New central laws: Corporate entities scale up direct purchases of crops from farmers

By Prabhudatta Mishra

Corporate entities and large traders have increased their direct purchases of crops from farmers, thanks to the new central laws concerning marketing of agricultural produce, according to trading sources. Of their total purchases, up to 85% are now via the direct purchase route in states where such purchases were allowed even before the latest laws; even in many other states, up to a half of their requirements seems to be met through direct transactions with farmers, with the APMC mandis catering to only the other balance demand.

“In Madhya Pradesh, Maharashtra and Rajasthan, we used to procure 30% of soyabean from our own network and the remaining from APMC mandis. Now that the new laws have come into force, we are meeting 85% of our requirement from purchases outside mandis,” said Rajanikant Rai, CEO of ITC’s agri-business division. Since ITC already has its e-Choupal network, it is easier to scale up operations. The company has also started buying paddy through e-Choupal, he added.

However, most of the other large trading companies like Adani group, Cargill and Glencore do not have e-Choupal infrastructure and are currently availing the services of traders, who in turn are directly buying from farmers.

“We already have a network of traders through which we have been buying commodities. While earlier we were buying 100% from mandis, we have now decided to buy at least half of the requirement directly from the farmers,” a senior executive of a global trading firm having large presence in wheat, cotton and pulses trading said, requesting not to be identified. “Depending on the situation, we are planning to shift from mandis completely as there will be a savings on market fees and arhatiya commission,” this source said.

Many other corporate firms are on wait and watch mode in Rajasthan, Haryana and Punjab after farmers’ protests against the Centre’s three laws and given the Bills passed by Rajasthan and Punjab assemblies, ostensibly to counter the central laws. While Punjab and Haryana are two major producers of paddy, Rajasthan is the top producer of bajra and moong among kharif crops.

“I think mandis will become irrelevant in two years. Existing licence holders will start dealing outside APMC under central law,” said food policy expert Vijay Sardana. The APMCs need re-orientation and it depends on the political will of the state governments to do so, Sardana said adding, they have to move from political organisations to business service organisations to remain relevant.

In Uttar Pradesh, most of the rice millers are now buying their entire paddy requirement outside mandi platforms and trying to set up their own network. “If the procurement is happening from farms within 30-40 kilometre distance, traders are delivering paddy at the mill-gate by taking `25-30/quintal commission. Most of the millers are passing on the mandi tax benefit to farmers when fixing the daily buying rate, which is normally `25-30/quintal higher than local mandi rate,” said Atul Agarwal, MD of Saket Foods at Bahraich in Uttar Pradesh.

After promulgating three ordinances on June 5, the Centre got the relevant Bills passed by Parliament and notified via official gazette after President’s assent. The laws are aimed at unshackling of the entire agriculture-to-food-processing-to-retailing value-chain and giving farmers the choice to sell their produce in any market across the country. Under one new central law on inter-state trade, farmers have the freedom to sell their produce anywhere within and outside the state of their residence, without being hamstrung by the Agriculture Produce Marketing Committee (APMC) mandis, while another law on contract farming allows farmers to get a share of post-contract price surge. The third one is the amended Essential Commodities Act which claimed to have eased stock holding restrictions on commodities.

Following the enactment of new laws, the mandi arrivals seem to have dropped in most of major kharif crops including paddy (common), jowar, bajra, maize, arhar, moong, urad, soyabean, groundnut and cotton during October from the year-ago period, according to trading sources. The falling trend continued in the first 12 days of this month, they added.