A Step in the Right Direction: Government Moves to Deregulate Mandis

According to a news story published in the Times of India yesterday, Finance Minister Arun Jaitley has instructed states to delist fruits and vegetables from the agriculture produce marketing committees to control food inflation. This advisory from the central government issued to states, and immediately adopted by the Delhi government, is a welcome move and a step in the right direction. It probably displays an understanding on part of the government that lesser control by the government and open competition in markets is good for everybody — cheaper goods for the consumers and a fair price for the producers.

We hope that soon the same principle is applied to not just fruits and vegetables but to all other commodities and markets as well.

It was 11 years ago, when Centre for Civil Society had covered the issue in its 2003 Delhi Citizen Handbook. We reproduce below the summary of the study conducted on Delhi Agricultural Marketing Board. Interested readers can find the detailed report here (pages 225–233).

Delhi Agricultural Marketing Board

Functions

The Delhi Agricultural Marketing Board (DAMB) attempts to safeguard the interests of farmers and consumers by providing wholesale markets where farmers’ produce is auctioned to licensed agents.

Findings

• The Azadpur Agricultural Produce Marketing Committee had an income of Rs 36.79 crore in 2001–02. It contributed Rs 4.42 crore to DAMB. The lowest income that year was of the Khoya-Mawa Marketing Committee amounting to Rs 32 lac. And it paid Rs 6.4 lac to DAMB.
• Farmers actually pay 7–15% of the sales as commission to licensed agents, on top of 1% transaction fee they give to the mandi.
• The rampant corruption in the marketing committees was brought to fore by the arrest of the Delhi Fodder Market Committee Chairman, Om Prakash Oman in May 2002 for allegedly demanding and accepting a bribe of Rs 50,000.

Reforms

• Remove the monopoly of the DAMB on wholesale markets. Let private parties set up competing markets. The Azadpur Agricultural Produce Marketing Committee alone pays about Rs 442 lac per year to DAMB which is in effect paid by the farmers. If we do away with the monopoly market, a large part of money could be saved for the farmers.
• Eliminate the licensing system for wholesalers and commission agents and create genuine competition for the purchase of farmers’ produce. They will pay a much lower commission. The farmers are exploited by the monopoly of DAMB and by the restrictions on wholesalers.
• Those voluntary agencies that truly want to help farmers should start by providing space for wholesale trade and offer choice of markets so that free and fair trade can take place.