Last week the column focused on enhancing agricultural production as the main intervention in the transformation of the agrarian economy. However, of equal importance is the issue of farmers’ incomes because given the imperfections in the market, growth in production often leads to a situation where farmers are compelled to go in for distress sale. While some interventions and price stabilization efforts have been made have been made in the case of cereal crops, the ‘market’ for perishables is in the hands of a cartel in most urban centres. This is bad – both for the consumers as well as for the produces, and some examples from the Azadpur Mandi will confirm this.
Azadpur Mandi in the NCT of Delhi is perhaps one of the largest markets for fresh fruits and vegetables in Delhi. Almost every kind of fruit and vegetable – from bitter gourd to pomegranates – from potatoes to onions are transacted in this market. Fruits and vegetables arrive in this market from a hinterland of seven to eight hundred kilometers. Thus many trucks have a two day journey before they reach Azadpur. Once in the market, the auction takes place, but it is an oligopolistic market, because there are only a limited number of intermediaries who are allowed /authorized to transact. Many goods are not even traded because they have already been pre-booked by some commission agents who have also advanced ‘seed money’ and transportation charges to the growers. There are many other charges which are absolutely ‘rentier ‘in nature – like charges for stationery, charges for inspection etc. The approved commission is a whopping 8%, which is quite high considering the volumes that are being traded. And it is precisely for this reason that the resistance to reform and change is extremely high.
How does one tackle this? AgriMatters understands that successive governments in NCT of Delhi have tried to intervene and usher in transparency in the system, but the stakes have been so high that those who tried to bring in reform were either co-opted, or threatened or hounded out. Everyone involved in this tries to pass the buck – but AgriMatters feels that rather than enter into a confrontation, an attempt should be made to evolve a consensus by recognizing the fact that the ‘intermediaries’ were, and are an integral part of the value chain, and that their livelihoods are dependent on these transactions, and many of them may want to join a new initiative which recognizes their rights and contributions and gives them a better way out. After all, till a decade ago, the underworld was deeply entrenched in the film industry, till legitimate financing gave a lifeline to producers. Likewise with the real estate sector.
AgriMatters therefore proposes that the right of the ‘intermediary’ to transact should be recognized, monetized and assigned a ‘share value’ based on the trade volumes handled by him. If share values are assigned to each of the two thousand odd traders, they can be motivated to join a spot Exchange or an electronic trading platform as exists in the major fruits, flowers and vegetable markets of the world. These share values could range from Rs 10 lakh to Rs Fifty lakh, depending on the transactions reported by the trader. However, once the shares have been monetized, it would be possible for some of the intermediaries to exit this particular business, besides allowing space to newer players to enter the market. A domain economy can grow and flourish, and get new ideas and values only when entry and exit options are easy. This is not to say that anyone and everyone will be allowed to transact. Like every Exchange, there will be conditions for entry – but these norms will be transparent and clear.
The Azadpur traders could then join hands with the Government of NCT of Delhi to establish a modern terminal market, with an electronic auction platform. All trucks entering the market can be tracked, and their produce sent for washing, cleaning, grading, sorting and preliminary inspection with regard to quality. Only after these parameters have been cleared will the fruits and vegetables be put up for auction? This will also enable farmer’s organizations, co-ops, and state federations to transact directly with the retail chains and other institutional buyers. The transactions will be clear and transparent.
The option given above has several advantages, and every stakeholder gets value in the process. The trader gets a monetized share, and even if he does not undertake active transactions, he will still get an assured return every month from the profits of the exchange, the farmers get a better price, the health authorities can check the quality of fruits and vegetables ‘at source’, tracking systems can be installed and consumers can get ‘better produce’ at a ‘fair price’. Last, but not the least, as and when the government wants to intervene in prices- either on behalf of the farmers, or the consumers, it can do so by taking a position on the exchange. The exchange can also have in-built triggers to ensure that extreme volatilities are avoided.
AgriMatters hopes that with this intervention the wide gaps that exist today between the wholesale prices at Azadpur Mandi and the retail kiosk/cart can be brought down, besides of curse ensuring a better quality produce for the citizens of the capital. And if this works well, like the Mother Dairy in Delhi, it can be replicated and up scaled elsewhere!