Bringing mandis closer to farm: A way to stop wheat smuggling into Haryana, Punjab

Since huge stocks of paddy and wheat, year after year, finds way to Punjab and Haryana which offer a guaranteed MSP realisation, there are enough reasons why this should not be treated as an 'illegal' activity. The fact of the matter is that because the Central government did not invest in expanding the mandi network and thereby failed to create conditions where an assured MSP could be delivered, farmers have been deprived of suitable marketing opportunities

Once again, despite strict vigil at borders with Uttar Pradesh, large quantities of paddy are being brought from the neighbouring state to be sold in Haryana mandis. Reports of paddy arriving at grain markets in Karnal, Gharaunda, Kunjpura, Indri, Taraori, Nissing in Karnal and Kurukshetra districts in Haryana continue to hog the headlines.

This reminds me of news reports some two years ago that talked of how numerous FIRs under Section 420 (cheating) and 120-B (criminal conspiracy) of the Indian Penal Code had been filed against unscrupulous traders who were trying to bring in paddy into Punjab from Uttar Pradesh and still far away, from Bihar. Call it a racket or blame these traders for illegally smuggling paddy into Punjab and Haryana, the fact remains that there are not enough marketing opportunities available in Uttar Pradesh and Bihar that deprives farmers from getting the Minimum Support Price (MSP).

This week, reports say UP farmers are getting a price of Rs 1,500 to Rs 1,700 per quintal against the MSP for paddy being Rs 2,040 per quintal. Such low prices prompt traders to purchase paddy at low prices, and then transport it to Haryana and Punjab mandis, where farmers get paid as per the MSP fixed. Now before you cry 'foul' and blame officials of the State Agricultural Marketing Board to be 'hand in glove' with traders, let's be clear: the continuing activity every harvest season only tells how wrong are the claims that markets provide farmers with higher prices.

If the markets were benevolent and were providing farmers with a higher price, I see no reason why truckloads of paddy have to be transported every year from Bihar and UP into Punjab and Haryana, which have a robust marketing infrastructure and provide farmers with an assured price of paddy (and for that matter for wheat). It is because adequate infrastructure is lacking in other states that large quantities are illegally transported to be sold at a higher price it would fetch in the mandis in the frontline agricultural states of Punjab and Haryana. Although paddy procurement began on Oct 1, as per the FCI database, UP has procured only 0.1 lakh metric tonnes of paddy till Oct 15. Comparatively, Haryana had procured 28.66 lakh metric tonnes, and Punjab has procured another 18.94 lakh metric tonnes.

As per the latest available Situational Assessment Survey (SAS) for Agriculture 2021, analysing crop production data for 2019-20, only about 14.5 per cent farmers were able to sell kharif paddy, and another 9.7 per cent farmers were able to sell wheat at the MSP price announced. Considering that bulk of procurement is happening in Punjab and Haryana, procurement is far less in most of the states, and barring Tamil Nadu, Chhattisgarh, Telengana and Madhya Pradesh (mainly for wheat), procurement is down to a trickle elsewhere. Many analysts have argued that most paddy sales that happen outside public procurement are at prices that are much lower than the MSP announced or in other words the private trade mostly purchases paddy at distress prices.

Because majority farmers have never sold paddy at MSP they remain unaware of the procurement system from which they can get a higher price. Even the SAS survey report tells us that only 30.3 per cent of paddy growing households and 27.2 per cent of wheat cultivators knew about procurement agencies, which tells us very clearly about the absence of public procurement in most past of the country. That is why the iconic farmers protest at the borders of New Delhi in 2020-21 remained confined to farmers from Punjab, Haryana and to some extent neighbouring parts of Uttar Pradesh because farmers in rest of the country were not even aware of what procurement was all about, and how they had lost out on higher price all these years.

Similarly, considering that only 40.7 per cent of the paddy growing households, and 37.1 per cent wheat farmers were aware of MSP, the demand for making MSP a legal right did not find an echo from the rest of the country. Nevertheless, it brings me to a related and perhaps more important aspect. Given the keenness of the government to usher in 'one-country-one-market', and given the thrust by mainline economists all these years to allow for unhindered inter-state trading of agricultural commodities, it is difficult to understand why the so called 'illegal' transportation of paddy and wheat from far and wide, to be brought to Punjab and Haryana for a higher price realisation, should invite punitive action. After all, shouldn't farmers be allowed to carry their produce to any part of the country where they can get a higher price? Didn't we make this promise at the time the three contentious farm laws were introduced (and later shelved), and wasn't that implied as bringing in 'freedom for farmers'?

It's time to rethink. Since huge stocks of paddy and wheat, year after year, finds way to Punjab and Haryana which offer a guaranteed MSP realisation, there are enough reasons why this should not be treated as an 'illegal' activity. The fact of the matter is that because the Central government did not invest in expanding the mandi network and thereby failed to create conditions where an assured MSP could be delivered, farmers have been deprived of suitable marketing opportunities. As I have said earlier, the need is to expand the existing 7,000 APMC regulated mandis, increasing the number to 42,000 mandis, if a market has to be made available at every 5 kms. What makes Punjab and Haryana governments oppose the opening of such a long-distance marketing channel is to ensure that the State does not deprive its farmers of an assured price, given the limited availability from RBI of a cash credit limit of Rs 36,999-crores to be used for paddy purchase at MSP. Well, this amount certainly needs to be increased so as to enable additional procurement from outside. After all, this additional amount will provide for economic justice, considering lack of adequate infrastructure only drove these farmers to take advantage of a higher price realisation in Punjab and Haryana. This is fair enough.

In any case, the additional stock that is procured will form part of the procurement that has to be made for the Central pool. With Bihar admitting that throwing away APMC network in 2006, under pressure from free market apologists, was a mistake and is therefore re-introducing public procurement, it is high time other States are made to put more money in creating more mandis. Why should traders be made to travel all the way to Punjab and Haryana to get a higher price? We also know that the price gain in reality from the thriving 'illegal' trading activity is shared among the middlemen and transporters, and does not benefit farmers.

To ensure that the farmers get a higher price, the best way is to bring mandis closer to the farm. Let the benefit of public procurement, which ensures price discovery, reach farmers. This will be real freedom for farmers.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)