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The Subbarao Dilemma: To cut or not to cut

Economy Apr 16, 2012

Will veggie, fruit prices decline in Maharashtra as middlemen get ditched?

By Firstbiz Editors

Get your shopping baskets ready to pack in a lot more fruits and vegetables because their prices might be poised to fall.

In a recent notification, the Maharashtra government announced that farmers could now directly sell their produce, including fruits, vegetables and condiments, to consumers instead of selling to agricultural produce marketing committees (APMCs), according to a DNA report.

Until now, farmers had no option but to sell their produce to APMCs, which have a reputation for playing off one farmer against another with the intention of forcing all of them to accept lower rates, according to agriculture sector experts.The lack of proper storage facilities and fear of losing sales because of rotting produce left farmers with no choice but to accept that exploitative system. At the other end, consumers also had to pay much higher rates for their vegetables and fruits.

Currently, the difference between the wholesale and retail prices of farm produce is 40-50 percent. Reuters

One official told the newspaper that farmers, for instance, would sell onion at Rs 4-10 per kilo to APMCs, but consumers ended up shelling out Rs 40-60 per kilo."Farmers don't need to pay 12 percent commission to the market any more," Shiv Sena MLA Sharad Patil added.

Currently, the difference between the wholesale and retail prices of farm produce is 40-50 percent, which should decline in future if everything goes according to plan. More competition from wholesale buyers should fetch better prices for farmers.

At least some farmers are delighted at the move."The removal of the APMC regulation will help farmers to get a better price for their produce while consumers can get their vegetables cheaper and fresher," said Sriram Gadhve, president, All India Vegetable Growers' Association, told The Economic Times a few weeks ago.

Don't expect AMPCs to give up without a fight, though. Shankar Pingale, APMC director, said a meeting of all traders to oppose the notification has been called, according to DNA. "There are 290 AMPCs in the state; nearly 2 lakh people's livelihood depends on them. Giving farmers freedom to sell their yield directly to consumers will break down the well-functioning traditional market committee chain."

Well-functioning only for middlemen, Mr Pingale. The farmers were by no means content with the current system.Indeed, one of the main reasons behind introducing foreign direct investment in multi-brand retail was to overhaul and introduce more contemporary and organised agricultural supply chains.

For too long, middlemen have been the main beneficiaries of the agricultural supply chain. It's time farmers -- and consumers -- benefitted too. The rest of India's states must follow Maharastra's lead.

by Firstbiz Editors

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