Market Dynamics Evolving: Direct purchase rates marginally higher than local mandi prices

Traders and corporate houses are purchasing from farmers at rates marginally higher than the local mandi prices in the case of many crops such as paddy, bajra and soyabean. At least a part of the savings on mandi fees/taxes and arhatiya commission are being passed on to farmers by them.

The entire benefit, however, is not transferred to farmers as the outside-mandi transactions involve higher expenses on labour, cleaning and grading of commodities and commission to the village-level aggregators. In mandis, the labour charge is shared by traders and farmers in 50:50 ratio, while traders are bearing these costs when buying at the village level.

“We are paying at least 1% more than the local mandi rates wherever we are buying outside mandis. The rates are even higher depending on the location of the collection centres and quality of the crops,” said Kapil Biyani, a trader in Haryana. Farmers are also saving on hamali charges and freight when they are selling crops at their villages, he said.

Mandi tax has been reduced to 1% about a month ago from 4% (market fee and development cess 2% each) earlier in Haryana, while Punjab continues to levy 3% each as market fee and rural development fee. Currently, there are apprehensions among traders and corporate firms after farmers’ protests over the Centre’s laws in Haryana and Punjab. Corporate entities have not shown adequate interest as they do not want to get into any controversy, said Biyani, who has been into buying paddy for large corporate.

“Farmers are getting `1,400/quintal outside while mandi rate is about `1,350/quintal in the case of bajra,” said RK Bansal, a commission agent in Hathras mandi of Uttar Pradesh. He admitted that there was a decline in mandi arrivals of bajra last month. According to Agmarknet portal, the bajra arrivals dropped 67% to 1,075 tonne from the year-ago period in Hathras during October.

Traders are perplexed as to why bajra rates are depressed — 38% below MSP in October — when there is also speculation that the kharif output this year would be lower than last season. Prices of bajra could be depressed due to drop in business at mandis, which are helping the cattle feed manufacturers even if they pay higher than mandi rates outside, said a trader in Alwar. Some other traders said that farmers were holding up the crops in expectation of higher rates after few months (last year the bajra price was over `1,700/quintal in October). The arrivals of bajra in Alwar mandi last month was over 50% lower than the year-ago period, while daily arrivals now recorded at an average 125 tonne.

“I was offered a higher rate than the price in mandi and sold some of my crops to the gram vyapari (aggregator). I also checked the rate from the arhatiya,” said Rajendra Tomar, a farmer in Alwar, one of the leading mandis of bajra. Even in the case of soyabean, farmers producers’ organisations (FPOs) are paying higher than mandi rates to the farmers. For instance, Ranban Agro Producer Company, an FPO, paid farmers at `4,020/quintal last month when soyabean was traded at `3,980 in Latur APMC mandi in Maharashtra. Local processors in Sri Ganganagar, Rajasthan, are paying `6,700/quintal for moong on direct purchase whereas the average rate in local mandi is `6,600. Sri Ganganagar is a major producing hub in Rajasthan, which is India’s biggest producer of moong.

“Unless the government provides a credible alternative to farmers to check the benchmark rates, the reforms will be incomplete and the growers will be exploited,” said the Alwar-based trader, who is now ready to buy directly from farmers outside mandis for large traders on commission basis. He said Rajasthan’s bajra producers are getting higher prices for their produce from Haryana’s cattle feed manufacturers as the state government started buying bajra at MSP. Farmers across the country have been protesting against the laws demanding incorporation of minimum support price (MSP) as a legal right.

Already Punjab, Rajasthan and Chhattisgarh have passed Bills in their respective assemblies to negate the impact of Central laws. Some other states like Jharkhand, West Bengal and Maharashtra are said to have been mulling to pass similar Bills. Mandi prices of seven among the 10 key summer-sown crops like jowar, bajra, maize, moong and soyabean were 8-38% below their minimum support prices (MSPs) during first fortnight of last month, indicating that procurement by the designated agencies hasn’t yet gathered momentum after kharif harvesting season started from October 1.

However, prices of soyabean inched up later and currently at par with its MSP of `3,880/quintal or higher in most of the places. Though the all-India weighted average mandi rate for paddy (common variety) is at par with MSP of `1,868/quintal, in Uttar Pradesh and Bihar farmers are selling at `1,100-1,300 and in Chhattisgarh and Odisha `1,400-1,550.