I used to stay in Thiruvallikeni in the then Madras during my school days in the late 60s. I used to watch with fun how my grandmother used to buy  milk from the milk vendor daily. Those days milk vending means, the vendor will come along with the cows or buffaloes near our houses and all the ladies will get together to buy from him. He will milk these cows then and there and distribute to everyone. He will then mark the quantity on the wall with a chalk piece. Then the fight will start; My grandmother would then start arguing saying that he had mixed water with milk and he would argue saying that it was an empty can when he had started. He was a bully, though nice otherwise and my grandmother could only make customary protest. Otherwise, as a buyer she had no voice and she would come home murmuring. This is the state of  agricultural marketing  even now in India. Only thing  here is that the buyers are all powerful intermediaries and sellers are powerless farmers.

In the agricultural mandi, the farmers operate in the buyers’ market. He takes his wheat or rice physically to the mandi and the deal is struck with a buyer, like you see in movies with two hands inside a towel negotiating the deal. It is then entered in the digital record which is the e-marketing site,the Government is boasting about. Sometimes, the deal is struck outside and accounted for inside the mandi. The farmer cannot obviously take back his commodity and so he has to sell whatever the market fetches that day. It is these practices that the farm laws are trying to change. To complete the milk story, the Government started distributing milk in bottles much later, and in plastic pouches after a decade. Now we can get it in stand-up packs in India, which is an old technology in America. When I was studying in Ahmedabad, I used to travel to Delhi by Ashram express and its last bogie was always a milk van. Imagine the transformation of the milk industry from carrying cows to the home to carrying refrigerated milk though containers across India. This is the power of markets and corporates.      

Why this long story on milk? All these magic developments were possible in India not only because of the cooperative structure of milk federations but also their corporate like structure. This would not have been possible without market reforms, technology and investment. The milk sector got deregulated in 1992 and since then milk revolution is a story of privatization and corporatization, of course with milk federations providing solid competition. This is the design that the farm bills provide for.    

Modern Farm Markets

Agricultural markets in certain commodities have undergone qualitative change in last two decades. A farmer wanting to sell commodities like mustard seed, jeera, chana, etc. can take their goods to an approved warehouse and take a warehouse receipt certifying the quality and quantity. He can trade on the basis of the receipt in the nearest mandi or on online platforms. He need not move around with the commodity. Once the sale is made, he can take the sales receipt to his banker and get it encashed. This is facilitated by corporation like National Commodities and Derivates Exchange Ltd (NCDEX). This will be the future of agricultural market as envisaged in the Farm Laws. The prices are determined based on the national or regional market position and everything is transparent.     

Value Chain of Commodities Market

The farm laws are expected to bring gains on various dimensions of the value chain of agricultural production and marketing. The value chain has been broken down and the direction of the gains are indicated. One factor that everybody has to appreciate, whether one likes it or not, is that these gains will come from the better management by the private corporates and creation of vibrant agricultural market. Privatization and marketization with regulation is the mantra since 1991 in all sectors, and agriculture has always been private anyway. It needed a formal market in place.  

 

Dimension	Impact	Improvement  Decline
Cultivation  / Production Efficiency	Will Improve under contract farming.
Procurement Efficiency	Will Improve from better supply chain management
Gains to farmers	Will Improve Significantly. Better price from better quality and sorting. Reduced Risk.
Logistics Efficiency	Will Improve because of Scale and aggregation.
Storage Efficiency	Will Improve because of scale. There will be less wastages.
Intermediation Efficiency	Less no of Intermediaries. More automation and transparency.
Gains to consumers – MRP	Improved Quality and value for money.
Reach & Equity	? Small farmers can through producers societies. No access controls unlike mandis.
Corporates Status	These will bring in efficiency but extract profit.
Market structure	Oligopolistic competition with regulation.
Employment	More skilled employment
Taxes	Collection will go up. Less evasion
Scope for Entrepreneurship	Good scope Franchise model
Overall impact	Significantly better for all stakeholders from efficiency gains in value chain. From larger size of the cake.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Reform Fear

The basis of all fear from Reforms, whether it is NEET, or Educational Policy or Farm laws is same. Fear of change, innovation and losing control.  All countries take steps to take their citizens to the next level of development than keeping them in comfort zone with lower performance. This invariably means administering bitter medicine. Generational changes, paradigm changes, social transformation, etc are natural processes. Government’s role is to unleash the energy and facilitate the process.    

 Image credits: Apni Mandi, Chandigarh

                       

        

 

 

Tags :

• $5 T Economy: Which Way65
• New Beginnings65
• Indian Politics65

• Share on Social Media

• Follow us on Social Media