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Dismantling mandis to benefit MNCs
By Devinder Sharma



Not withstanding poor management, mandis have played a critical role in ensuring remunerative prices and timely purchase for the benefit of farmers and therefore, India needs improvement in mandi system, not its dismantlement as desired by industry bodies and Montek Singh Ahluwalia.

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Assured procurement price and registered mandis played key role in keeping
famines away

Not long ago, a little over 40 years back, farmers would invariably get cheated at the time of the harvest. The traders – wholesalers and retailers – would rip them off. Farmers were paid low prices at the time of harvest, and distress sale was a normal phenomenon, rather than an exception.

It was only after the Green Revolution began in 1966-67 that the government provided farmers with procurement prices and an assured market. Minimum support prices for wheat, rice, cotton and other crops helped farmers earn a remunerative price based on the cost of cultivation. At the same time, mandis were created in the Green Revolution belt of the country to provide an assured market for the farm produce.

It is primarily because of the procurement systems that were built up over the years that food production has been on an upswing, and food inflation has remained within manageable limits. India hasn’t faced the kind of inflation in food prices as many developing countries have in the past, and therefore there is sense of complacency that has set in. We therefore fail to appreciate the important role the two planks of food strategy – procurement price and registered mandis – have played in keeping famines away.

I remember visiting Brazil in the early 1980s which was then faced with a horrendous 440 per cent inflation. I stood in a line to buy bread in the morning, and there were some 20 people ahead of me. By the time my turn came, bread price had risen three times. In India, it is primarily because of a robust procurement system that food has not only remained within reach of a large section of the population but has also been carried to distant places to be delivered to the poor through the public distribution system.

I am afraid the comfort the nation has enjoyed on the food front will not last long. The Planning Commission as well as the Ministry of Agriculture are keen to dismantle the procurement structures, and are looking for an early opportunity to hand over the mandis to private companies.

I can understand the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) demanding it. But when the Deputy Chairman of the Planning Commission Dr Montek Singh Ahluwalia starts speaking the language of an industry lobbyist there is reason to be alarmed. Montek had recently called for removing horticultural products -- vegetables and fruits -- from the ambit of the Agricultural Produce Marketing Committee (APMC) Act.

In an interview, Ahluwalia says that that the APMC laws must be amended to free farmers from the markets controlled by a few people and provide them access to consumer markets directly. He wants all horticulture products such as onions, apples and vegetables to be exempted from APMC laws, and adds: “Licences for participating wholesale buyers — who are required to pay a transaction or mandi tax — are concentrated in a few hands. In the present scenario, these markets are not a free buyer-seller platform. Farmer should be allowed to sell to whosoever he wants to.”


Government itself didn’t implement APMC Acts to make mandis efficient
In my understanding, food inflation is being used to justify the dismantling the very foundations of food security. It is actually passing on the control of food into the hands of a few big players, who can then manipulate the prices at will. The nation needs to understand the dangerous game being played.

This may sound as if Ahluwalia is trying to help the farmers, but in reality his suggestion will come at heavy price for the farmers. There is no denying that over time some problems have cropped up in the way the mandis operate. What is not known is that the APMC laws have the provisions to effectively regulate these mandis. But rarely has the government ever stepped in, and in fact it is because of the political cover to the powerful middlemen coterie that the entire mess has generated.

But to take away horticultural produce from the purview of the mandis, and that too after the 2005 amendment in the APMC Act had allowed the private buyers to bypass the mandis and purchase wheat and rice directly from the farmers, is primarily aimed at killing the procurement system. In other words, Mr Ahluwalia is very cleverly suggesting destruction of the very foundations of food self-sufficiency built so assiduously over the past four decades.

The 8-point plan that the government had spelled out some days back to control inflation too says the same. I don't know how many people could grasp the real meaning of what is cleverly hidden in the garb of steps needed to control inflation. In my understanding, food inflation is being used to justify the dismantling the very foundations of food security. It is actually passing on the control of food into the hands of a few big players, who can then manipulate the prices at will. The nation needs to understand the dangerous game being played.

It is completely wrong to blame the APMC Laws for food inflation. If this is true, than why did the domestic food prices in India remain low in 2008 when the world food prices had hit the roof, resulting in food riots in 37 countries? Even now, global food prices are on an upswing especially that of sugar and oilseed crops. Why are the global prices rising when internationally APMC Act does not exist in any of the major food exporting country?

Let us not forget, in 2006-07, after the APMC Act was amended, companies like Rallis, Hindustan Lever, ITC, Australian Wheat Board and Cargill had purchased wheat directly from farmers. This happened at a time when there was no shortfall in domestic production. But because the companies purchased directly from farmers, the government godowns remained empty. To meet the requirement for PDS, India had to import roughly 8 million tonnes of wheat.

Imported wheat came at a price that was much higher than the domestic prices. Subsequently, Ministry of Agriculture warned the private companies to stay away from making direct purchases from farmers. After 2007, private trade refrained from buying wheat and rice directly from farmers. If the direct purchase was so good, why did the Ministry of Agriculture issue a dictat forbidding it?

Buyers in the mandis have to pay on an average of 10 per cent as the mandi transaction tax. This may be a little higher for some vegetables and fruits. The tax collection helps in the maintenance of the mandis. For instance, 70 per cent of the total expenditure of the Punjab government on its mandis comes from the tax collections. Taking out wheat, rice, vegetables and fruits from the APMC Act means that the mandis will collapse.

Procurement prices and the network of mandis have helped farmers realise a fair and better price for their produce. This system needs to be improved and strengthened, not dismantled.

 
Disclaimer:
The views expressed above are personal and do not necessarily reflect the views of d-sector editorial team.
 

Devinder Sharma  |  hunger55@gmail.com

Devinder Sharma is an award-winning journalist, writer, and researcher globally recognised for his analysis on food, agriculture and trade policy. 

Write to the Author  |  Write to d-sector  |  Editor's Note
 


 Other Articles by Devinder Sharma in
Socio-Economic Development  > Indian Economy > Agriculture

Saving Punjab farmer
Tuesday, October 04, 2011

To overcome the adverse long term impacts of intensive farming, Punjab needs to make its agriculture more sustainable and farmer centric.

Distressed farmers declare crop-holiday
Thursday, September 15, 2011

To revive agriculture and to make farmers debt-free, government must bring in a Farmers Income Guarantee Act to determine the monthly income package a farm family must receive.

Corruption behind farm-crisis
Wednesday, September 07, 2011

Corruption has not only hindered development of India but its role in creating and aggravating farm crisis is no less critical. Corrupt scientists, bank officials and policy makers have pushed farmers to the brink.

UP goes the Punjab way
Friday, March 25, 2011

Considering the role of mandis in making Punjab food bowl of country, it is urgently required to set up a nationwide network of mandis in India. Though late, but UP government has taken a right decision to increase their number.
  1  2  3     
 
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The shocking revelation is that the health and education sectors haven't remained untouched by this phenomenon. With 5th and 6th positions respectively for these sectors on the public perception chart on corruption, corruption has crept insidiously into these sectors of hope for the masses. With bureaucracy being fourth in the list of corrupt institutions in the country, corruption seems to have been non-formally institutionalized with little hope if public services would ever be effective in the country. With economic growth having literally institutionalized corruption, are we now expecting corrupt to be socially responsible - a different CSR.

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Not giving 'aid' to India is one thing but calling it 'rich' is quite another. If one in three of the world's malnourished children live in India, what does average daily income of $3 indicate? It perhaps means that there is a relative decline in poverty - people are 'less poor' than what they used to be in the past. But having crossed the World Bank arbitrary threshold of $2 a day does not absolve the 'developed' countries of their obligation to part with 0.7 per cent of their Gross National Income in development aid. Should this three-decade old figure not be revised?  

An interesting debate in UK's House of Commons delved on future of development assistance by the British Government. While prioritizing limited resources has been a concern, there has been no denying the fact that development aid must be guided towards tangible gains over a short period of time to start with. There are difficult choices for elected governments to make - should they invest in long-term primary education or in short-term university scholarships? Which of these will bring gains and trigger long-term transformation in the society. As politicians continue to be divided on the matter, poverty persists!!   

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