Battlefield Harda

Harda isn’t normally a place one would associate with market economics. However, in the last few years, this small town in Madhya Pradesh has seen a small battle brew between tobacco giant ITC and the government. ITC cut into the government’s share of the grain procurement mechanism from farmers with Choupal Saagar, its rural procurement hub and supermarket six years ago. But, the government is now hitting back as it embarks on a modernisation process to woo back farmers it lost to the company.

Ram Bharos Bishnoi is one such farmer. He started bringing his produce to the government mandi 33 years ago but inefficiencies like faulty weighing measures and lack of storage for grains there encouraged him to shift to ITC Choupal Saagar six years ago.

Earlier, it could take up to two days to just get in the premises and hours to weigh the produce. But farmers could only sell at the government mandis till the Madhya Pradesh government changed regulations and allowed ITC to procure farm produce in 2004. This cut out middle men, and gave better service and prices to farmers. Little wonder that big farmers like Bishnoi migrated to ITC.

But now he is back at the government mandi, with 26 quintals of soybean. When Bishnoi drives in with his produce now, there are electronic weighing scales that cut down the time taken to measure grain as it comes in. Newly constructed sheds protect grain-filled trolleys from the weather and pests. The modern technology centre records all transactions and smart cards ensure that payments are smooth.

Exhibit A
All this follows from Madhya Pradesh government’s decision during the autumn harvest of 2007, to fight back and bring back large farmers who had defected en masse to ITC and other private players.
The mandi in Harda became an adarsh mandi, a standard for other mandis to emulate. This was the first step in an attempt to transform more than 237 mandis in the mould of the Choupal Saagars and do better.

This mandi modernisation move has to an extent stemmed the exodus of wealthy farmers to the Choupal Saagars. The share of grain being sold from the area to ITC and other private players, including Cargill Inc. and Ruchi Soya Industries, dropped from 7.51 percent in 2007 to 5.5 percent for the year ended March 2008 as per mandi records. It has gone down
further to 4.22 percent from March to July 2008.

Rajesh Jat, another farmer who came to sell wheat at the Harda mandi after several seasons of selling at the Choupal Saagar, says, “We did get done at ITC faster. But we spend one year growing our crop. We will not sell out cheaply for one day of comfort. We have nothing to do with comfort. All we want is better prices.” He feels there is a better chance of getting a higher price at the mandi because there is a multiplicity of buyers unlike at ITC.

At mandis where the transformation has not yet happened, the exodus continues. ITC has maintained a stronghold at places like Sehore, 40 km from Bhopal, where it set up its first Choupal Saagar. That mandi is changing slower than Harda. The amount of grain sold dropped by about a third over the past five years, and has not recovered yet.

The biggest change from the competition between the mandi and the Choupals has been the shift of power away from traders to farmers. The handheld devices used at the auctions have ensured that farmers get correct prices and traders pay proper taxes on all the grain purchased.

Use of such technology has beefed up statewide mandi tax collection to a record Rs. 466 crore for the year ended March 2008, from Rs. 370 crore in the previous year, according to the Madhya Pradesh Agriculture Marketing Board. Much of this is being used to upgrade Harda and other mandis. Already, 64 mandis maintain computerised records and one mandi in each district has been designated adarsh mandi. Across the state, electronic weighing is now mandatory.

Will it Sustain?
These modernisation projects are often driven by the state marketing board, local mandi officials and the mandi samiti, which is made up of farmers and traders. This makes progress slow. For the sample auction pilot at Harda, samples of soybean collected from an entire lot were auctioned in a hall and electronic boards were used to show prices. However, there is no grading facility and traders say deciding prices for several quintals based on just a one-kilo sample can be tricky since quality varies even within a single consignment. Farmers too don’t want sample auctions as lack of grading means their good quality grain does not fetch the highest prices.

Mandis must learn to manage scale. As arrivals at the mandi picked up during harvest season — to 5488.5 metric tonnes of wheat in December 2008 and 3948 metric tonnes in January 2009 from 3140.6 metric tonnes in August 2008 — the pilot for the sample auction was discontinued because the rush of produce caused delays.

But the Madhya Pradesh government intends to take this experiment to the next step by moving to electronic trading at its mandis, says Vivek Aggarwal, commissioner of the Madhya Pradesh Agriculture Marketing Board. To enable buyers across the country to buy at its mandis, the Board will set up certified grading facilities.

Regulation passed in March allows private players to set up private mandis or spot exchanges in the state. The National Spot Exchange, which runs spot exchanges in several states including Gujarat, Rajasthan and Maharashtra, has applied to run four such exchanges in Madhya Pradesh. The government is now working to set up infrastructure needed for this, including warehouses and cold storage facilities, says Aggarwal.

But while the Agriculture Marketing Board seems to look at Choupal Saagar as a model to bring back the big farmers to the mandis, experts say a government-run mandi needs to have an eye out for small farmers too. The government has brought in smaller electronic weighing machines for the secondary mandis as well, but making farming viable for small farmers could be its biggest challenge yet.

“Big farmers had migrated to ITC because they were the ones who had the truckloads of similar quality grain that ITC wanted,” says Jaya Mehta, an Indore-based economist researching on the impact of ITC’s direct procurement on the state’s farmers. “Big farmers benefited from not having to pay for unloading grain. And it is these farmers the government mandis want to woo back. But the government-run mandi is the only place for small and marginal farmers to find a market and it is them the government needs to get the best deal for.”

The Harda experiment is being closely watched because it strengthens mandis at a time when more than 16 states have amended the APMC (Agriculture Produce Marketing Committee) Act to allow companies to procure produce directly from farmers. If it works, it could ensure that mandi inefficiencies do not drive farmers into the hands of private players.

Meanwhile, at the tea stall outside the mandi, Bishnoi and his friends compare prices between the conventional and sample auction, debating where to go for the best deal.