facilities, 29% having drying facilities, 49% have weighing facilities, and 66% having covered platforms. Further, only 65% were found to have toilets, 38% had rest houses for farmers and 32% canteen had facilities.

Moreover, most of them don't easily extend new licenses for trading or commission agencies and therefore, the markets are in the hands of a few dozen/hundred buyers and commission agents.

To top it all, in some states like Punjab, they interlink credit with the sale of farm produce and thus farmers can’t exercise the choice of channels or buyers in the same mandi.

This is a completely unregulated and unmonitored lending activity which prevents farmers from getting a higher price for their produce.       

There is also a lot of talk that some state governments have used the APMCs as revenue generating sources and the taxes charged in them should be brought down to a reasonable level. What is your take on this and what should be the ideal tax that states should allow regulated mandis to charge?

There can’t be a one size fits all approach as each state has its own requirements for building and maintaining agriculture market infrastructure. There is no doubt that some states have very high market fees and cess charges and even high commission for intermediaries.

But, it is for buyers to decide whether to go to one state or the other if the same product is available in more than one state.

Some states even charge a commission from farmers which is unfair as generally in a regulated market, sellers don’t pay any commission or fees other than produce handling charges like loading, unloading or cleaning and bagging. It is the buyer who bears all fees and commissions. 

The new farm Acts have come under severe criticism for their substance and how they will endanger farmers' lives. Do you think that the laws answer the fundamental flaws in the APMC systems or instead of trying to address them try to bypass the mandis altogether?

They not only bypass the APMCs, but also make it less secure for farmers to sell in the new trade area as anyone with a PAN card can buy any produce from farmers in wholesale or any agency can undertake contract farming without any protection or risk coverage for farmers.

Unlike in an APMC where there are counterparty risk coverage measures in place with all buyers and facilitators licensed to operate with fees and guarantees being provided in case a farmer is needed to be compensated against some buyer default.

Now, there is no such thing.

What could be the drawbacks of such a law that seeks to bypass the mandis and create an alternative ecosystem for trade in agriculture products?

As mentioned above, the law has turned it into a free for all with no adequate checks and balances for the protection of farmers' interests and no local agency the farmer can go to unlike the APMC Committee which used to perform this role for all transactions in a notified area and for notified crops as it used to permit direct purchase and contract farming.

MSP is another contentious issue which has riddled farmers across India. Do you think we need a robust network of mandis to guarantee MSP as shown by Punjab and Haryana or there can be other systems through which MSP can be provided to farmers?

MSP can be implemented in any system - APMC or s new trade area - provided there is adequate will to do it as the MSP is declared for 23 crops apart from sugarcane, but backed up with the procurement of only a few crops, in a few states and in an ad hoc manner.

Most of MSP delivery is about government policy and it can be done through direct purchase by government, use of market interventions scheme (MIS), or deficiency price payment (DPP) in most crops.

There is no need for APMCs for this as in some states like Chhattisgarh and Bihar, even PACS have been procuring for the government at the local level.

Now we have Farmer-Producer Organisations (FPOs), or companies, which can be roped in to do the job, and which would also help them as they would get a service charge from such activity.

As a related question, Do we need to relook at the MSP mechanism and re-orient it in line with our changing consumption patterns and demand priorities?

Yes. If MSP is implemented in terms of procurement of crops other than wheat and paddy, the crop diversification would happen even in states like Punjab which badly need it. It would also help produce crops like pulses and oilseeds which are being imported. It would be a win-win situation for farmers and the government.