How Maharashtra is changing the way farmers sell their produce
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Mumbai: These days, Lata Arun Dimble is out at 8am in her farm in Khed Shivapur. Along with husband Arun and son Ajit, she picks brinjal, tomato, chilly, cucumber, spinach, radish, bitter gourd, cabbage, cauliflower, and green peas. By 11am, the vegetables are loaded onto a mini-truck her husband owns.
It’s the same story at neighbouring farms in Khed Shivapur affiliated to Kanifnath Shetkari Bachat Gat, a farmers’ group. Fruits including pomegranate, guava and banana are also loaded on to vehicles. Around 1pm, a small convoy of four-five mini-trucks with vegetables and fruits grown by 15 members of the group starts for Pune, Maharashtra’s second largest city which is 25km away.
Forty minutes later, the trucks empty their contents at Shetkari Grahak Athavadi Bazaar (farmer-consumer weekly market) off Pune’s Sinhagad road. The farmers spread their fresh produce at the stalls put up by farmers’ groups themselves, farm produce companies or farm produce cooperatives. In 15 minutes, Dimble gets her first customer.
From the farm to the customer, all it took was six hours.
Dimble’s group is one of the 60 such groups enrolled with Pune-based Shri Swami Samarth Shetkari Utpadak Company, registered with the Registrar of Companies. Narendra Pawar, one of its directors and a farm activist himself who has spiritedly piloted the deregulated farmer-consumer markets, says this change was long overdue. One of the 800-plus such companies operating in Maharashtra, Pawar’s Shri Swami Samarth is connected to around 2,200 farmers through 60 groups.
The Maharashtra State Agriculture Marketing Board (MSAMB) operates 31 such farmers markets in the state involving farmers’ cooperatives, farm producers’ organizations (FPOs), farmers’ self-help groups (SHGs) and farm produce companies. Out of these 31 markets, 25 are in Pune. According to Bhaskar Patil, a senior assistant manager at MSAMB, there are plans to open 100 such markets across the state.
A government agency, MSAMB also supervises the functioning of Maharashtra’s APMC (agriculture produce marketing committee) markets constituted under the APMC (Regulation) Act of 1963. “Except milk and sugar cane, APMC markets in the state are licensed to carry out transactions in all farm commodities,” Patil says. “But it is not mandatory on farmers to bring their produce to APMC markets only. The legal provision is that buyers licensed by Maharashtra’s directorate of agriculture marketing can purchase farm produce from farmers.”
Maharashtra has 305 principal and 603 secondary APMC market yards. The APMC Act mandates that these markets must have facilities like auction halls, warehouses, weigh bridges, shops for retailers, police station, post office, bore-wells, farmer amenity centres and a soil-testing laboratory.
“But most of the APMC markets offer very few of these facilities and the systems to buy produce from farmers, auction it, and sell to wholesalers and retailers through traders are very opaque and they leave enormous scope for malpractices,” says an official from the directorate of agriculture marketing requesting anonymity.
What is new?
There are three key differences between the APMC markets and farmer-consumer markets. One, at the APMC markets, farmers do not sell directly to consumers. Two, the produce is handled at multiple levels. Three, farmers have to pay 10-20% of the value of their produce as market fees, commission, and charges for loading, unloading, and weighing. At the farmer-consumer markets, it is the farmer who is directly selling his produce to the consumer, cutting out all these steps. There are no levies either. The produce, as farmers like Dimble demonstrate, is transported fresh from the farm with least handling, which helps it retain freshness.
Changdev Bhisare, a vegetable farmer at Bhiwri village near Pune, says at the APMC market, vegetables and fruits travel from farms to consumer through a multi-tier system. “The produce first reaches adtiyas (commission agents) at the APMC market yards, who auction it by negotiating the price with the buyers who are traders. This system leaves a lot of scope for farmers getting exploited because it is not transparent. We do not get to know the price of our produce immediately after auction. The final price is determined by the commission agent and we get paid the price by another transaction agent a week after the auction. The transaction agent also charges 3% of the price as service charge,” he points out.
After the farm produce is auctioned, the traders licensed by APMC take it to APMC-regulated wholesale markets, where retail buyers and hawkers buy the vegetables and fruits. At the next level, the produce is sold to the consumer. As the produce travels from farm to consumer through multiple stakeholders and handlers, its retail price goes up by 50% over the price that was negotiated by the commission agent at the auction. Also, Bhisare says, the produce suffers at least 25% damages since it is handled at multiple levels. “We don’t get the benefit of price appreciation but the consumers pay for it,” he says.
In August, Maharashtra chief minister Devendra Fadnavis opened Mumbai’s first “farmers to consumers” market on the premises of the Maharashtra legislature at Nariman Point. This followed an ordinance to exclude the sale and purchase of vegetables and fruits from Maharashtra’s APMC Act, and allow their sales outside APMC-regulated markets. MSAMB’s Patil says this intervention has provided farmers with a legal framework to operate outside APMC markets without any licence.
Patil calls farmer-consumer markets as part of “the second generation reforms in Maharashtra’s agriculture marketing sector”, after the first generation introduced a decade ago. “In 2006, Maharashtra came up with a model APMC Act which established private agriculture markets, direct marketing licence to bulk buyers and contract farming ventures. It also had a provision for farmer-consumer markets but it did not get implemented till June 2014 when we opened the first such market in Pune’s Kothrud area,” he says.
Patil also recalls resistance to these markets. “In Mumbai, for instance, the APMC traders would not allow a single truck of farm produce to move beyond the Vashi APMC market. The ordinance has effectively limited the jurisdiction of APMC Act to APMC markets only and not beyond,” he says.
Pawar of Shri Swami Samarth confirms that it has been extremely difficult for farmers to reach out to consumers, despite legal backing. “I have been named in two police first information reports filed against me for opening farmers’ markets outside APMC,” he says.
At Shirur, about 95km from Khed Shivapur, 23-year-old farmer Sagar Kolpe starts his daily grind a little earlier—at 7am, as he has to cover a longer distance than the Dimbles. “We have to transport our produce nearly 80km from Shirur to Pune,” he says. But Kolpe is happy. He points out that farmers like him could benefit from this only because they formed small SHGs, FPOs, and farm producers’ companies, and because these ventures have tied with government to create infrastructure. “I cannot do this alone. No single farmer can bear the cost of transport and paying the rentals for markets outside APMC,” says Kolpe.
Pawar concurs. “We also take produce to the Mumbai market on Sunday. Farmers start collecting vegetables late Saturday afternoon and load them on vehicles by evening. They leave around midnight for Mumbai and reach by 5am. The return journey starts around 12 noon. This is not logistically possible for one farmer,” explains Pawar.
At the other end of the chain, consumers are delighted. At the Nariman Point market, a middle-aged banker, who refused to give his name, says he has visited the market on three consecutive Sundays with his wife. “I read about it in the newspapers and wanted to see it for myself. Normally, we buy from superstores in the neighbourhood. This market is not as clean but it is not filthy also like the average sabji mandi. There are no stray cattle and dogs loitering about the place,” he says, carrying two bulky bags.
Kirti Diwan, homemaker and one of the regular consumers at Pune’s Sinhagad market, says it is a great concept as farmers bring “fresh from the farm” produce. “Before this market opened, I would buy vegetables from local sellers who rarely had fresh produce but still charged the same price. This market is much better and has a lot more variety,” says Diwan.
Madhukar Jogdand, another regular buyer says he does not mind paying more if his money is going directly to the farmers and he gets fresh vegetables. “Earlier, I was not sure if I was buying from farmers or traders. Now, I know I am buying stuff from the one who has grown it. The produce here is also least handled and so much cleaner. I don’t know why it has taken the government so long to start a thing as simple as this market,” he wonders.
The answer is hidden in the labyrinth of regulations that rule agriculture markets in India. Maharashtra has tried to clear some of the regulatory roadblocks on the way from the farm to the consumer.
In 1963, when the APMC Act was enacted, the intention was not to create a monopolistic behemoth that it became. “The idea was to ensure that farmers get regulated markets close to their farms, and price for their produce. Regulations were put in place to protect farmers from getting exploited by traders and middlemen,” says MSAMB’s Patil.
To be sure, the APMC Act is not exclusive to Maharashtra and several other states have their own APMC Acts as agriculture is a state subject. Also, Maharashtra is not the first state to allow farmers to sell directly to consumers either. The Congress-ruled Karnataka is the pioneer here, concedes Maharashtra chief minister Devendra Fadnavis. In fact, Bihar got rid of the APMC Act in 2006 and Madhya Pradesh delisted fruits and vegetables from the APMC Act in 2012. In September 2014, Delhi denotified fruits and vegetables from the APMC Act, allowing producers to sell outside the APMC markets of Azadpur, Keshopur and Shahdara. (According to Economic Survey 2014-15, Azadpur is India’s second largest APMC market in terms of annual income with Rs90.9 crore in 2013-14).
A 2015 status report on APMC reforms prepared by Small Farmers’Agri-Business Consortium (SFAC), an autonomous body promoted by the Union government’s department of agriculture, cooperation and farmers welfare, said at least seven states including Maharashtra have notified rules to establish farmer-consumer markets.
What is special about Maharashtra’s APMC reforms then?
There are strong economic and political reasons why Maharashtra has become a template case of this great conflict between monopolistic and severely regulated farm produce markets and the new models of market reforms. According to the 2014-15 Economic Survey, the state is home to two of India’s biggest APMC-regulated markets earning the highest annual income. The APMC market in Navi Mumbai’s Vashi—the gateway to Mumbai—is India’s top such market yard with an annual income of Rs126 crore in 2013-14, the survey said. Pune’s Gultekdi APMC market was fourth on the list of five such markets with an annual income of Rs47 crore in 2013-14. The survey said India had 2,477 principal APMC-regulated markets and 4,843 sub-markets.
The state is also home to 36 private markets licensed by MSAMB under the 2006 reforms. The APMC Act specifies the jurisdiction of these principal and secondary markets. The membership of each APMC comprises farmers in that specified market area, traders and commission agents licensed by the directorate of marketing and chairman of the cooperative society which does the job of processing and marketing the produce in the specified market yard. The committee is elected every five years.
Congress leader and Maharashtra’s former cooperation and marketing minister Harshawardhan Patil, who controls some of the APMC market committees in Pune and Mumbai, outlines the scale of the APMC machine: “The entire agriculture market turnover in Maharashtra is worth more than Rs1 trillion. The APMC markets complete transactions worth Rs55,000 crore in a year. Transactions worth Rs30,000 crore per annum take place at smaller informal markets. Private contracts worth Rs20,000 crore are signed outside these two markets. There are 40,000 adtiyas in Maharashtra.”
Jaydatta Holkar, elected chairman of the APMC in Lasalgaon near Nashik, which is Asia’s biggest wholesale market for onions, says the APMC markets in Nashik district, thanks to the Lasalgaon APMC, have a daily turnover of Rs15-20 crore. “In a normal onion season, the Lasalgaon APMC sees a daily offloading of 2 lakh quintals of onions,” he says.
Maharashtra, these figures confirm, accounts for a large pie of this regulated farm produce economy. It is here that the government’s intent to carry out market reforms will be tested the most. There are multiple stakeholders and lobbies at work and the politics around reforms is severe, agree both Fadnavis and his predecessor from the Congress party Prithviraj Chavan, who did his best to push some of these reforms but was thwarted by the Nationalist Congress Party (NCP).
“I am glad Fadnavis is taking forward some of the reforms we initiated. I had also drawn up a list of reforms including deregulating fruits and vegetables from the APMC Act and the Congress party had the intent to carry them out. But I faced severe opposition from the NCP, which has a nexus with APMC traders and labour unions. Since it was an alliance government, we could not go ahead,” says Chavan. The Congress veteran, however, cautions Fadnavis against being “brash” about these changes. “Reforms are welcome but you have to get all stakeholders on board. This government does not seem to be doing that and it is also doing things with a political intent,” says Chavan.
Political claims and counterclaims apart, Chavan and Fadnavis, from ideologically rival camps but similarly committed to agriculture market reforms, have more in common: neither are farm leaders themselves, nor do they come from any of the stake-holding lobbies.
In the national context, the reforms in Maharashtra are a representative case. In July 2015, the Union cabinet approved setting up of a National Agriculture Market (NAM) between 2015-16 and 2017-18 with an estimated budget of Rs200 crore. The scheme proposes developing a common e-market platform that would be deployed in 585 regulated agriculture wholesale markets across the country. The Union government’s department of agriculture, cooperation and farmers welfare appointed SFAC as the nodal agency to implement the programme. In order to qualify for the e-NAM project and integrate select mandis with the common e-market, the Union government mandated states to carry out three reforms in their APMC Acts—a single licence to be valid across the state, single point levy of market fee and provision of electronic auction to determine price. By December 2015, only 138 APMC mandis in five states including 30 in Maharashtra qualified for this project. A project review report issued by SFAC in 2016 says 15 more states and Union territories have proposed to integrate another 400 mandis. In his 2016 budget speech, while making a strong case for reforms in the state APMC Acts, Union finance minister Arun Jaitley said 12 states had qualified for e-NAM. Fadnavis says the number of qualifying APMC mandis in Maharashtra has gone up to 40.
In September 2003, the Union government came up with what is now known as the State Agriculture Produce Marketing (Development and Regulation) Act of 2003 or the Model Act 2003. The government also asked states and Union territories to enact similar laws in tune with the Centre’s legislation. Thus, in 2006, Maharashtra came up with its own model Act which put in place the first set of reforms.
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Are these reforms big-bang?
A farm sector expert, who spoke on condition of anonymity, argues that farmers never had any restrictions on selling their produce to anybody. “It was only in 2006 that a legal mechanism was provided to establish private agriculture markets, contract farming, and farmer-consumer markets,” points out the expert. He, however, agrees that the NCP, which was an alliance partner in the previous Congress-led government in Maharashtra, resisted these reforms. “Wherever farmers could resist the NCP pressure, they could actually implement the reforms,” he says.
Pankaj Khandelwal, chairman and managing director of INI Farms, a Mumbai-based integrated horticulture firm focused on pomegranates and bananas, says the reforms seem to be in the right direction to put in place a legal and enabling framework. “The fundamental role of the government is to create an enabling environment which it seems to be doing with these reforms. But a lot more needs to be done to create the right infrastructure, provide farmers better access to market, and ensure competition and fair trade,” he says. Purnima Khandelwal, wife of Pankaj Khandelwal and chief executive of INI Farms, thinks the direct market between farmer and consumer is a good idea. “At INI Farms, we source pomegranates and bananas directly from farmers so that the quality of the produce meets export standards and expectations of our overseas consumers. In that sense, the farmer-consumer market is a great concept,” she says.
The farm sector expert cited earlier is sceptical. He says the government is still not creating a level-playing field between the markets outside APMC and the APMC markets. “Even though the government is claiming that markets outside APMC are not regulated, it continues to stifle the APMC market itself with regulations which prevent a level-playing field. How will a parallel system and supply chain get created when you continue to regulate the APMC,” he asks. The expert also points out that states which have carried out similar reforms much earlier have not been able to develop a marketing infrastructure and supply chain parallel to APMC.
“Kerala never had APMC Act. Has it attracted private investment in agriculture marketing and developed a parallel supply and value chain? Bihar scrapped the APMC Act in 2006 but has it created better markets for farmers? In Delhi where fruits and vegetables were deregulated, there has not been any effort to create parallel infrastructure and farmers have gone back to the APMC markets. This simply means that APMC itself is not a problem. The state’s failure to reform APMC and simultaneously create competition by encouraging private investment is the problem,” says the expert. Private investors, will not come in this sector since this is a “low margin, high volume activity”, he says. “The government needs to make special efforts for private enterprise to come in and develop a supply chain.” Even efforts like farmer-consumer markets have their limitations, he says, and adds: “How many markets can the government open? In urban spaces, there are severe limitations on making places available for these markets. As it is, the turnover at these markets does not account for even 2% of the APMC trade.”
Agrees Shetkari Sanghatana’s Maharashtra unit president Raghunathdada Patil, who says 95% of the total transactions in agriculture market still take place at APMC markets only. “At most APMC markets, even these reforms are not being implemented,” he says.
At the end of the day at Sinhagad market, Dimble’s 20-year-old son Ajit counts their earnings. “Today, we carried produce worth Rs7,000 and made around Rs2,000. On an average, on each truck that we load with produce worth Rs6,000-7,000 we make Rs1,400-1,700. This is our net income after deducting transport expense and our contribution to the group to pay for the stall and other facilities,” he says. And his mother adds that this is so much better than APMC markets.
Big reforms or not, Dimble is delighted to actually see her consumers, talk to them and receive customers’ compliments about the “fresh cucumbers and spinach” that she brings to the Sinhagad market.