If the mandi is gone, there is no buyer of last resort left anymore- Richa Kumar, Associate Professor, IIT-Delhi. (Part-1)

Paridhi Sinha
  • When we talk of the economy, we think of stock markets and corporate but agriculture is rarely the first thing on our mind despite the fact that agriculture still plays a major role. How this perception affects our agrarian policies and reforms which are many a times alleged to be more consumer friendly than farmer friendly?

We all eat and that is an intimate connection we have with agriculture and the land. Unfortunately, most of us don’t get to see that connection – it is invisibilised behind packaging, markets, supply chains etc. Food has a big share in our index of inflation. Hence, rise in the price of food immediately impacts economic indices and raises consumer concerns, which become politically important. Urban consumers may not be an organized votebank but their concerns immediately get highlighted in the media given the skew of reporting across the urban-rural divide.

On the other hand, farmers, since the 1990s and 2000s have made headlines only for suicides. Although in some parts of the country, they had a political say in the 1970s and 80s, the power of their votebank eroded over time given the caste, class transformations taking place in rural society. It is only in the last few years that farm voices are being heard, but policy responses to them have been adhoc, piecemeal and short term, and have reinforced the problem instead of solving it.

  • What has been the impact of the ongoing pandemic on our farmers and agrarian economy? How our existing agrarian policies and reforms or lacunae in them in turn affected the people in such a scenario?

First, harvesting of the rabi crop was affected in March and April when the nationwide lockdown was imposed. Movement of labourers and harvesting machines was allowed with special permission. At the same time, markets collapsed – first supply chains shut down due to the lockdown, and then demand fell, as people lost work, restaurants and hotels shut down. Many vegetable farmers didn’t even bother harvesting their crop.

The trains of walking migrants who went back home, many of whom have not returned, have been struggling to find work. The MGNREGA has been an important safety net for them but there are very few jobs either in farming or in the non-farm economy.

We have followed a development pathway that seeks to move people out of agriculture and into the urban, industrial economy. Unfortunately, there are hardly enough jobs in these areas given the extent of mechanization and automation. There is a need to rethink our approach towards work and livelihoods—to value ecologically suitable, meaningful, and satisfying work as opposed to measuring work simply from the yardstick of efficiency or productivity. There is also a need to revive non-farm rural livelihoods in the form of artisanal and craft products for everyday use and as aesthetic objects (textiles, metal objects, wood work etc.) that have been produced historically in India and even exported in the pre-colonial era. 

  • Considering the Indian social structure, ecology and prevalent practices, how important is the role of APMCs for both the consumers and farmers? And what would be the impact of recently passed farm bills on APMCs and their future role? Would the proposed reforms benefit the farmers and the consumers?

The APMCs were setup in the 1970s to ensure accountability of private traders in their transactions with farmers with the oversight of the Mandi (market yard) administration and Mandi Committee. In places where these institutions functioned well, closed auctions were replaced with open outcry auctions, systematic infrastructure was created, payment was made in cash (not credit) and medium to large farmers benefited from the system. However, in some parts of the country and in some commodities, the mandi system ended up being controlled by an oligopoly of private traders who began to control information and prices to their benefit. Unfortunately, no concrete steps were taken to introduce competition within these mandis.

Corporate players, when they entered the agricultural sector in the 1990s, channelled all their transactions through traders in the mandi. However, over time, they felt the need to bypass these traders and to purchase from farmers directly. One way would have been to compete against these traders by setting up purchase infrastructure inside the mandi premises and participating in the mandi auction as a buyer (which would have challenged trader oligopolies), and some corporates tried to do that. But in many cases, companies wanted larger quantities, or wanted to purchase at their processing factories, or felt that duplicating traders’ infrastructure in the mandi was not worthwhile, and they wanted to set up alternative buying centres. Since they would incur the infrastructure cost and maintenance cost at their own buying centre, they did not want to pay the mandi tax on transactions done at their centre. The new Act allows companies, and anyone for that matter, to set up a buying centre outside the mandi and no mandi tax is to be paid at those centres. Assuming that a significant volume of transactions may shift to such private marketplaces, this is a huge blow to mandis because the infrastructure and maintenance of the market yard was dependent upon the mandi tax. Moreover, there is no compulsion for private traders to conduct their purchases within the mandi anymore, and thus, no oversight on these transactions.

The Act has been publicized as giving farmers the freedom to sell to anyone outside the mandi system, whereas, earlier it was not allowed officially. However, even in the past, a large number of farmers were still selling their crop outside the mandi system—to village level traders, local shopkeepers, and other intermediaries, as the mandi has been out of their reach. The quantity they produced was little, and it was too expensive for them to transport it to the mandi. Many of them might have pledged their crop to local intermediaries against loans. These would typically be poor farmers from under-privileged caste groups. But even medium and large farmers would often sell to intermediaries outside the mandi system depending on local relations of trust, need for immediate cash, enmeshed relations of debt etc. So what the Act enables is corporate buyers or startups to enter the space in a big way. It is freedom to buy anywhere rather than freedom to sell for farmers, since the latter already existed in practice.

What is important to note is that within the mandi system, there was some protection for farmers but outside it, there is none. The mandi infrastructure was a public space where farmers could demonstrate, go on strike, complain against traders, call upon the district collector to support their demands, etc. Of course, in places where traders were very powerful this was next to impossible. Yet, the rules provided an enabling framework where accountability could be demanded (see here). Of course, there is a pressing need to break up these oligopolies and bring more competition within the mandi auction itself.

But it is not clear how private marketplaces, which will mostly be financed and managed by corporates, would be more accountable to farmers. In fact, these would be ‘private spaces’ where the rules of purchase would be set up in the interests of maintaining shareholder value. It is argued that with several such competing marketplaces, including the mandi, farmers would be spoilt for choice. However, the history of corporatization in agriculture across the world is the story of takeovers, mergers and growing oligopolies. Agribusinesses, with their deep pockets will be able to purchase large quantities, far more than the largest trader in most mandis in the country. This may eventually drive other private traders out of business along with decimating the mandi infrastructure. If the mandi is gone, there is no buyer of last resort left anymore (see here).

Link to the second part of the interview: https://theblueletters.com/wp-admin/post.php?post=1025&action=edit.

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