A Study of the Agricultural Markets of Bihar, Odisha and Punjab

In India, states the report, farm policies have focused on three ways to increase and stabilise farmers’ income: decreasing input costs, improving crop yields and increasing output prices. However, more recently, the policy lens has shifted its focus on getting farmers a more significant share of the market surplus in agriculture markets.

In 2016, the government of India announced plans to double farmers’ incomes by 2023. However, the seven-year period was seen as ambitious and unrealistic since the prior doubling of farmer’s incomes in India took 22 years (1993–94 to 2015–16).

The attention on farmers’ incomes led to a focus on the real prices that farmers received for their produce in agricultural markets. This pushed several states to adopt APMC Acts in the 1950s and 60s. APMCs initially led to substantial improvements in agricultural trade and farm incomes, but they were eventually ‘captured by entrenched interests’ and began being viewed as an obstacle to increased farm incomes by policymakers.

In May 2020, amidst the Covid-19 pandemic, the central government announced its intention to reform state APMC Acts through legislation to establish a national agricultural market. Soon after, in September 2020, the government enacted three new farm laws with direct implications on the degree of State regulation over the exchange, storage, movement and taxation of agricultural produce.

The report notes that many small farmers refrain from participating in agricultural markets since their output barely meets personal consumption requirements. Across states, farmers with large landholdings are more likely to participate in agricultural markets. In Bihar and Odisha, farmers who participate in market transactions own roughly twice as much land as those who do not.

Farmers avoid taking the risk of growing crops that might bring them higher incomes due the lack of insurance infrastructure. The report conducted a survey of about 10,000 farmers in Bihar’s Nalanda, Purnia and Samastipur districts; Odisha’s Baleshwar, Koraput and Sambalpur districts; and Punjab’s Hoshiarpur district. It found that only 41 per cent of farmers in Bihar and 27 per cent in Odisha were aware of the Pradhan Mantri Fasal Bima Yojna (Prime Minister’s Crop Insurance Scheme), while only 5.5 per cent and 8.8 per cent of those surveyed accessed it. Despite a higher awareness in Punjab (70 per cent of surveyed farmers), the actual utilisation of the scheme was just 0.3 per cent.

Even though Punjab has a strong mandi system, the report observes that many transactions related to non-MSP (minimum support price) crops are carried out at the farmgate. Farmers often sell their produce without harvesting; the contractors then bring their labour, harvest it and take the crop.

In Bihar, notes the report, land is predominantly owned by the upper caste communities such as Brahmins, Bhumihars, Kayasthas and Rajputs. Smaller plots of land are also owned by Other Backward Class (OBC) communities like Yadavs, Kurmis and Kushwahas. Land in Punjab’s Hoshiarpur district is primarily owned and cultivated by the Sikh population, with Jat Sikhs constituting the dominant landowning caste.

Farmers in remotely located villages face two critical problems at agricultural markets: lower profits due to transportation costs, and that there are limited buyers, giving them the power to set prices.

Given the limited number of buyers in remote areas, farmers in such regions would benefit significantly from MSP procurement by the government, along with policies supporting the entry of small and medium enterprises as alternate buyers of agricultural commodities.

Agricultural markets are characterised by market deregulation in Bihar, and weak formal regulation in Odisha. This is in contrast to the dominant view that such markets are subject to restrictive government regulations in India.

Interventions and public investments in agricultural markets need to be sensitive to specific contexts relating to the site of sale, the manner of sale, post-harvest processing, storage as well as aggregation. Policies must recognise the multiplicity of market sites such as APMCs, periodic haats and permanent wholesale markets.

The report says that there is little scope for increasing farmers’ income through market intervention in the states of Bihar, Odisha and Punjab, without any significant changes in the conditions of production, or an increase in demand for farm commodities.

Focus and Factoids by Neymat Chadha.