Farmers in Punjab’s regulated agricultural markets obtained 30% more price for their products than their counterparts in unregulated and partially regulated mandi in Bihar and Odisha in 2018-19, a new study found that rated the minimum support price ( MSP) as the only risk: Management instrument for growers.
The study was conducted by the University of Pennsylvania Institute for Advanced Study of India through surveys and research in collaboration with local research institutes to understand the dynamics of agricultural trading systems in the three states.
It comes at a time when farmers in Punjab, Haryana, and some other states are protesting the three central government agricultural laws, demanding that they be removed.
In Punjab, 90% of agricultural products are traded in markets regulated by the Agricultural Products Marketing Committee (APMC) Act by authorized commissioned agents.
Bihar abolished the APMC Law in 2006 and traders and private actors can buy products directly from farmers. Odisha has both the market system and acquisitions on the farm.
Shoumitro Chatterjee, Research Associate at the Delhi-based Center for Policy Research and lead author of the study, said: “We found that the price gap between open market sales and public procurement was a significant 30% and the deregulation of Markets, as in Bihar, had helped traders, rather than farmers, as their access to agricultural products improved. ”
“The former APMC markets (now unregulated) in Bihar are still the main outlets for products that have a dilapidated infrastructure. On the other hand, markets in Punjab have better infrastructure and are affordable for farmers, ”he said, clearly showing that private sector investment has not helped build agricultural infrastructure in Bihar along the expected lines.
The study said that only 5% and 11%, mostly large farmers in Bihar and Odisha, sell their products to government agencies, while in Punjab even small and marginal farmers benefit from public procurement.
Almost 80% of farmers in Bihar and Odisha are small and marginal, according to data from the Ministry of Agriculture.
“Inadequate procurement centers, delayed procurement initiation and payments are the reasons why most farmers in Bihar and Odisha prefer to sell their products to private players,” the study conducted in seven districts found. of the three states.
Despite these limitations, farmers prefer to sell to government agencies due to the insured MSP. In Bihar, farmers told surveyors they would like to sell corn, the flagship crop, to the government because of the MSP, but there are not enough procurement centers, he added.
‘Government insurance scheme has little penetration ‘
“The study clearly shows that the MSP is the only risk management instrument available to farmers, as the government’s crop insurance plan has little acceptability and penetration,” Chatterjee said.
Crop insurance was used by less than 7% of farmers in Bihar and Odisha, while it was even less than 1% in Punjab. The reason for this is a cumbersome process to obtain claims and a low insurance value of the product.
Unlike in Punjab, the relationship between farmers and traders was weak in Bihar and Odisha, where due to the absence of the mandi system, producers rarely sell their products to the same trader every year, it was revealed.
Contrary to popular perception, there is transparency in the system of payments to farmers in Punjab due to the disbursement of money online. Commissioners or arhtiyas can only pay up to Rs 10,000 in cash and the remainder must be transferred to the farmer’s bank account. The government transfers the commission of agents directly to their bank accounts, according to the reforms of the central government’s mandi system in 2018.
In Bihar and Odisha, there is no such transparency, as small unregulated traders have replaced the licensed ones. “In Odisha, there were cases of cartelization, collusion during cold sales and farmers were forced to sell at lower prices,” the study said.
Former Union agriculture secretary Siraj Hussain said: “It is a comprehensive study that summarizes the reality of the field. He clearly explained that the marketing challenges are more pronounced in Bihar, where the fees charged by intermediaries for various crops in informal markets are much higher than in regulated markets in Punjab and Odisha. ”
‘A secured market is needed for crop diversification ‘
The study also underlined that since MSP could be a roadblock in the way of crop diversification as it provides price guarantee for a given crop, as farmers grow too much wheat and rice in Punjab and Haryana despite the great demand for cereals and legumes.
But diversification cannot be achieved through legal reforms, as it requires several coordinated public investments on the ground, Chatterjee said.
R Ramakumar, a professor at the Tata Institute of Social Sciences, Mumbai, said that if the government wants farmers to diversify crops through the three laws, it would weaken the MSP system. “The government should sit down with the farmers and assure them compensation for the loss of income due to diversification. This can be done through a higher MSP for crops or through cash, ”he said.
Punjab’s minister for food and civil supplies, Bharat Bhushan Ashu, said the mandi system was well established and worked well for decades. “For crop diversification, farmers need a secure market to sell their products. The area under basmati (not covered by the MSP regime) saw a massive jump last year, but was reduced this time because prices fell. Although the government has declared MSP for 23 crops, there is no guaranteed purchase for most, ”he said.
Admitting that the state lacked regulated markets, an official from Odisha’s department of food and civil supplies said they are continually improving facilities so that more small and marginal farmers can sell their rice under the MSP system.
Bihar’s agriculture minister, Amrendra Pratap Singh, said the study’s findings are far from reality. “What is the basis for such findings? They (the researchers) don’t know about the system. The minimum price for rice paddy is Rs 1,868 per quintal and is transferred directly to farmers’ accounts. You cannot deposit less than the MSP into your account, ”Singh said.
(With input from offices in Patna, Chandigarh and Bhubaneswar)
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