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Free market: vision and actuality - Farm sector

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Free markets are beneficial but only when agriculture/farming is a large scale business and agri as an occupation doesn't affect the livelihoods of landless agri labourers. After all, they are also part of the economy and their livelihood should be saved until India is industrialized to bear the labour force. The infrastructure for so-called farm gate procurement must be ensured with good logistics, storage and accessibility to the market.


Photo by Nandhu Kumar on Unsplash

If a farmer with less than 2 hectares of land (80% of the farmers have less than 2 hectares of land according to Agricultural senses 2015–16) needs to sell his produce in his farm gate who will visit there for purchase? Can he expect a large exporter or a food processing company procuring it through agri executives bargaining in their fields? Only a middle man will procure it and sells it to a large procurer. Already farmers are selling their produce to whomever they wish. Only traders need to sell it in APMCs. So the farm acts do nothing to farm gate businesses.


Otherwise, the farmer needs to go to the area where the demand for his produce is high. Will the transportation charge be compensated by the price he realizes? Does Kisan rails and flights come free of cost? Even though the free market is introduced, accessibility to the market must be ensured through high investments in market areas.


As govt says the APMCs will not be abolished but farmers will have an additional choice of the market with APMCs. Giving a choice doesn't make difference in the system but developing means to realise the choice will.


Free markets will give rise to common markets for agri produce which would be beneficial for buyers especially international, but it would dilute the existence of APMCs that are beneficial for small farmers who cannot bear the transport and storage charges.


The success of Uzhavar sandhai in Tamilnadu which is a Scheme that lets farmers sell their farm produce directly to the consumers without the middlemen is because the farmers have more accessibility to the markets since the transportation charge is free through TNSTC buses, the rent for the shop in the market is free and there is no transaction charge. Govt gives the farmers a weighing scale for free too. The prices are fixed daily and regulated by officials of Dept. Of Agriculture. The farmers say they realize more price here than the open market where the middlemen exploit them and the consumers also pay very less when compared to the open market.


So it is obvious that the small marginal farmer cannot sell his produce directly to a big procurer without transporting his produce and end up by selling it to a middleman. There is evidence also that mere liberalisation does not lead to private investment in new markets. When Bihar removed the APMC system, govt suffered a loss of fee revenue, with no significant private investments in the sector. Also, the farmers realised low prices compared to the other states that had APMCs and MSP scheme. To counter this govt comes up with contract farming framework. But the large corporates will always do a market analysis to know the demand before entering into the contract, they never offer higher prices since they need to keep the consumer price cheap to market their goods easily as storage will cost them more when the demand is not so low.


Patrica.com

Govt ensures the farmer gets MSP if he sells his produce for a low price in APMCs, though the farmer pays the commission of middleman, transaction fee, wages for lifters, storage fee, transportation fee etc. in mandis. But is MSP or any guaranteed price possible in the free market? Also, the lifters, brokers, sellers in the mandis belong to the underprivileged section of landless citizens. APMCs ensure they get jobs and wages. Are there any schemes to rehabilitate their livelihood?


So govt without developing the infrastructure and a good model for the farmers to sell their farm produce outside the mandis, introducing free agri markets paves way for the corporates to enter the contract farming. Farmers would fall for the higher price initially and enter into contracts, this might eventually lead to dilution of the mandis and their dissolution which is a threat as India would become a market or investment spot and not a big producer or exporter. Many argue the Farm trade Legislation is a milestone and comparing it to the 1991 reforms. But with the 91 reforms, we ended up being the largest market than exporter.


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