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Putting India's Food Security At Stake

By Devinder Sharma

21 January, 2011
Ground Reality

I can understand the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII) demanding it. But when the Deputy Chairman of the Planning Commission Dr Montek Singh Ahluwalia starts speaking the language of an industry lobbyist there is reason to be alarmed. I am talking of Montek's interview in the Hindustan Times (Jan 18, 2011) wherein he called for removing horticultural products -- vegetables and fruits -- from the ambit of the Agricultural Produce Marketing Committee (APMC) Act.

In the news report, Ahluwalia was quoted as saying: "the APMC laws must be amended to free farmers from the markets controlled by a few people and provide them access to consumer markets directly. Ahluwalia said all horticulture products such as onions, apples and vegetables should be exempted from APMC laws and the state governments should help farmers in better marketing of their produce."

He also said: the APMC laws in most states make it mandatory for farmers to sell their produce through local committees. Licences for participating wholesale buyers — who are required to pay a transaction or mandi tax — are concentrated in a few hands. In the present scenario, these markets are not a free buyer-seller platform. But any change in the APMC law is sensitive as powerful people control these committees at the local level." [Read the full report at: http://bit.ly/eQV2dJ]

There is no denying that over time some aberrations have come up in the way the mandis (as the public markets in India are known) operate. The APMC laws have the provisions to effectively regulate these mandis. But rarely has the government ever stepped in, and in fact it is because of the political cover to the powerful middlemen coterie that the entire mess has generated.

But to take away horticultural produce from the purview of the mandis, and that too after the 2005 amendment in the APMC Act had allowed the private buyers to bypass the mandis and purchase wheat and rice directly from the farmers, is primarily aimed at killing the procurement system. In other words, Mr Ahluwalia is very cleverly suggesting destruction of the very foundations of food self-sufficiency built so assiduously over the past four decades.

The 8-point plan that the government had spelled out some days back to control inflation too says the same. I don't know how many people could grasp the real meaning of what is cleverly hidden in the garb of steps needed to control inflation. In reality, food inflation is being used to justify the dismantling the very foundations of food security. It is actually passing on the control of food into the hands of a few big players, who can then manipulate the prices at will. The nation needs to understand the dangerous game being played.

I would like to flag a few points for your consideration.

1. It is completely wrong to blame the APMC Laws for food inflation. If this is true, than why did the domestic food prices in India remain low in 2008 when the world food prices had hit the roof, resulting in food riots in 37 countries? In any case why has food inflation remained below the double-digit mark for much of the past 40 years if APMC Act was so detrimental?

2. Even now, global food prices are on an upswing especially that of sugar and oilseed crops. Why are the global prices rising when internationally APMC Act does not apply (or exist) in any of the major food exporting country?

3. In 2006-07, after the APMC Act was amended, companies like Rallis, Hindustan Lever, ITC, Australian Wheat Board and Cargill had purchased wheat directly from farmers. This happened at a time when there was no shortfall in domestic production. But because the companies purchased directly from farmers, the government godowns remained empty. To fill up the empty godowns (for meeting PDS needs) India had imported roughly 8 million tonnes of wheat at almost double the price.

4. Imported wheat came at a price that was much higher than the domestic prices. Ministry of Agriculture subsequently warned the private players to stay away from making direct purchases from farmers. After 2007, private trade has refrained buying wheat and rice directly from farmers. If the direct purchase was so good, why did the Ministry of Agriculture issue a dictat forbidding it?

5. Buyers in the mandis have to pay on an average of 10 per cent as the mandi transaction tax. This may be a little higher for some vegetables and fruits. The tax collection helps in the maintenance of the mandis. For instance, 70 per cent of the total expenditure of the Punjab government on its mandis comes from the tax collections. Taking out wheat, rice, vegetables and fruits from the mandi purview means that the mandis will collapse.

6. Prior to the Green Revolution, and before the Agricultural Prices Commission was set up, farmers were free to sell their produce to anyone who offered them good prices. It was known to be an exploitative system wherein the trade squeezed the profit margin of farmers at the time of harvest. It was only when procurement prices were introduced that farmers got an assured price for their produce, and that is what encouraged them to produce more. Procurement prices helps farmers realise a fair and better price for their produce. This system needs to be improved and strengthened, not dismantled.

7. What Mr Ahluwalia is suggesting is what exactly existed at the time Bengal Famine happened.


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