Jul 1, 2011 – W. H. Moreland, the celebrated writer of From Akbar to Aurangzeb, commenting on the agrarian system of Mughal India, said that: “the peasant is the last person to benefit from price rise while he is the first to suffer from a fall.” It is not a little curious that this realisation does not dawn on Indian experts who have been dealing with agriculture policy for decades. In no other sector of the Indian economy is the principal protagonist such a pathetic victim as he is in Indian agriculture.

It is even more curious that agriculture is put to strange comparisons: comparing oranges with apples would seem normal in a world where the farm sector is compared with the automotive sector. The reasoning is so erroneous that it would be hilarious had it not been about such a critical sector of the Indian economy that provides India with the ultimate security of food. Man cannot live by the motor car alone and yet, when it comes to consideration of sectoral policies, one hears of discussions where farming and the automotive sector are placed on the same plane. So much for national priorities.

The Indian automotive industry will be employing two million people by 2020 and contributing to about 15 per cent of India’s gross domestic product, which is the same as the contribution of agriculture and that of 60 million farmers. This is an often-made pronouncement from automotive sector platforms and repeated in the media with great alacrity. Apart from the grave ignorance of fundamentals of economics, ethics and even ecology that such reasoning demonstrates, the worry is that such arguments are increasingly dominating Indian policies.

Even so, agriculture is the biggest private sector activity in the country and willy nilly India has to make it a profitable enterprise. Marketing of farm produce is perhaps one of the largest ‘unorganised sectors’ businesses in the country though it is the state sector that has a ‘near monopoly’ in the procurement and a lead role in the distribution of cereals (the main agriculture crops). The state is conspicuous by its absence in the distribution and marketing of perishables (horticulture crops). With the sole exception of Mother Dairy’s ‘Safal’ brand of outlets in the National Capital Territory of Delhi, the distribution is in the hands of private guilds, which do not encourage the entry of new players.

These private guilds of middlemen, commission agents at the sabzi mandis (wholesale markets), street vendors and vegetable sellers in the retail market work in tandem to make huge profits on sale of perishable commodities sold by farmers. Given the perishable nature of food like fruit and vegetables, the farmer needs to sell his crop when it is time to harvest. He cannot wait for a better price, thus exposing himself to exploitation by the guilds and this has been happening since time immemorial. They buy cheap and allow no competition or transparency in the market. Yet, when it comes to preparing guidelines for foreign direct investment in retail, the government curiously can only think of trying to secure the right of these very guilds from anticipated competition of large format stores. These guilds exploit both the farmer and the consumer as the farmers’ share in the consumer price keeps falling even as the consumer keeps paying more.

Most agriculture produce sold in such retail stores will be fruits and vegetables. Growing these perishable commodities is a labour-intensive activity and undertaken in India by small-holder farmers and producers. Since foreign investment in multi-brand retail is almost a done deal, it is important to consider the following recommendations while the policy for multi-brand retail is being finalised. Foreign investment in retail can be allowed provided:

  • 75 per cent of the total retail sales of agriculture produce are purchased directly from the farmers.
  • 50 per cent agriculture produce purchased directly from the farmers is from within 100 km of every store.

Attention to at least these two details will benefit all stakeholders and will specially help farmers get higher prices for their produce and, amongst other benefits, will also help in diversification of agriculture. It is perfectly fair for the government to consider the position of the many small and medium enterprises and small kirana store owners but could it not spare a thought for the poor farmer too?