Maharashtra's failed marketing experiment

Maharashtra is the perfect example of reforms in agricultural marketing gone awry.

A deserted APMC yard with empty containers in Navi Mumbai during the nationwide general strike called by farmers on December 8.

Maharashtra, which ranks among the country’s leading agricultural producers, has periodically since the early 2000s introduced agricultural reforms to enable private markets. However, these initiatives have not been successful, as farmers and farmer organisations reveal.

Farmers in Maharashtra say the State’s minimum support price (MSP) mechanism has been a safety net for them despite the private market. Their concern with the new Central laws is that farmers will now be entirely at the mercy of traders and free-market practices. Some 90 per cent of the crops that Maharashtra produces come under the MSP. Additionally, most of the crops that are set to be removed from the Essential Commodities Act are also grown in the State.

Farmers and activists whom Frontline spoke to revealed a sense of insecurity and fear about the state pulling back from the compensatory payment policies. Given that Maharashtra has indulged in free-market trade and not benefited from it, the fear is not unfounded.

On December 8, a dozen prominent farmers’ organisations and rights groups in the State joined the nationwide bandh by holding rasta rokos near Mumbai. Several rallies in solidarity with protesting farmers were also held in the agrarian belts of Vidarbha, Nashik and western Maharashtra.

Said Manek Kadam, a cotton farmer in Parbhani: “The new laws may not have anything on the MSP but we know the government wants to run away from it. They do not want to take on this burden. This year the CCI [Cotton Corporation of India] did not pick up our crop in time because of the lockdown. We had to sell it to traders at throwaway prices. If the CCI had bought it, we would have got the MSP and managed to cover costs. Between the lockdown and unseasonal rains, we are in deep debt.”

The MSP for cotton this year was fixed at Rs.5,400 a quintal. But with the CCI not procuring it, farmers had to sell the crop in the open market for anything between Rs.3,000 and 4,000 a quintal. “The State’s regulatory system in the form of the MSP ensures we get cost plus 50 per cent profit. This year we are facing severe losses which will lead to terrible distress. This is why we need the state to intervene in agriculture,” he said.

Periodical reforms

Maharashtra is the first State in country to enable private markets and collection centres. In 2006 the Congress government led by Vilasrao Deshmukh issued Direct Marketing Licences (DMLs) to create a parallel market system to help farmers sell their produce. Subsequently, farmers were encouraged to form Farmer Producer Organisations (FPOs), which would have a major role, among other things, in promoting contract farming.

Following the Central government’s Model Agricultural Produce and Livestock Market Act (2017), the Devendra Fadnavis-led Bharatiya Janata Party government began the process of deregulating all agricultural produce, opening new channels for farmers to sell outside the Agriculture Produce Marketing Committees (APMC). A year before that, the State government had deregulated all fruits and vegetables. Essentially, all agricultural produce can be traded both through the 305 APMCs and outside it.

According to the Maharashtra State Agricultural Marketing Board, the provision for single licence and permission for purchase of agriculture produce across the State in more than one market yard was introduced with “great success.” Data from 2018 by the Board show that there were 57 private markets in the State earning an annual turnover of Rs.5,000 crore. Of the 1,064 DMLs issued, 400 were to FPOs. The FPO turnover was estimated at Rs.2,806 crore.

Shaji Narvane is a farming activist, academic and member of an FPO in Tuljapur in Osmanabad district. According to him, the ground realities are quite different from what is portrayed. “For instance, support in the form of investment and infrastructure is missing [in contract farming]. Banks are unwilling to give credit and even private companies who are guaranteeing procurement do not honour their commitment of providing infrastructure support.”

Narvane says unless there is a profit assurance in all schemes, farmers will not prosper. This is the bottom line whether you privatise or keep agriculture marketing under state control. He says Maharashtra should be seen as an example of the failed policies because private mandis (markets) have been appropriated by the erstwhile cooperative owners. “The cooperative, be it sugar, cotton or milk, has collapsed due to corruption, so they took over the mandis and the poor farmer continues to be subjected to feudal ways. These are the ground realities,” he said.

As a stakeholder in an FPO called the Krishi Parivartan Onion Producer, he says though the concept of a support group is good, the lack of institutional help has not allowed farmers to flourish. He points out that agriculture is a State subject, which is being undermined with interference from the Centre. “It should be on the Concurrent List. The Centre had a callous attitude towards the suicide of cotton farmers. Why are they so interested in farmers now?”

Said Vijay Jawandhia, leader of the Kisan Shetkari Sanghatana: “Corporates will only buy depending on the price point. If the global price is high, they will look towards their own farmers. If it is low, they will buy from producers. Do not expect altruistic gestures from corporates. Nothing binds them to the Indian farmer. Show me a country where farmers are dependent on a market economy. You need state support. For instance, the reason an American farmer can sell low is because of the huge subsidies they get. Even in that free market, there is state support.”

ITC and e-choupal

Jawandhia, who is also a farmer in the cotton-producing belt of Vidarbha, says in 2010, ITC began the e-choupal scheme linking rural farmers via the Internet to procure agricultural and aquaculture products. The MSP of soybean was $15 per bushel at the time. When the global price dropped to $8, ITC stopped buying soybean through e-choupal and bought it from a vendor for lower prices. “If a giant like ITC could not sustain its operations how will smaller companies manage?” he asked.

Kishore Tiwari, farmer activist and Shiv Sena leader, says that even as reforms are required in the agriculture sector, the market needs government regulation. “The problem with the new laws is that they look at agriculture not the agriculturist. We have to take both into account while framing policy.”

‘Dangerous experiment’

Commenting on contract farming, Tiwari said: “It is a flawed and dangerous experiment aimed at eliminating the farmers and handing over agricultural land to corporate houses.” The State Agricultural Marketing Board estimates that 50,000 of around 1.5 crore farmers in the State are involved in contract farming. “This is a minuscule amount and an indicator that although the system has been around for some time there are few takers,” said Tiwari.

Pradeep Sawant, who grows exotic vegetables in Nashik district, believes that for corporates it is only about profits. He said: “If the rains ruin the crop or the yield is not as per their demand, they penalise the farmer or just do not pay. These companies squeeze us. They do not have any social motive; it is all about profits. In an ideal scenario, we can have huge earnings, but given our dependency on so many variables such as water and electricity, it is not a safe arrangement unless there are safety mechanisms.”