The Perils of Reform

A major battle of nerves seems to be on in Maharashtra between the state government and traders, as well as representatives of the agriculture produce market committees (APMC), ever since the Governor approved an ordinance to remove fruits and vegetables (F&V) from the ambit of compulsory trading in the APMC-controlled mandis. The decision, which itself took one year to get implemented, sparked off snap-strikes across the the major mandis in the state. Scores of delegations of mandi traders descended on Mumbai streets to pressurise the government to roll back the decision. A committee set up by Chief Minister Devendra Fadnavis will now receive suggestions from all stakeholders, including traders before detailed guidelines are issued.

One of the grounds on which the Maharashtra APMC reform has been attacked is that it will permit the private sector and multi-national companies (MNCs) to buy directly from farmers. This was not desirable to the local traders (who are in effect also private entities) as they would lose their established monopoly. However, the traders need not worry, because the chances of direct buying centres appearing across the state as a result of the state government move are remote.

The experience of Azadpur mandi in Delhi, where a similar decision on delisting of F&V was taken by the central government (which then ruled Delhi through the Lieutenant Governor) in 2014, shows that the private sector cannot set up parallel mandis to trade in F&V in the short-term, even if the law permits it to do so. Major metros, such as Delhi and Mumbai, suffer from severe scarcity of land. No private sector entity can access a land parcel large enough to create infrastructure to match that of Azadpur or Vashi mandis in Mumbai. So, unless the local authorities follow up delisting of F&V with proactive identification of (public) land to create modern new mandis and invite the private sector to invest, the monopoly of existing market yards is unlikely to be challenged.

E-trading in F&V is also a non-starter since standardisation and quality norms for F&V are very poorly developed in India. The huge variations in F&V produce coming from different regions, regional food preferences and lack of organised retail to book large orders effectively rule out e-trading in F&V in the near future. In a few weeks' time, things will go back to the old normal. Farmers will be compelled to bring produce to the same market yards, where opaque processes for price discovery, assaying, settlement and delivery prevail.

It is no secret that APMCs in all major agricultural states are an arena for patronage and a source of funding for electoral politics. Though supposedly representative of all stakeholders, including farmers, APMCs are dominated by traders, who play both the role of the regulator and the buyer. This inherent conflict of interest is at the heart of the resistance to any change, since even the smallest reform will hurt incumbents habituated to self-serving behaviour.

The loud silence of almost all major political formations in Maharashtra, including the BJP as a party, on the state government's reform move, is a sobering reminder that reforms of any kind are undertaken by the executive at its own risk. Parties that compete with each other to claim exclusive wailing rights on behalf of farmers have not issued a single statement, a sound byte, or even that current rage, a tweet in support of the government.

Farmers, who will be the real beneficiaries of this move, wait with bated breath to see who blinks first. They have seen this movie before, but hope that this time it will have a different ending.

The writer, a former IAS officer, is the CEO of an agriculture marketing start-up, and is also visiting senior fellow at the Indian Council for Research on International Economic Relations, New Delhi