Free-market agriculture is essential for 600 million farmers in India

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Since 2020, the farmer protests in India has received global coverage. However, many of those of the mainstream news media do not explain the actual problems faced by farmers and what their real concerns are.

The mainstream media insists that farmers should be controlled by government mandated prices for the crops. But contrary to popular opinion, many sections of farmers in India advocate for a free-market system where they are allowed to sell their produce at their own prices.

Free market is essential for farmers to progress financially and for their produce to avoid being capped at government mandated prices.

India – A Global Agricultural Giant

Agriculture is a major livelihood in the Indian sub-continent. Nearly 600 million people in India alone depend on agriculture for their income. That is almost twice the current population of U.S.

Indian agriculture has transformed since independence, from a food crop deficit country in the 1960s to a food crop exporting nation in recent decades. Productivity of food grains, pulses, oilseeds and many other horticultural commodities have increased manyfold.

But farmers still face challenges and have traditionally endured increased government involvement in setting prices. Here are some of the challenges and how they can be overcome.

Small Agricultural Holdings and Problem of Plenty

Land being supply-inelastic, increase in population and inheritance of hereditary properties among all the legal heir have reduced the size of operational land holdings.

The size of operational holdings has also changed over time from 2.28 hectares in 1970-71 to 1.08 hectares in 2015-16. More than 86 per cent of Indian farmers have small (1 to 2 hectares) and marginal land holdings (less than 1 hectares).

Under such circumstances, extensive cultivation is next to impossible. So, output from each farmer is limited and thereby reducing their bargaining power with sellers.

Agriculture in India is also prone to “paradox of plenty”, where an excess production would reduce the profit of the farmers, because price is determined by supply-demand ratio of a particular produce at a given time.

During a bumper harvest, supply would exceed demand leading to a sharp drop in prices. Farmers in India suffer not from less production or productivity, but from profitability.

Middlemen Interference

Many farmers in India use the government’s guidelines or rule to sell their produce. Government’s low procurement prices make it impossible for farmers to sell their producer at higher rates.

Taking advantage of this, farmers are generally forced to sell their produce to a middle-man or a commission agent, who in turn make profit.

Storage Inefficiency

Agricultural commodities being highly perishable, require proper storage infrastructure as they provide a buffer for the farmers to resell his/her produce later.

India, being a developing country, lacks some of the advanced storage facilities that exist in the developed part of the world. Moreover, the tropical climate can cause produce to perish faster than it does in temperate regions.

Recommendations for A Free-Market Enabled Farmer Freedom

To reduce the interference of middlemen in the supply chain, farmers could directly sell their produces to the consumers, which would fetch them more profit.

Some of the States in India have recognized this and have set up farmer’s markets—platforms like Uzhavar Sandhai (Tamil Nadu), Apni Mandi (Punjab), Rytu Bazar (Andhra Pradesh)—where farmers could sell their locally produced products directly to the consumers. Through these channels, farmers could bypass middlemen and increase producer’s share in consumers’ cost.

There is also a need to invest more in rural cold storages that are sufficiently connected for the farmers to benefit from. The cold storage facilities for Onions in the state of Maharashtra is one such example, where the highest onion growing region of India manages to save most of its produce from perishing.

A focal point for addressing these issues could come in the form a Crop-based Farmers Producer Organizations (FPOs). These organizations are typically run by a group of local farmers who grow similar crops, and partially financed by governments.

FPOs help in efficient implementation of farmer welfare schemes: FPOs provide farming products at a subsidized price to the members, provide technical guidance, keep the farmers informed about the market prices, store their excess produces during bumper harvest, issue advance loan against their produces, and add value to their produces, and ultimately helping them gain more profit.

Most importantly, FPOs will enable the farmers to avoid middlemen and sell their produce in the market at a competitive rate.

  • "Vijay Jayaraj (M.Sc., Environmental Science, University of East Anglia, England), is an Environmental Researcher based in New Delhi, India. He served as a Graduate Research Assistant at the University of British Columbia, Canada and has worked in the fields of Conservation, Climate change and Energy."

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