Vantage point

Tuesday, June 21, 2005

Liberal Farming

I have often written about how the key to eradicating poverty from India is not less, but more liberalisation. A lot of sectors which employ the poor are still under the inefficient, corrupt, unproductive and stifling grip of state control and monopoly. Look at an ailing sector and you will find that the problem is the state.

Take agriculture for instance. The stifling controls allow very little flexibility for the farmers. They don;t have the freedom to sell their produce to whoever they want, since procurement of produce is (until now) a government monopoly. So while many other businessmen can negotiate and then decide whom to sell their wares too, farmers have to depend on the state.

There is a welcome news on its way though.

The Maharashtra Government has announced that it will allow private parties to enter the market and the state monopoly will be broken.

The 285 agriculture produce market committees (APMC) in the state will have to pull up their socks soon as competition from private markets is just round the corner. The entry of contract farming and direct selling is also expected to keep the APMCs on their toes.

To understand how this will make life easier for the farmers, compare the attitude and service levels of BSNL prior to telecom privatisation, and after it.

"We are exploring the possibility of permitting private markets at Tathawade near Pune and Igatpuri near Nasik as the existing APMCs there can not accommodate the increasing business vol-ume", Patil revealed. He remarked that facilities like pre-cooling, grading, packing and ripening chambers will be provided at the private markets and the APMCs will have to upgrade their facilities if they wanted to maintain their business. "Else farmers will have the choice to sell their produce to markets that give better prices and offer required facilities", he pointed out.

Farmers will now also have the option of going in for contract farming.

On the decision to allow contract farming, Patil said that a group of farmers will be allowed to enter into contract with private buyers by signing an agreement about issues like price and quality of pro-duce. "This does not mean that farmers will lose ownership of their land, the agreement will be only about supplying the desired pro-duce at the pre-fixed rates which will not be impacted by market fluctuations", he clarified. He said that this has been successfully tried at Punjab and Haryana.

Direct marketing will also be allowed, cutting the middlemen and optimising the value chain.

The success of this act will be a great tool while selling reforms to the masses.