Monday, September 26, 2022

Lower Mandi Arrivals: Small firms active in farm trade on behalf of bigger companies


The corporate houses active in agricultural trade include ITC, Cargill, Adani Agro, LT Overseas.The corporate houses active in agricultural trade include ITC, Cargill, Adani Agro, LT Overseas.

By Prabhudatta Mishra

Though the farm laws that sought to liberalise marketing of agricultural crops have been kept in abeyance since January, a steep fall in crop arrivals is being reported from several Agriculture Produce Marketing Committees-controlled mandis, indicating that significant volumes of the crops are directly purchased from farmers by private traders.

Even as big corporate houses are keeping away from direct purchases of the agricultural produce from farmers amid the row over the farm laws, smaller traders are active in the market and sell the stocks to the biggies.

Direct purchases are less expensive to the traders as mandi taxes are not required to be paid.

While there are anecdotal evidences of a flourishing trade outside the mandis from other states, data gathered by FE from the Madhya Pradesh agriculture department showed arrivals of crops across the mandis in the state witnessed a 19% fall during the rabi harvesting period (April-June). Mandi arrivals of all agriculture and horticulture crops in the state were at 150.63 lakh tonne during April-June against 185.27 lakh tonne in the year-ago period. Wheat arrivals at the state’s mandis witnessed an ever sharper 48% year-on-year fall at 32.47 lakh tonne.

“As there was no decline in any of the rabi crop output barring masur, crops should have reached the mandis. Covid-19 can’t be cited as reason for the fall as the pandemic was there during last season as well and a nationwide lockdown was imposed,” said a market observer adding that some more relaxations in enforcement would further push trading activities outside the APMC market yards.

Thanks to a bumper harvest of wheat, government agencies have purchased 128 lakh tonne of the grain during April-June in MP for the Central Pool, almost on a par with the level in the last season.

Traders have preferred to buy directly from farmers to save mandi tax of 1.5%, sources said. Small companies and traders opened procurement centres at village levels and bought wheat on behalf of big corporate houses. The Supreme Court in January put on hold implementation of the three laws till further orders. A committee set up by the apex court which looked into the contentious aspects of the laws that led to prolonged protest from a section of the farming community, has since submitted its report.

The corporate houses active in agricultural trade include ITC, Cargill, Adani Agro, LT Overseas.

The small private traders who continue to do direct purchases from farmers don’t have any formal contracts with big companies who they sell the commodities to. “We don’t have any contract with any company. However, the crops purchased by us are being sold on every alternate day as the storage capacity at the village level is very limited. Whenever there is a dispute over price or the companies refuse to pay us at least the procurement rate, we will exercise the option of selling the stocks to flour millers,” said a staff at a Gurgaon-based agri-trade firm which is into wheat procurement in the Malwa region of Madhya Pradesh for many big FMCG companies.

However, officials maintained that the drop in mandi arrivals was largely due to closure of mandis during April-May, amid the second wave of coronavirus. Madhya Pradesh last year introduced “Sauda Patrak” system in which any licensed traders are allowed to buy directly from farmers and self-assess the deals by entering the trade details on a specified portal. The Mandi Board captures the data.

On June 5 last year, the Centre promulgated three Ordinances, and passed the bills in Parliament in September, reforming the country’s agriculture marketing. The impact of farm laws on the trade had been rather sudden and material: During the June 6-August 31, 2020 period, mandi arrivals of crops –- from fruits and vegetables to cereals and pulses – dropped dramatically. The fall was up to 49% for fruits, 57% for vegetables and 45% for grains.

Of course, part of the decline was attributed to the lockdown restrictions that prevailed in large parts of the country and the crop damage or rotting of stored produce as in the case of onion, but the ceding of trade share by the once-all-powerful mandis indeed had much to do with the reforms.

Thousands of farmers, mainly from Punjab, Haryana, Rajasthan and western Uttar Pradesh, have been camping at different border points of Delhi for over eight months demanding repeal of the three contentious laws and to ensure a legally guaranteed Minimum Support Price (MSP) mechanism. However, the government has been maintaining that it is open to discussions with farmers union on the provisions of the three Acts and will remain open to discussion with agitating farmers to resolve the issue. Farmers have been demanding unconditional talks to resume the dialogue which broke down in January after 11th round of discussions.

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