In 2015, the potato farmers of West Bengal were devastated — not by weather, but by a bumper crop. Prices hit rock bottom, traders refused to lift the crop and storage facilities proved woefully inadequate, leaving thousands of farming families destitute.
One likely reason for the crisis of plenty was West Bengal’s ban on potato exports to neighbouring states over the previous three years. The potato is a significant agricultural export, and a cash crop for farmers. But, having been repeatedly denied access to West Bengal’s potatoes, the other states no longer had as big an appetite for them.
The latest ban on potato exports — like all such bans — has been justified from the point of view of moderating prices; that is, it has been imposed for the benefit of consumers. What about the farmers, who will not realise better prices for their produce? Their losses will not be calculated, nor will they be compensated. Traders will suffer, too — small wonder they have called a strike.
Earlier this year, when the Centre lifted the ban on overseas export of non-basmati white rice, all the stakeholders — from exporters to rice mills to farmers — celebrated because they stood to benefit from higher prices. A few months prior to that, ahead of the Maharashtra elections, the ban on onion exports was lifted and state deputy chief minister Ajit Pawar offered a public apology to the onion growers of north Maharashtra, who were upset because the ban had led to falling prices.
This was an indirect acknowledgement that export bans, both international and domestic, hurt farmers. Yet, when the prices of agricultural commodities rise, both the Centre and the states ban exports by default. With the threat of a freeze hanging over their heads, traders and exporters tend to avoid purchasing and storing exportable agricultural commodities, which naturally means that farmers do not realize higher values.
All of the above are powerful arguments in favour of farmer-oriented reforms in agricultural markets. The consensus among experts is that state barriers are detrimental for farmers, and a national agricultural market is needed, where farmers can freely sell their produce to the highest bidder or directly to the food processor. A common market, with transparent price discovery, will liberate farmers from middlemen. The logic is simple: if there are many buyers bidding for a farmer’s produce rather than just one, he will command a better price.
Take Karnataka’s pioneering move in linking all its government-run (APMC) mandis into a common electronic spot market platform. Studies have shown that this has helped in more transparent and scientific price discovery and boosted farm incomes.
A common market with no inter-state barriers faces numerous hurdles. For one thing, state governments bridle at the idea of ceding control of agricultural markets, although it is evident that restrictions on inter-state trade adversely affects farm incomes. The Essential Commodities Act clearly favours consumers, and serves as a tool to keep voters happy. Besides, the APMC mandis are a source of revenue and political clout, because the committees themselves are often packed with government nominees.
Technically, the Centre can regulate “Inter-State trade and commerce” (entry 42 in the Union List) and “Trade and Commerce in, and the production, supply and distribution of foodstuffs, including edible oilseeds and oils” (entry 33 in the Concurrent List). State governments’ right to regulate “trade and commerce” and “Production, supply and distribution of goods” is subject to the provisions of entry 33 in the Concurrent List. However, the judiciary has yet to take a clear-cut view on the Centre’s right to legislate on agriculture, which is a state subject.
To overcome inter- and intra-state barriers, the e-National Agricultural Market (e-NAM) project, based on the Karnataka model, was launched in 2016. It was intended to boost farm incomes by integrating markets, facilitating price discovery and increasing competitiveness among traders. It has the potential to prove a game-changer, but adoption of eNAM has been patchy and a host of structural problems remain.
Farmers are unfamiliar with digital technology in the first place, and when servers crash during peak selling, online payments are delayed, computer operators are unavailable or software glitches crop up, they tend to lose faith in the process. Also, they often need immediate cash payments, as informal loans have to be returned. In addition, grading, assaying and sorting systems are not up to the mark and entail long delays. Studies have found mismatches between arrivals and quantities traded, inexplicable volatility in prices and a mismatch in data on live trading. It is vital that these operational issues be addressed and processes streamlined.
Further, it must be noted that most small farmers tend to sell to aggregators at the farm gate, as their surplus does not justify the expense of a trip to the mandi. For these farmers, the e-NAM can prove beneficial if they join a Farmer Producer Organisation (FPO).
Ultimately, no pan-Indian agricultural market can succeed without the active cooperation of state governments and farmers’ representatives. Setting up an inter-state council to address the issue of farmers’ access to marketing platforms could be a first step.
Bhavdeep Kang is a senior journalist with 35 years of experience in working with major newspapers and magazines. She is now an independent writer and author
