Why are farmers in AP not affected by the New Farm Bills?
For a long time, Andhra Pradesh and Telangana have not enforced any requirement that farmers should sell their produce in Agriculture Produce Market Yards (APMC or Mandi) only or that any trader must purchase agricultural commodities in Mandis and nowhere else. Hence, even though the market yard Act was in place and is still in place, in practice, it is as if there is no such Act in place. Farmers in the two states are free to sell their produce to traders at any place. They are also free to transport their produce and would be asked for their Pattadar passbooks during transit, at the worst.
Would Market Yards in AP be affected?
The entire geography of the state has been fully covered under the area of operation of one market Yard or other. Since farmers choose not to bring their produce to the Mandis, staff of Mandis collects market cess by establishing check posts at strategic locations.
Out of a total of revenue of 540 crores (FY 1920) of all 216 Mandis in AP, only about INR 100 crores is collected from produce actually brought to the Mandi. The rest of the amount of INR 440 crores came by way of cess collection at check posts. The figures indicate that the services provided by Mandis are not attractive enough for farmers to bring their produce to yards. Market yards have been reduced to collecting cess for their survival.
The present annual salary bill of staff of all Mandis in AP is about INR 250 crores. The new central Act does not allow an entire geography to be notified as area of operation of the Mandi. All business premises have to be notified specifically. Hence, mandis will no longer be allowed to set up check posts to collect market cess. In AP, this means that INR 440 crores of cess revenue vanishes into thin air. The revenue collection of Mandis will be sufficient to pay only 40% of their salaries.
Another point of note is that this INR 100 crores comes from the operations of about 10 of the 216 market yards in the state. So with the new bills, at least 200 market yards would straight off be unviable and would need to close operations (at least). Whether Government would choose to physically close them or reinvent them with a different mandate remains to be seen. In any case, they were already functionally irrelevant for more than two decades.
The scenario in Andhra Pradesh was previously also as if the two new farm bills (other than Essential commodities Act) were already under implementation. Going forward, functionally, it means that out of 216 market yards only about 10 or 12 would be functional. With the Central Acts being passed, the condition of even these 10-12 market yards would deteriorate over time on account of competition. The time lines are difficult to guess, as the market yards might reinvent themselves and provide value addition to farmers.
What would happen to Mandis in other states?
In states like Punjab, Haryana, Chhattisgarh and Madhya Pradesh where the Mandi system is much more stringently operated, the situation that is presently seen in Andhra Pradesh would be seen quickly in these states. It is a matter of time before mandis become unviable. However, some mandis might reinvent themselves under dynamic leadership. The state governments might also step in to provide additional responsibilities and value addition duties to the Mandis.
What would make farmers happy?
What would farmers need under such circumstances when the Mandis as regulatory entities are going to gradually fade away? Farmers are always worried about getting remunerative prices for their produce. They would desire a foolproof mechanism to ensure that they are able to realise minimum support price for their produce. They will like that MSP is announced in time every years and is reasonable and that they are actively consulted in the process of setting MSP. They would also like that MSP operations are taken up as and when ruling market prices get suppressed and that they don’t have to take up an agitational path in order to get Governments to initiate MSP operations.
They would like that the Government of India take up greater financial responsibility of carrying out purchases. In all cases in recent times we have seen that GoI unilaterally decides the quantity that they are willing to buy. GoI assumes that such limited purchases are enough to spur demand and boost prices. In some cases the quantity that GoI is willing to buy is a function of the amount that they have budgeted for the process.
In many cases we have seen that burden of MSP operations is being thrust on state governments who are perennially cash starved. State governments also end up buying only part of the quantity under offer from farmers in many cases.
It is a different matter that the MSP system creates perverse incentives to take up crops whose MSP is remunerative, but which have little demand in the market. A typical example is sugarcane where farmers keep growing sugarcane due to better than reasonable MSP. Sugar mills are forced to buy this sugarcane at MSP even though their cost of production thereafter rises above ruling market prices. Sugar mills are left with unsold stocks and farmers are not paid their dues. Governments are forced to intervene every now and then, in order to mitigate immediate difficulties. These steps, however, cannot change the underlying situation which requires governments to intervene again later. Farmers need to be provided clear signals as to what they can expect before they decide on crops to grow in the next season.
I feel that governments would need to convince farmers that there is no intention to do away with MSP operations and it would only be improved. They would also like assurance that governments would ensure that private traders and corporates also pay MSP to farmers.
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