There is a hope for agriculture. As the government integrates 585 major APMC mandis into one e-platform over the next three years, it is bound to revolutionize how agriculture produce is priced and sold.
Regulated markets such as APMCs have outlived their existence. Operating in geographic silos, the entrenched commission agents and buyers have squeezed the farmer to the hilt. However, it isn’t easy to reform this archaic structure as the entire agriculture marketing ecosystem has been built around this model. According to an estimate, the total turnover of APMCs nationwide is about Rs. 12 lakh crore per annum. Moreover, a parallel market cannot be created overnight to absorb the huge volumes the APMCs handle. Incremental reforms to straighten out the crooked APMC supply chain while encouraging private players to set up parallel markets seems to be the proper way.
The government is aiming to scale-up Karnataka’s relatively successful experience in unifying its APMCs. As a farmer who ferries about 2.5 tonnes of edible ball copra every quarter to the Tiptur market, I have benefited immensely from the unified market. Prior to the introduction of new platform, copra price never breached Rs.60 per kilo. The market has not traded below Rs. 125 for top grade copra for two years. While other factors such as increase in tender coconut demand, high coconut oil prices might have helped sustain the higher price of copra, unified market has increased competition by ushering in licensed online traders who seem to have broken the existing oligopsony. While Karnataka’s move might be a work in progress, the chinks in the armour are already getting exposed.
The common market will invariably put the thrust towards higher quality agriculture produce. However, the absence of extension services to educate and train farmers to increase production quality is quite alarming. At the Tiptur market, the ball copra is graded on three parameters. Large (85cms diameter), medium (75cms) and small (60cms and above). Due to scanty rains and steady decrease in ground water, bulk of market arrivals is in the small to medium segments. The price difference between top grade and low varieties can be as high as 50 rupees per kilo. According to the coconut development board, an adult coconut palm needs at least 600 to 800 liters of water once in four to seven days and to increase the yield and quality of the nuts, a rigorous fertilizer/micronutrient schedule has to be maintained. Dispensation of pests and disease advisories are very rare if not nonexistent.
While no tears will be shed for the extinction of commission agents and their 2.5 per cent cut, their absence will close a short-term borrowing facility for farmers. Loans from ‘arthiyas’ have funded marriages, school fees, hospitalization expenses and many other incidental expenses, albeit at a very high interest rate. Several field studies have noted that up to 40 percent of farmers contact commission agents for financing and input needs in the middle of the crop season. The liquidity gap created by the absence of commission agents needs to creatively plugged.
Taming the mandis that deal with perishables is a stiffer challenge. Karnataka too has side stepped it. Fruits and vegetables have not yet been brought online in the State. There are significant supply chain and grading issues that need to be ironed out. Though fruits and vegetables have been delisted from APMCs, private aggregators outside the APMCs are yet to scale up their procurement volumes. Delisting has not really helped boost competition among traders either. The commission charged by ‘arthiyas’ remains a steep 10 percent for fruits and vegetables.
No doubt a unified national market will certainly boost farm incomes, but to sustain and spread the prosperity far and wide, the Union and respective State governments need to enable small and marginal farmers to up their game. Or else, vast majority of these cultivators will be deprived of the benefits of the unified market.
Aruna Urs farms in his village in Mysuru, Karnataka. He was co-founder and CEO of a database management company in Mysuru. Prior to that, he worked as an adviser to the government of Timor-Leste (East Timor).
This is Aruna's first post on his blog, Rural Dispatch, a part of Business Standard's collaborative platform, Punditry.
Aruna tweets as @arunaurs