Harvest of plenty: But too many laws and the stranglehold of mandis are stifling Indian agriculture

Land ownership, seeds, fertilisers, technology, extension services, marketing, relationships between farmers and traders… there is nothing about Indian farm sector that is not state monitored or controlled. Agriculture is India's largest parastatal; in fact, most politicians are born into it and then live off it for the rest of their careers. As for bureaucrats, there are armies of them in every state whose job it is to regulate every aspect of agriculture.

So, what are we talking about? Unshackling agriculture? Yes, because while the government spent more than 50 years engineering labyrinthine regulations for the farm sector, inefficiencies piled up, population kept growing, food insecurity persisted, technology advanced, and the world at large became much cleverer. "There is perhaps not a square inch of space in India that is outside a state-governed APMC (Agricultural Produce Marketing Committee) mandi for farm commodities. A commodity moving from Punjab to Kerala would pass through dozens of APMC markets, attracting 'mandi fee' every time it enters a new regulated market. In fact, it's easier to import wheat from Australia into Kerala than from Punjab," says Gokul Patnaik, Chairman, Global AgriSytem, a Delhi-based farm marketing consultant.

Today, India's 7,000-plus APMC mandis, which work through a series of commission agents and other middlemen, have a vice-like grip on trade in every farm commodity imaginable-grains, pulses, oilseeds, fruits, vegetables, meat, fish, dairy products, and forest produce. A study conducted by Patnaik in Delhi's vegetable market estimated that there was 60-75 per cent mark-up in price of commodities-cornered by middlemen-between the farmer and consumer. That means the farmer only got 40-25 per cent of the retail price.

The state marketing boards, which manage the APMC markets, collect mandi fee, and that's a reason why some of them aren't keen on letting go of the controlled mandis even after many states amended their APMC laws to allow for private participation. While Punjab and Haryana governments, for example, collect hundreds of crores of rupees in mandi taxes, they invest barely anything in improving infrastructure in these markets. Most of them are in a pathetic state and characterise a supply chain that allows large wastage of commodities and their nutritional values. "The Centre is now guided by the recommendations of an inter-ministerial task force on agricultural marketing reforms that called for direct marketing of commodities by farmers to the consumers outside the mandis (without payment of fees) and where there is no 'outside', single-point levy of fee," says a government official, who prefers not to be named.

The task force also recommended contract farming, private and cooperative sector participation in marketing, banning of commission agents, and setting up of region-specific special commodity markets. So, have states moved fast in implementing and fostering these reforms? Not really. "Except for Andhra Pradesh and Himachal, most states have yet to frame rules under their amended APMC laws to implement these reforms. Some of the states are urging the Centre to come up with a 'model' set of rules for them to follow," says the government official. Considering that agriculture is a 'state' subject under the Constitution, the challenge of reforms becomes even more formidable; each state must move separately to get its act together.

India's 7,000-plus APMC mandis have a vice-like grip on trade in every farm commodity imaginable

Meanwhile, there are other laws that need attention. The Essential Commodities Act (ECA), for instance, continues to impose restrictions on storage and movement of farm commodities. "There are hundreds of 'control orders' passed by the states under ECA that will need to be scrapped before free trading could begin," says Patnaik. A number of states have been issuing orders under ECA that require a private trader to obtain a licence if dealing in specified commodities and in quantities in excess of those prescribed.

Some states have also been dictating maximum stock of commodities that a trader can hold. And under paddy/rice levy orders, the licensed traders and millers are required to give a prescribed percentage of paddy/rice to the states at notified prices. Control orders have also been issued with regard to display of stocks and prices, regulation of catering establishments, requisition of stocks and regulation of distribution of card system.

Himmat Singh, Managing Director, Punjab Agro Industries Corporation, says though the government has undertaken several reforms in recent years like the new APMC law, new contract law, new patent law, and regulated cultivation of genetically modified crops, the overall impact has not been to dilute the tight government control over agriculture. "The government has also failed to apply its mind to determine what kinds of technologies would be suitable in agriculture-from increasing yields to sorting, grading, distribution, etc. We don't know the suitability of a technology with respect to productivity, environment, or labour," he says.

Besides, a variety of local laws and levies in states has made India a confederation of agricultural markets divided along state boundaries instead of being a single market. "Despite being composed of several countries, the European Union is a single agricultural market. India, on the other hand, is a fragmented market even though it's a close federation of states," says M.S. Swaminathan, Chairman, National Commission on Farmers.

India has also taken another 'irrational' approach of treating all commodities at par-wheat and rice are given the same status as apples and oranges-instead of exploiting the commercial potential of more valued crops, points out Singh. Perhaps, when originally conceived, the various rules and regulations were meant to help consumers. But today, they are both outdated and harmful. There's plenty to do in reforming agricultural laws. A good time to start would be now.