Does India need a paradigm shift in agri-marketing system to develop free and competitive agriculture markets?

Sustainable Agriculture, MSME & Green Value Chain Finance | Priority Sector Finance | Manoj Rawat, ValueFin India

Does India need a paradigm shift in agri-marketing system to develop free and competitive agriculture markets?

Does India need a paradigm shift in agri-marketing system to develop free and competitive agriculture markets?

Does the country need to completely revamp its agriculture market management policies, ensure scientific pricing for agriculture products and introduce true competition in the market to make them efficient?

India is a net surplus country when it comes to trade in agriculture produce and has see significant growth in its food production over the last few decades but a large part of population still remains deprived of the basic access to nutrition and the middle class highly vulnerable to food inflation.

 1.Bottlenecks due to inefficient markets

One of the major bottlenecks in the availability and price of food for consumers is existence of grossly inefficient agricultural marketing and distribution system that was originally created to help the farmers realize justified and non-discriminatory price for crops and the consumer’s availability of food at affordable prices. The existing policies have failed on both fronts.

2.Poor are most vulnerable to Inflation

In India poor spend disproportionate part of their daily income to purchase food and therefore inflation hurts them the most. The majority of the rural poor depend on agriculture for their livelihood; it’s the poor farmers themselves who suffer the most for lack of food.

3.Agri-marketing and distribution ecosystem

While low yields, low productivity, soil degradation, climate change and lack of market linkages as the main factors affecting farmer income, one the big areas of concern is the prevailing Agri-marketing and distribution ecosystem in India. In India most of the agri-marketing ecosystem is controlled by public sector. The Government is controlling the Agriculture-marketing distribution ecosystem through three key interventions.

  1. Instituting a Minimum Support Prices regime for farmers
  2. Controlling the agriculture trade through 7500 APMC Markets (Mandis)
  3. Controlling procurement and distribution through various public sector entities like Food Corporation of India (FCI)

4.Decontrolling the existing Agri-marketing ecosystem?

The subject ‘agriculture’ basically is a state subject under the Indian constitution; hence, respective state governments have also been vested with the power to enact laws on this subject.   States regulate the sale of agricultural produce by farmers under a collection of laws. These rules, collectively known as the Agricultural Produce Marketing Committees Acts, require farmers to sell their produce to licensed agents in APMC yards.

5.Existing Agri-marketing institutions have failed to keep with times

The regulation of markets has achieved which were relevant when introduced have failed to keep up with times and have become restrictive and have failed to provide an efficient agricultural marketing system to the country. These development oriented institutions (e.g. the State Agriculture Marketing Boards, APMCs) have become revenue generating institutions rather than facilitating efficient marketing practices to benefit the farmers and market participants.The non-transparencies in transactions, high markups, collusion and mushrooming of large intermediary players have added to further inefficiencies and woes.

 

 
 

The inefficient distribution channel has lead to both high retail prices as well as price variations of up to 250% across regions.

6.Major challenges with APMC controlled marketing

The major problems faced in the process of marketing agricultural Produce through APMC markets include:

  1. Restriction to provide or allow alternative marketing channels,
  2. Compulsory requirement of owning shops within APMC premises
  3. Requirement of minimum distance of private/cooperative markets from existing APMC market
  4. Compulsory payment of market fee even if sale transaction takes place outside the market yard
  5. Restriction on trading in another Mandi,
  6. Regulator and licence issuing authority one and the same,
  7. Levy of Market fee at each stage.

The farmers have to travel on an average 70-100 sq km for the purpose of marketing their harvested agricultural produce. Due to non-availability Market/Mandi or an alternative marketing channel nearby, farmers sell the agricultural produce at a price dictated by local trader which many times even does not cover cost of cultivation.

7.Plethora of Laws and Multiple Frameworks


 

Besides the plethora of orders that are promulgated by Center and States from time to time, multiplicity in policies and framework and physical barriers between states have prevented development of free and competitive agriculture markets in the country. Besides the existing laws do not encourage much private sector investment in agriculture and participation in logistics and storage. This is critical to issue of food wastage,combating hunger and improving food security.

8.Need for a paradigm shift in Agriculture marketing system

Though certain measures like introducing schemes for agri-warehousing, subsidy schemes for warehousing and cold storage, tax incentives, introduction of warehousing act, model APMC act and other schemes shall help attract private players but these efforts do not cover the entire value chain.

What is the need to time is have paradigm shift in our agricultural marketing system which helps promotes an efficient markets, scientific storage, efficient  logistics,  predictable price variation across regions and above all help institute free and competitive agriculture markets in the country which ensures level playing field for both public & private sectors.

Manoj Rawat

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The views expressed in this article are purely personal.

Email: mkrawat@gmail.com| http://mkrawat.bogspot.in

http://in.linkedin.com/in/mkrawat | twitter: TheManojRawat

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