To help farmers, right approach is through FPOs, not APMC mandis

  • IASbaba
  • January 2, 2021
  • 0
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Topic: General Studies 2,3:

  • Issues and challenges pertaining to Agriculture
  • Public Distribution System- objectives, functioning, limitations, revamping; issues of buffer stocks and food security
  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

To help farmers, right approach is through FPOs, not APMC mandis

Context: Protest by farmers against newly enacted farm bills and their adamant demand of the repeal of these laws. However, government is trying its best to negotiate with agitating farmers and reach an amicable solution

Basic facts about Indian agriculture, which may help negotiators on both sides, with a common objective of benefitting the larger interest of the farming community.

  1. Implicit Taxation: As per research by ICRIER, Indian agriculture was implicitly taxed to the tune of almost 14% of its value. This was primarily due to restrictive trade and marketing policies, ranging from export controls and stocking limits to the restrictive mandi system.
  2. Misplaced Fears: The way to improve farmers’ price realisation, therefore, was to liberate agriculture from these various controls. But somehow, a fear has been created that these farm laws will rob farmers of APMC markets, MSP, and they may even lose their lands to big corporate houses through contract farming. 

But won’t the APMC face competition from Private Players?

  • There is no doubt that APMC markets and MSP will face competition from private markets and out-of-APMC mandi transactions.
  • But agricultural experts like Ashok Gulati believe the competition will help the farmers at large, especially small and marginal ones. The creation of an additional 10,000 Farmer Producer Organisations (FPOs) and the promised Agri-infrastructure Fund of Rs one lakh crore will aid this process. 
  • But many among the agitating farmers fear losing the MSP for wheat and paddy that they get in Punjab-Haryana.
  • However, in all these years since the MSP was given birth to in 1965 only 6 per cent of farmers and broadly, 6 per cent of the value of agri-produce has benefitted from this system
  • The MSP and APMC system primarily helps those who have large surpluses, mainly the large farmers. 
  • So, if one really wants to help the small and marginal farmers, the right approach is through FPOs at the village level and not in APMC mandis. About 86 per cent of Indian farmers are small and marginal (less than 2 ha), operating roughly 47 per cent of the total operated area in the country.

What about famers demand of making MSP Statutory right & repealing of laws?

  • Asking for making MSP a statutory binding even on the private sector will turn out to be anti-farmer as much of the private trade will shun such a system, leading to chaos. It will be worse than repealing these laws.
  • Repealing these farm laws would be like robbing more than 90 per cent of farmers — who never gained from the MSP system and who are largely small and marginal — of their rights

Given these basic facts, how do we dispel the fears of agitating farmers?

  • First, the government should be ready to give in writing that the existing system of APMC markets and MSP will continue and be strengthened. 
  • Second, the government can also give in writing that the contract will be for the produce, not the land. 
  • Third, farmers can take disputes to district courts, if they like. 
  • Fourth, to add to these written assurances, the government can also commit to creating a fund of Rs 25,000 crores under the Price Stabilisation Scheme, which can be used to support market prices of specified commodities that take a dip of more than 10 per cent below MSP. 
  • This is akin to NAFED’s operations to support market prices of pulses and oilseeds, or the Cotton Corporation of India (CCI) for cotton prices, and can be extended to maize, sorghum, pearl millet, etc.
  • Fifth, if stocks keep piling up, as is the case with wheat and rice today, to correct imbalance in demand and supply, government should either limit the size of procurement or go for price deficiency payments. A further positive step will be to announce a diversification package for the Punjab-Haryana belt.


One must remember that farmers always want a higher price for their produce, but higher food prices can also bring pains to poor consumers. The art of policymaking is to balance the interest of producers and consumers within reasonable financial resources.

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