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Surinder Sud: Realities behind an embargo

By disallowing foreign direct investment in organised retail in Delhi, the Aam Aadmi Party has proved anti-farmer

Surinder Sud 

Surinder Sud

The Aam Aadmi Party government's decision to disallow foreign direct investment in organised retail has not gone down well with farmers. They view it as an anti-farmer move that will deny them better returns by dealing directly with retail chains, bypassing the intermediaries who corner the bulk of the money spent by consumers. The inadequate share of producers in consumer prices is a major disincentive for farmers to produce more vegetables, fruits and livestock products that are in short supply.

A sharply-worded letter to Delhi Chief Minister Arvind Kejriwal by P Chengal Reddy, general secretary of the Consortium of Indian Farmers Associations, makes a forceful plea for reducing intermediaries in farm marketing. It points out that Arhtiyas (commission agents), through whom the farmers have to sell their products at local mandis, charge 20 to 25 per cent commission on perishables such as vegetables and fruits, and eight to 12 per cent commission on other agricultural commodities. There are also other marketing costs and transit losses that the growers have to bear. The ultimate share of the farmers in every Rs 100 spent by the consumer is merely Rs 30 to 35; the rest, Rs 65, going to the middlemen.

The censure of the Delhi government's move by the farmers is, indeed, only a means of airing their discontent over agricultural marketing, and not an end in itself. The real goal is to seek broader reforms in agricultural pricing and marketing policies to restore profitability in farming. Recently, another key farmers' body, the Bharat Krishak Samaj, had also held an experts meet to chalk out an agenda for pricing and marketing reforms.

The current system of agricultural marketing is inefficient and non-transparent. The pricing policies, on the other hand, suffer from conceptual limitations. These prices are looked at mainly in the perspective of "inflation", as measured by wholesale, retail or consumer price indices. There is hardly any instrument to realistically capture the prices received by the producers, which is what matters for the farmers, whether they are selling their produce in regulated or unregulated informal markets.

Distress sales by growers, especially the resource-poor small and marginal farmers, are quite common even when consumer prices are high. Going by the assessment of the National Commission on Farmers (NCF), headed by noted agricultural expert M S Swaminathan, about half the total marketable farm produce of small farmers is disposed of under distress in informal markets to square off their debts and meet immediate cash needs. "It is normal for a farmer to get a 10 to 15 per cent discounted price for spot payment for his produce," the NCF has observed in its report.

This apart, the farm marketing infrastructure, too, is woefully inadequate and devoid of basic facilities. According to the report of the empowered committee of the agriculture ministers of the states, presented to the Centre in July 2013, there is, on an average, just one proper market in an area as large as 115 sq km. In the case of regulated agricultural markets functioning under the agricultural produce marketing committees, the area served by one mandi is as vast as 457 sq km. Besides, nearly one-third of the regulated markets do not have proper platforms for an open auction of the produce. Most markets lack the needed facilities for grading and drying of the produce to enhance its value. Nor do they have tamper-proof weighbridges or electronic boards to display ruling prices.

The need to encourage private investment to augment marketing infrastructure, and to operate these markets transparently has been stressed by several expert panels. The Planning Commission, too, has stated in its approach paper for the 12th Plan that it would focus on "leveraging the required private investment and also policies that make markets more efficient and competitive". But hardly anything has actually been done to achieve this objective. Unless such issues are suitably addressed to ensure remunerative returns to the growers, farm production cannot be expected to respond effectively to the changing demand for agricultural commodities. Nor can prices be expected to stabilise.

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First Published: Mon, January 27 2014. 21:48 IST