APMCs lose business share after reforms; crop arrival drops as traders and farmers drive out middlemen

In Maharashtra, merchants have launched an open revolt against APMC bosses, refusing to pay mandi taxes and opting for direct sales to bulk consumers outside of APMC’s purview.

By Prabhudatta Mishra, Nanda Kasabe and Deepa Jainani

Signs of a weakening of the Agricultural Products Marketing Committee (APMC) networks are now evident in the country’s main agricultural production centers, heralding an era of unrestricted market access and increased bargaining power for farmers.

On June 5, the Center promulgated three Ordinances that reform the country’s agricultural marketing, and their impact on trade has been quite sudden and material: During the period of June 6 to August 31, mandi of crops arrived – from fruits and veggies to grains and pulses – have fallen dramatically. The drop was up to 49% for fruits, 57% for vegetables and 45% for grains (see table).

Of course, part of the decrease can be attributed to the closure restrictions that prevail in much of the country and damage to crops or rotting of stored products as in the case of onions, but the transfer of commercial participation by part of the once almighty mandis has a lot to do with reforms. In many centers, particularly in states such as Maharashtra and Uttar Pradesh, the farming community, organized as agricultural producer organizations / enterprises (FPO / FPC), and small traders / aggregators are missing out on APMC markets. In Maharashtra, some MROs, with whom FE spoke, recounted how a definitive change is taking place in agricultural marketing. There is also anecdotal evidence of aggregators and food processing companies buying directly from farmers on a scale never seen before.

In Uttar Pradesh, the total drop in mandi arrivals from all crops was 32% year-on-year during June and 64% in July. The state has collected Rs 172 crore in tax / mandi tax revenue during June-July, a drop of 36% year-on-year. The decline in arrival is likely to continue in August as well, and market watchers believe it could be in the 65-70% range in the month.

“We have closed our points of sale within the local mandi and have begun to supply 100% of our requirements directly from farmers. Traders are now reaching out to farmers in their villages and receiving the crops at the mills, ”said Atul Agarwal, MD of Saket Foods in Bahraich in Uttar Pradesh. Agarwal has already ordered machinery to add another rice plant to the three existing in Bahraich. “Now we are looking for land to establish a food park within a 20 km radius of Lucknow in which we will install three units: solvent extraction plant, edible oil refinery and rice mill,” said Agarwal, who also has two legume processors. units.

“The traders we deal with to buy raw materials like corn and jowar have now started buying directly from farmers / aggregators. The legal reforms have been a great relief to us as we no longer have to divert Bihar maize through the local mandi, ”said Vijay Jain of Vikas Sortex Industries, a Kanpur-based cattle feed manufacturer. Since Bihar does not have the APMC law, merchants from other states used to ship the material from Bihar via local mandis.

While arrivals across India have declined for nine out of 11 field crops (cereals, pulses, etc.) examined by FE during the period since the ordinances were enacted, higher arrivals were reported only for peanuts and the corn. The sharp drop in the arrival of fruit and vegetable mandi is largely due to the shift to alternative sales routes such as corporate purchases and supplies to retailers by farmers. But the drop in demand for restaurant closings also contributed to the lower arrival of fruit and vegetable mandi.

In Maharashtra, merchants have launched an open revolt against APMC bosses, refusing to pay mandi taxes and opting for direct sales to bulk consumers outside of APMC’s purview.

While the majority of the mandis in Maharashtra remained closed during the closure period, Jai Sardar Farmer Producer Company in the Buldhana district of the state reached out to farmers to provide an alternative marketing mechanism. Ashish Nafade, who heads the FPC, said that he acquired about 300 tons of corn at market prices, 2,000 quintals of turkey and 4,500 quintals of chana under the Price Stabilization Plan (PSS).

“About 30 farmer groups are part of our FPC and through its 30 odd procurement centers we reach almost 1,500 farmers both at the buying centers and at the farm gate level,” he said. The FPC also sold vegetables to housing societies in considerable quantities, he said. The FPC has established 1,500 tonnes of storage infrastructure and will soon run a pilot with the Storage Development and Registration Authority to provide electronic storage receipts to farmers. The FPC has established two drying platforms for agricultural products, cleaning and sorting facilities and an 80-ton weighbridge, Nafade said, adding that the plan is to enter online commerce starting next season through agreements. with NCDEX and registration. at E-NAM as well.

Santosh Dedhe, President of Jaylaxmi Farmers Producer Company, Osmanabad, said his FPC has been active in purchasing chana and tur from farmers and is also part of the government’s PSS program. Chetna Sinha, founder of the Manndeshi Foundation, Mhaswad, Satara, a foundation that works with marginalized women farmers in Satara, Maharashtra, said that Manndeshi FPO works with around 1,200 women farmers and sources turmeric, rice, dal and vegetables from them.

Under a new central law on interstate commerce, farmers have the freedom to sell their products in any market inside and outside their state of residence, without being hampered by APMC. No state levies will be imposed on trade outside of APMC mandis and it is assumed that the farmer will receive payment within three business days of the agreement. According to the new law, anyone who has a PAN card can trade, while the Center reserves the right to establish new procedures, including mandatory prior registration.

Through another Ordinance on contract farming, farmers would get a share of the post-contract price increase, after signing contract farming agreements with private actors. Also, they will have guaranteed minimum price coverage if open market / mandi rates drop drastically. The two ordinances, along with another through which the Essential Products Law has been amended to ease stockholding restrictions on commodities, will go a long way toward unleashing the entire value chain from agriculture to processing Food to retail and give farmers have the option to sell their products in any market in the country, analysts say.

Although the UP government has decided to reduce the total incidence of mandi taxes and layoffs to 1% from 2.5%, it has yet to issue the necessary order, said Rishi Kumar Bansal, a commission agent in Hathras, Uttar Pradesh. . “The mandi trade will change substantially in the long run, but the mandi will continue to coexist. Large traders and processors will appoint commission agents to buy directly from farmers on their behalf, as they cannot establish infrastructure in all villages, ”Bansal said. The arrivals of maize and baja to Hathras mandi have not been affected, he said.

“Arrivals at the mandis are definitely low, as it is turning out to be a losing proposition. Traders who buy from mandi still have to pay a mandi tax of 2%. Given that trade margins range from 0.5% to 1%, how will they (merchants who used to trade through mandis) compete against those who do not pay taxes? Asked Bharat Bhushan, president of the Lucknow Dal and Rice Millers Association.

During April, arrivals across India of five key rabi crops fell between 18% and 80% year-on-year, but in June these crops (except masur) saw an increase of 16% to 80% (year-on-year) in the Arrivals. Clearly, the easing of the closing curbs boosted arrivals. Various restrictions during the shutdown (March 24 to May 31) were lifted in phases beginning June 1 to facilitate public movement and expand economic activities.

In the case of wheat, arrivals to mandis during May-June of this year were around 35% lower than in the previous year, but they improved in June (when they tend to decline) registering 22% more than in the previous year. period of the previous year.

“As kharif corn prices were around the MSP level (Rs 1,760 per quintal) during October-December last year, a further increase was expected and farmers kept the crops. Now that the corn is lower, around Rs 1,270 per quintal (June-August 2020), farmers have resumed selling, out of obligation, ”said Basavraj Patil, an aggregator in Karnataka’s Davangere district.

Interestingly, some farmer leaders in the northern states of Punjab, Haryana, Rasjasthan, Madhya Pradesh and Uttar Pradesh have called on the government to repeal all three ordinances. “The government should say how much farm prices have risen after the ordinances were enacted,” said Sudhir Panwar, president of Kisan Jagriti Manch.