Despite the Supreme Court putting hold on farm laws, how will any farmer earning Rs. 8059 per month, spending Rs. 6646 per month, with a daily expenditure of Rs. 221 in India, continue agitation not for days, not for weeks, but for months? Is the Samyukt Kisan Morcha observing the 7th month agitation indicative of the strength of the middlemen lobby? The following graph from the detailed RBI study (bit.ly/39moGy9) clearly reflecting the abysmal share of farmers receiving not even 50 percent of the consumer rupee in major traded crops offers a response.
Who and What are preventing farmers to double incomes?
Despite farm technologies developed by the State Agricultural Universities, the Indian Council of Agricultural Research and the National Agricultural Research and Extension System working in tandem which have doubled or even tripled the yield per acre in most crops, why farmers are still unable to double their farm incomes? The answer lies in answers to these questions: Why farmers are continuing to receive abysmally low share of consumer rupee? Why superfluous middleman, ‘undercover sales’, issue of ‘white slips’, illegal deductions, improper weighing of produce, usurious interest rates in lending loans creating distress sales distress are continuing to exist in APMCs?
Why APMCs are stifled?
Even after 55 years of existence of the Agricultural Produce Market Committee (APMC) in most States, even though APMC markets are attracting around 50 percent of the agricultural produce, the middleman with their network both inside and outside APMCs, are able to exploit the farmers one the one hand by providing abysmally low share of the consumer rupee and simultaneously charging high price for consumers. While the APMCs have virtually no representation of consumers of farm produce who form the bulk of ultimate consumption, even with representation for just one trader, one middleman in the APMC and even with representation of around 11 farmers as members, the traders and middleman wield greater influence with their relatively capital rich status. Thus, the larger benefits of increased productivity, increased trade, increased marketing, increased infrastructure, the benefits of no or low taxes in agriculture, are virtually grabbed by the superfluous middleman.
The margins of middleman and traders are not only high but are also increasing over time as they are superfluous and in addition influenced by commissions, mandi charges, loading / unloading charges, packing, weighing, assaying charges, transport costs, shop rentals, local tests, storage costs, membership fees, profit margins of middleman, traders, retailers.
Market power is lopsided
Even to this day the market power is with middleman and traders whether marketing takes place inside or outside APMCs due to market inefficiencies, infrastructural deficiencies and interlocked markets, where middleman and traders by lending farmers to cover their farm expenditure, adding to distress sales, in the process make informal deductions including usurious interest rates. Government has a major role in short term financing farmers with soft terms and informal lending terms, since middleman and traders offer all these benefits to farmers who are obviously attracted to seek loan from middleman and traders in APMCs.
New farm laws
New farm laws enacted after detailed serious committed discussions with all stakeholders from 2000 onwards explained in Harshvardhan Patil Committee of 2013 address market inefficiencies, deficit market infrastructure by increasing competition. By allowing any trader, any FPO, any progressive farmer or any one with a PAN card to enter into agricultural produce purchase farmers may receive better prices and reduce the number of middleman responsible for increased share of market intermediaries lowering the benefits for both farmers and consumers. When farmers and consumers benefit, obviously traders and middleman have their opportunity costs and hence continued agitation by their lobby.
Mere new technologies cannot double farm incomes
Farmers by diversifying crops and enterprises according to sustainable farming principles, will increase their output, reduce their risk in cultivation as well as adopt sustainable farming practices. For instance, 1 kg of paddy cultivation requires 5000 litres of water and fetches hardly Rs. 30 worth of rice. However, farmers with the same volume of water can grow 4 times Jasmine flower crop, which fetches Rs. 500 to Rs. 1000 per kg. While Punjab farmers cultivating paddy by overexploiting precious groundwater, are realizing net income of Rs. 40,000 per acre, Kolar farmers in Karnataka using 1/4th of this water used by Punjab farmers realize Rs. one lakh per acre.
However, mere increasing production of diverse produce will not increase farm incomes, unless the farm markets support farmers offering them remunerative prices. With poor oligopsony competition, cartels and price rigidity, farmers are fraught with enduring ill effects of both monsoon and market. The new laws present the farmers an opportunity where in new players may offer competitive prices and farmers have their liberty to either chose the new buyers or stay with their existing buyers as long as the price offered as well as associated benefits of marketing functions are transparent and accountable.
Benefits from competition
The benefits to small and marginal farmers have been empirically, amply, econometrically proved by Chandra, Sutradhar, Reardon and Qaim (2020) in their profound study in World Development clearly establishing that even after controlling for differences in quality and other relevant factors, the imputed farmgate prices that farmers receive in supermarket channels are at least 20% higher than the prices received in traditional channels such as APMC Mandies.
Therefore, new farm laws will make transactions relatively transparent and benefit farmers. In fact, there is nothing so great about the new farm laws except that they enhance competition, by allowing outside buyers other than APMCs also to participate in marketing by buying from farmers which have immense benefits to not only farmers but also consumers with no force on any of them to sell or buy from any channel. Farmers, farmer leaders and those supporting the agitation will benefit if they seriously introspect why are they agitating?
Views expressed above are the author’s own.
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