Every few weeks farmer Jay Narayan Singh hauls onions and potatoes in a hired lorry to a wholesale market an hour’s drive from his home in the northern plains, only to sell his vegetables at a quarter of the prices retail consumers pay.
A law that dates back more than 50 years forces Singh and millions of other farmers to sell produce in regulated markets where middlemen take a hefty cut, boosting the cost of fruit and vegetables sold from handcarts and corner shops.
“The market is nothing but a haven for a clique of middlemen who indulge in profiteering, depriving both farmers and consumers of a fair price,” Singh said.
As food inflation nears 10%, the new government of Prime Minister Narendra Modi faces accusations that it is doing no better at reining in prices than the Nehru-Gandhi dynasty’s Congress party, which suffered its worst election defeat in May.
Determined to avoid a repeat of the inflation scourge that contributed to the Congress downfall, Modi is taking aim at the Agriculture Produce Marketing Committee (APMC) Act.
The law aims to protect farmers from exploitation by rich landlords, and requires all produce to be sold through regulated markets in most of the country’s 29 states. Even big retailers, such as Reliance Industries, Wal-Mart Stores, Shoppers’ Stop and Britain’s Tesco Plc, can only buy through wholesale markets governed by the Act.
But critics say too many people in the supply chain seek a cut, which exaggerates price rises during the frequent supply disruptions because of a perennial shortage of storage.
Modi’s food and finance ministers are now pushing states to let fruit and vegetable farmers sell to anyone they want, ending a practice that governs more than 7,000 wholesale markets.
“Allowing direct purchases will be a win-win proposition,” said farmer Ved Prakash Sharma, as he oversaw labourers unloading sacks of vegetables at the Hapur wholesale market, about 60km from New Delhi.
“While we will get a fair price for our goods, consumers will have to pay less.”
Authorities in the capital have already taken the step, but other state governments face a tough battle against entrenched vested interests in doing the same.
Only Bihar has so far succeeded in revoking the Act. Many middlemen who benefit from the system are supporters of Modi’s Bharatiya Janata Party (BJP), which needs to keep voters sweet ahead of assembly polls due this year in Delhi, Haryana and Maharashtra.
Even some farmers could baulk at any assault on traders, who are often a source of credit in hard times after drought or crop failure.
An opaque system of auction by traders’ cartels leaves farmers with scant bargaining power. Farmers who travel long distances to market often cannot afford to return home without a sale, said Naveen Yadav, a farmer who brought a truckload of okra to Hapur.
“After extensive research we found that the total margin of middlemen in the entire chain adds up to 75%, ramping up costs for consumers,” said Gokul Patnaik, chairman of GlobalAgri System, a Delhi-based farm consultancy.
