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The Farmer Protests and the Importance of Mandis

By passing the three new agriculture-related laws in September, the Centre has enacted its vision of an agricultural sector tending to the economic interests of large corporates, and the erosion of the mandi system, which is India’s primary agricultural marketing infrastructure. 

Words by Shivani Gupta

December 11, 2020

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Mandis are in mainstream focus.  Not for their crumbling infrastructure this time, but for their centrality as trading centres for agrarian India. By passing the three new agriculture-related laws in September –  the Farmers Produce Trade and Commerce (Promotion & Facilitation) Act, the Farmers (Empowerment   & Protection) Assurance and Farm Service Act and the Essential Commodities (Amendment) Act  – the Centre has enacted its vision of an agricultural sector tending to the economic interests of large corporates, and the erosion of the mandi system, which is India’s primary agricultural marketing infrastructure. While the pushback against the Farm Bills 2020, which aim to overhaul the way the farmers engaged in trade by paving the way for greater privatization and the dismantlement of public-sector protections, is nationwide, the farmers of North Indian states have been especially active in protesting this move due to their long-term familiarity and comfort with the mandi system. Thousands of farmers from Punjab and Haryana are at the Delhi-border protesting the three new farm laws passed by the central government in September. In the context of the farmers’ protests, I look at some of the functions of one of the most important Agricultural Produce Marketing Committee (APMC) mandis in India – the Azadpur mandi in Delhi – and use it to illustrate a proactive mandi’s role in providing accessible marketing infrastructure for agricultural produce trade. 

 

Agricultural markets or mandis are some of the oldest landmarks reflecting the evolution and dynamism of Indian cities; and so should be the case, as they lie at the very heart of a city’s food supply chain. Azadpur mandi truly epitomises this idea, and till very recently, it commanded the food supply for the entire North Indian region (and still continues to do so for many commodities), as described by its traders to me during the fieldwork I conducted there to better understand the marketing dynamics of agricultural commodities.

 

Right before the Centre promulgated the ordinances that threatened to render APMCs defunct, the Azadpur market committee had made extensive plans for decongesting the mandi. This was done by shifting a part of the trade to a plot it owns near Narela, 21 kilometres away from the principal market yard. There has been talk of relocation to enable decongestion for over two decades now. The calls to decongest the mandi have only grown louder over the years considering the mandi is in a constant state of chaos, with people, trucks, cattle and food incessantly competing with each other for physical space. The decongestion exercise is finally taking shape in the middle of a pandemic since physical distancing is next to impossible in the mandi in its current state. Cases initially reported in the mandi created panic amongst its traders and labourers, with three COVID-19 deaths recorded till early May. The Azadpur market committee drastically expedited its efforts towards ensuring public health and safety and has spent upwards of INR 30 lakhs on making sanitation equipment and health staff available at the mandi premises. Market participants (the labour, traders, and farmers) have acknowledged the APMC’s efforts and noted that this might be the cleanest the mandi has ever been. 


 

Mandis as sites of agricultural marketing infrastructure

 

It is important to note that all of the activities mentioned above – decongestion, infrastructure improvement, making public health provisions – are steps a market committee is empowered to take under the state’s respective APMC law. These market improvement activities ensure continuity of income and livelihood for those who earn a living at the mandi, including farmers, arhatiyas (or commission agents), palledars (or labour), and transporters. The market committee ensures the presence of essential market infrastructure (like approach roads, farmers’ sheds, sale platforms, trader’s offices, parking spots, and drinking water facilities) to help facilitate smooth trade of agricultural produce. It is the fees, cesses and taxes collected through the powers vested in these committees under the APMC Act that contribute towards the improvement of the mandi’s prevailing structure. 

 

Physical space is the most valuable commodity in the Azadpur mandi. The AMPC distributes the space available by dividing sale platforms (or phad) among fruit and vegetable arhatiyas, and is responsible for ensuring an equitable allotment of all these platforms on the basis of the volume of arrivals (or aavak) and the amount of market fees paid by the arhatiya in the preceding three years. The arhatiyas with higher aavak and fee payments get larger areas of the phad to conduct their trade. The incoming trucks are parked right along the arhatiya’s phad, making the process of loading and unloading of the agricultural produce efficient.

 

Agricultural trade is made of complex supply chains, numerous agents, and high levels of commodity specificity. Mandis provide a regulated market space that reduces some of the challenges and encourages fair competition, as well as synergies between arhatiyas and farmers. At any given point of time, all trade actors know the prevailing prices and all transactional costs – related to the weighing, cleaning, drying, bagging, loading, and unloading of produce – associated with the sale of any particular agricultural commodity in their geographic area. Thus, this system leaves very little room for individual farmers to receive an unduly subdued rate for their produce or being charged unjustly for any post-harvest processing facilitated by the arhatiya. While PM Narendra Modi claims that these middlemen “loot the profit of the farmers”, the possibility for an information asymmetry around prevailing prices and costs is limited in a mandi where the farmers have access to multiple competing buyers and can approach any of them to make a sale.

 

Farmers believe that the new laws will compromise the sanctity of the mandi as a site of sale. Purchasing agricultural produce outside the mandi will be cheaper for the buyers due to the absence of fees or taxes, as prescribed by The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020. The implementation of the Farm laws 2020 will create geographically dispersed trading areas with wide information asymmetries among the farmers. Discounting the role of the mandi system, to the extent that it ensures fair labour, weighment, post-harvesting costs (cleaning, drying, grading), and prices to the farmers, is disconcerting. For farmers, whatever limited bargaining power could be exercised with the small-scale arhatiya will vanish once they are made to face bigger corporations. The protesting farmers argue that the deep pockets of the corporates who enter the space created by the ‘APMC bypass Act’ will allow them to wipe out the arhatiyas while handing out a raw deal to farmers. Farmers commonly refer to this as the ‘Jio model’, where they expect the corporates to lure them with attractive prices at the first instance. Once the corporates dismantle the mandi system and leave no alternative buyers for the farmers, they are expected to unfairly slash their initial offer prices. 

 

Market infrastructure for robust farmer incomes 

 

Policymakers don't often talk about bolstering agricultural market infrastructure as in many parts of the country, the question of the availability of infrastructure remains unaddressed. Researchers have time and again emphasised that for a majority of farmers, the primary site of sale is not the mandi, but their village where a private trader goes from farm to farm to purchase the season’s harvest. Other than the limited presence of mandis in most states, there are social and economic reasons because of which they may not be accessible to farmers. Why we see strong opposition from farmers of Punjab and Haryana against the recently passed Farm Acts is because of the presence of a well-functioning mandi infrastructure in these states which serves all actors. The incentives of all players – the arhatiyas, palledars, market committees, procurement agencies, rice mills, and the transporters – are clearly defined by the state for the state procurement of wheat and paddy from farmers at the Minimum Support Price. 

 

The market committees play an important role in the mandis during state procurement, and otherwise. They are legal entities constituting members from the government, traders, farmers and labour unions, who have a definitive role to play in grievance redressal for agricultural transactions. The new acts, by completely deregulating the agricultural market space leave much to be desired in the area of legal recourse by leaving all matters of dispute resolution and redressal to the Sub-Divisional Magistrates (SDM), and also giving the bureaucrats complete legal immunity from being held liable for any wrongdoing. Indian farmers, owing to their small farm size and limited bargaining power are particularly distrustful of reaching out to the state’s bureaucratic machinery for dispute resolution as they are fearful of not getting adequate representation in the SDM-appointed Conciliation Boards. 

 

Until The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 was passed, regulated markets were the only legally permissible spaces for agricultural commodity trade.  Large-scale buyers are likely to take some time before finding their feet in this newly deregulated trade area. Till then, mandis remain the primary sites of price discovery for farmers’ produce. Many mandis, like Azadpur, are bursting at the seams. At present, they are the most widely available agriculture infrastructure to farmers. Ensuring infrastructure creation and enhancement in mandis has been emphasised by both the executive and the legislature time and again. To ensure accessibility, a vast network of 42,000 mandis is needed for farmers to reach a market yard within a 5 km radius. The current number stands at roughly 7,600. The central government committed to developing and upgrading the marketing infrastructure of existing 22,000 Gramin Agricultural Markets in the 2018 budget and has managed to complete work in about 2% of the targeted number till February 2020. 

 

The government’s latest attempt of making mandis defunct by taking away their powers to charge fees and taxes is a move that is at odds with its stated commitment of making sustainable and infrastructurally sound markets accessible to farmers. To this effect, improving existing market infrastructure would have been a low hanging fruit for a state which was truly focussed on improving farmers’ incomes. 

SHIVANI GUPTA is a Delhi-based policy and development professional. She has spent three years studying agricultural markets, particularly in the state of Punjab and Delhi. She was previously a LAMP Fellow at PRS Legislative Research. You can read more about her research on Medium.

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