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India has disappointed itself hugely in the way it handled the migrant labour issue. Why is the government being so tight-fisted in its support for the poor?

Scenes of migrant labour returning home thirsty hungry and helpless shall be a scar on India forever. Images of men women and children walking in 44 degrees Celsius heat on dusty roads and fields often subject to police lathis at times densely packed into trucks and tempos a young man cradling a dying friend a mother delivering her baby by the roadside dry rotis and stale eatables splattered on railway tracks as bodies crushed under a train are taken for cremation unknown and unsung the mad rush at disorganised bus and railway stations are now firmly embedded within our minds.

India has disappointed itself hugely in the way it handled the migrant labour issue. We forgot that they are not beggars. We forgot that they are men and women who come to cities with a dream of improving their lives and that of the families they leave behind at home. Urban India has broken their trust. They are now the “other” we have cast aside even as we strive to bring back “people like us” from across the world.

Is it not astonishing how millions were left to their own devices to reach home among panicking state governments and district administrations? There is no similar precedent of collective and administrative failure anywhere in the world. First the government stopped them subjecting them to intense physical hardship and mental trauma. Then they were allowed to leave amidst great confusion about the availability of trains and buses.

How could governments expect them to stay back in such hardship with minimal arrangements? Why did so many weeks pass before the government deployed trains and buses to help the migrants reach their home states? Why could district collectors not arrange water tankers every few miles when a caravan of hungry tired human beings was walking through their districts? Why could food packets not be distributed? Why could bandages and medicines not be provided for those with injured feet or other ailments? Why could school buildings temple and mosque premises not be used to house them at night? Who will take responsibility for this human tragedy of biblical proportions?

Though robust statistics are not available Ravi Srivastava a leading authority on labour markets assesses that some 10-12 million persons may be desperately trying to get home by whatever means possible.

While the plight of the migrant workers and in some cases their families is the most wretched of all they are by no means the only ones hard hit by the sudden imposition of the stringent country-wide lockdown without any prior intimation or adequate preparation. Based on Census projections there are at present about 450 million persons in the workforce. Of these there would be around 200 million informal workers outside agriculture who have been left with no work no income and hence no food following the lockdown. This would include casual daily wage earners as well as self-employed workers such as vendors carpenters plumbers etc. These informal workers (including the migrants) and their families probably add up to some 600 million persons.

Given the unprecedented scale of the humanitarian disaster facing this entire class of informal workers and their dependents prominent intellectuals including three Nobel laureates have been urging the government to launch liberal schemes of free food and income support for the population at large during these critical days. One of us had earlier estimated the cost of such additional food and income support to add up to about 3 per cent of GDP. 

Against this background the Rs 20 trillion package has turned out to be a public relations disaster. Soon after its much-hyped launch as a 10 per cent of GDP recovery package the actual fiscal stimulus amounted to a mere 1 per cent to 1.5 per cent of GDP. The rest amounted to promises of enhanced credit to various target groups such as MSMEs NBFCs farmers etc. These are promises on which the banks and other financial institutions may or may not follow through. None of this is direct extra money-in-hand for these groups which is immediately needed. Particularly disappointing is the measly allocation of Rs 40000 crore or 0.2 per cent of GDP for MGNREGA and only Rs 3500 crore (0.02 per cent of GDP) for free rations to migrants for two months.

It is also baffling why the government did not focus its messaging on the large genuine fiscal stimulus it had already provided before the latest package. The additional government borrowing announced prior to the package together with the fiscal deficits built into the central and state budgets the 2 per cent of GDP additional borrowing headroom now provided for states and the 1 per cent to 1.5 per cent of GDP actual fiscal stimulus in the package add up to a large stimulus of well over 10 per cent of GDP. But unfortunately here again only a very small component has been set aside for humanitarian relief through the PM-Kisan Yojana MGNREGA and subsidised food rations. 

Why is the government being so tight-fisted in its support for the poor?

Even now it is not late for the Union and state governments to ensure that the “out of work” people get some cash in hand for the next few months. The supply of food grains is not enough. There is need for other items of use in daily life. Besides this will push up demand and stimulate the economy. 

This article first appeared in the print edition on June 4 2020 under the title ‘Crisis and a tight-fisted response’. 

Najeeb Jung is the former Lieutenant Governor of Delhi and Sudipto Mundle is a former member of the 14th Finance Commission and Distinguished Fellow National Council of Applied Economic Research. Views expressed are personal

This sector has developed locally without following global standards.  Most players agree that setting standards and their voluntary adoption are the only way for reducing costs

After the extended lockdown necessitated by the need to contain the spread of the deadly Coronavirus in the country the process of kick-starting the economy has now commenced in a phased manner. As it is the Indian economy was in the doldrums even before the pandemic hit the nation making the lockdown that commenced from March 25 a hard choice for the Narendra Modi-led BJP Government at the Centre which was caught between a rock and a hard place. Now as various sectors of the economy are slowly opened up to save livelihoods the logistics supply chain which was in a suspended state for most of the commodities for more than 60 days needs to gear up to function again.

However given the fact that we have been unable to flatten the COVID curve as yet and instead have seen a surge in Coronavirus cases and deaths across the country which has corresponded with the opening up of the economy we have to rethink our operating processes.

The mode of operation of the supply chains may need to be tweaked now as cargo transporters may have to bypass normal or the shortest routes they usually take as they may be out of bound due to their location in containment zones a place where all activities are disallowed. Moreover the entire logistics operation now has to be undertaken while adhering to the new norms of social distancing.

As it is the logistics sector in India is not too well-developed. Inefficiencies have grown over the years from a combination factors like a non-conducive policy environment extensive industry fragmentation and lack of good basic infrastructure. India’s indirect tax regime discouraged large centralised warehouses and over a period of time this has led to the fragmentation of the warehousing sector.

Of course with the introduction of the Goods and Services Tax (GST) there has been a move towards a centralised warehouse hub. However the pace has been slow as modern warehouses cost much more and the logistics stakeholders are yet to recover their investment from the scattered warehouses across the country. However in the present scenario caused by the pandemic this is indeed a boon to the logistics sector.

Fragmented warehouse distribution implies that logistic operations will be affected only in a region where the storehouses fall in a containment area. It may be possible to move cargo from other regions to the desired destinations.   Thus a fragmented warehouse regime is probably more cost-effective in this situation than a centralised warehouse. While one can find a way to bypass distribution hurdles when finished goods are in stock the issue is more serious in respect of production activities as a modern production unit sources inputs from different parts of the country and the world.

As the COVID-19 map of India shows the principal industrial States of the country namely Maharashtra Gujarat Karnataka Tamil Nadu Andhra Pradesh the National Capital Region (NCR) and so on where most of the industrial clusters are located are also the States most affected by the Coronavirus. The majority of containment zones a place where all activities are non-operational are also located there.

In this scenario even though the unlocking of economic activity is commencing relaxation in non-containment zones continues to be a hindrance to supply chains transportation and logistics.

A firm may have to close operations if right inputs/raw materials cannot be sourced if suppliers are located in a containment zone. In India industrial clusters have developed around big industries in the metros both of which now happen to be located in Coronavirus-hit regions. North-east India which is practically unaffected by the Corona does not figure in the industrial map of the country. There is no way that inputs can be sourced from there to carry out production. Thus unless the entire supply chain is unlocked (or the number of containment zones declines) the impact of improved economic activity will be subdued.

A lockdown effectively increases the logistic cost of transporting goods in multiple ways. The shortage of labour at the point of origin and destination and new norms of social distancing may lead to increased time in loading/unloading activities causing in effect lower efficiency and higher cost.

Though the inter-State movement of goods has now been allowed (barring containment zones) putting up of traffic barricades along the highways  diversions to avoid containment zones and multiple checkpoints put up by law enforcement agencies would invariably lead to increased fuel consumption costly delays and more time on the road.

Even in normal circumstances the problem of harassment faced by the truck drivers at the hands of the Regional Transport Office personnel  and policemen is a serious issue across every route. With multiple barricades and officials on the road during the pandemic harassment of drivers will surely rise manifold.  All these factors amount to a fall in transportation efficiency and thereby higher transportation costs.

In effect the economy will have to live with higher logistics costs now which will have major economic repercussions. As per the NCAER’s recently-released Quarterly Review of the Economy a five per cent fall in efficiency in shipping in India translates to a 1.3 per cent loss in the Gross Domestic Product.

Thankfully unlike transportation by road freightage by rail is less hindered as there are no barricades on the railway lines. Moreover in the absence of normal train services there is less congestion on railway lines too. This is the time that the logistics supply chains could shift majorly towards freight transport by rail. As it is the movement of cargo by rail turns out to be cheaper for distances over 500 kilometres.

However if we compare cargo movement across major trunk routes (NCR-Mumbai NCR-Guwahati NCR-Chennai NCR- Kolkata) where both modes — rail and road — operate everywhere we see that the share of road transport is more than that of rail. This is the time to reverse the trend by ensuring timely delivery of consignment by the Railways.

However Indian Railways needs a major policy correction in respect of freight. With the fall in economic growth the overall demand for cargo movement will be low. Thus the Railways’ policy of operating a full length (52 wagon) cargo train does not sync with the current low demand. It makes sense to operate shorter cargo trains. But most importantly the Railways needs to stick to timely delivery to attract customers. There is no other reason why a consignment of pharmaceutical exports from Hyderabad via the Jawaharlal Nehru Port for a distance of about 700 km would be moved by road and not by rail.

According to the NCAER’s study on India’s Logistics Costs more than 90 per cent of the cargo is moved by road on this route. A key message that is currently being played is go local to make an Atma Nirbhar Bharat.

This does not augur well for the logistics sector as it is highly capital intensive. If all entrepreneurs go local the logistics investment will unlikely flow in as it would take a long time to generate the return from the investment. This sector has developed locally without following global standards. Most players agree that setting standards and their voluntary adoption are the only way for reducing costs.

This encompasses the following: Standardisation of truck bodies and loading/unloading docks for increasing operational efficiencies.

Second standardisation of pallet sizes for achieving faster turnaround times. Third standardisation of warehouse design and layout and a common standard across India in respect of other logistics facilities at airports riverboats sea ports Inland Container Depots Container Freight Stations Multi-Modal Logistics Hubs and warehousing clusters.

In the absence of a national blueprint on logistics infrastructure and standards we observe no uniformity across India in these facilities. This is essential to reduce India’s logistics cost. Of late a move has been made to modernise our logistics facilities by benchmarking them against international standards. One can only hope that our plan to go local does not hamper that process. If we are short of funds to adopt international norms of logistics facilities it is best to go for a synergy in standard within India. The Government may interact with logistics stakeholders on this front.  Else it will cost India in the long run in terms of competitiveness.

(The writer Sanjib Pohit is a Professor at the NCAER)

Reverse migration is one side of the story. Workers with chronic ailments residing within States can also pose a risk

Labour as a factor of production is a valuable service rendered by a human agent in the production of goods and services. The outcome is generation of wealth and welfare. In common parlance the term labour would cover manual and other kinds of services. Even in this day and age of increased automation in the production process labour remains an important component. In India the labour market basically constitutes the formal (organised) and informal (unorganised) sector. As per the Economic Survey 2019-20 total formal employment in India increased from eight per cent in 2011-12 to 9.98 per cent in 2017-18. Thus the informal sector still provides substantial employment.

The lockdown measures to tame the spread of the virus required businesses to close and the undesired resultant outcome that followed was the laying off of workers – and as a consequence wide-scale reverse migration. Large-scale stoppage of economic activity and the fear of loss of livelihood combined with little or no social protection increased the vulnerability of the labour force especially those employed in the informal sector. Uncertain about their future they were unwillingly forced to flee to their native place. The plight of migrant workers making their reverse migration to their native states has attracted a lot of attention nation-wide exposing their vulnerability. The economic plight of these migrant workers and their vulnerable health conditions are matters of grave concern.

Covid and co-morbidity

The rate at which persons with existing chronic conditions or compromised immune systems have been dying has been observed not only in India but across the world as well. According to the information from the Ministry of Home Affairs 70 per cent of Covid-19 fatalities in India were patients with co-morbid conditions. Several studies have also shown that there is very high correlation of co-morbidity with Covid fatality. One such study is by Jing Yang et al titled “Prevalence of co-morbidities and its effects in patients infected with SARS-CoV-2: a systematic review and meta-analysis” which concluded that underlying disease including hypertension respiratory system disease and cardio vascular disease may be risk factors for severe patients compared with non-severe patients. Taking care of chronic conditions has become critical right now as Covid-19 raises the risk for people with underlying medical issues.

Why the labour class is susceptible

In this context the physical health of the labour force is of prime concern as it affects not only in terms of productivity but also how it plays out in time of pandemics like the current one. To put forth we analysed the data of the 75th Round of the National Sample Survey Organization (NSSO) on “Household Social Consumption: Health 2017-18”. Since this particular NSS survey round referred above does not separately collect information on migrant workers with chronic ailments we cannot specifically comment on its prevalence among them. However there is no denying the fact that migrant workers are always at a disadvantage position either in terms of income shelter and their accessibility and affordability to healthcare facilities which make them more prone to chronic diseases.

The Survey estimated that 3.66 per cent of the total Indian population suffers from some form of chronic ailments. Of this 9.27 per cent is the labour force working in various public and other types of work. Andhra Pradesh (19.11 per cent) West Bengal (17.07 per cent) Kerala (16.42 per cent) Tamil Nadu (12.43 per cent) Maharashtra (7.21 per cent) and Uttar Pradesh (7.16 per cent) are States where chronic ailments are reported by a larger section of the labour work force. These six States along with Punjab Orissa Rajasthan and Madhya Pradesh constituted 91 per cent of the labour work force with chronic ailments. Ironically as per Government data around 70 per cent of the India’s Covid-19 cases have been reported from these ten States. Noteworthy is also the fact that at the all India level almost three-fourths of the labour force with chronic ailments falls in the productive age of 25- 59 years. State-wise in the age group of 25-years the range varies between 63 per cent in Punjab and 88 per cent in Rajasthan of labour force with chronic ailments. Since most of the labour force is engaged in the unorganised and informal sector with little or no social or healthcare protection it becomes all the more vulnerable. 

Figure: Percentage share of labour force with chronic ailment by top ten states

Magnitude of the problem

The wave of reverse migration amid the current pandemic and the fear that they may carry the virus and infect the population in their native state is just one side of the story. Labour force with chronic ailments residing within the States can also pose similar risk in terms of infections and the risk of high fatalities because of their vulnerable health conditions. The challenges posed by the combined effect of reverse migration and wide spread chronic ailments amongst the labour force warrant immediate focus. The option to shield high-risk people by more intensive physical distancing through quarantine measures may be have limited impact.

The question is how will this determine our future public healthcare policy both in the short run and long run? In the present context of the Covid-19 pandemic it becomes all the more critical to understand the significance of its impact. States have their task cut off to not only contain the spread of infection that the incoming native worker might carry but also to tame the infection rate of the labour force within the State.

Till now the general trend have shown that Covid-19 has comparatively affected the urban and semi urban population more on a wider scale than amongst the rural population. Also we know that majority (more than 82 per cent) of the labour work force resides in rural area only. But with the rise in the reverse migration of workers coupled with the nature of the virus being highly contagious the risk of its aggressive spreading in the rural areas should be a matter of concern for the healthcare authorities. This get compounded by the fact that the Government have been easing the lockdown and gradually open more economic activities.

The Covid pandemic and the chronic health conditions of the labour force deserves equal and dedicated attention in terms of public healthcare policy especially in these times when the healthcare systems are already being overwhelmed. The Government would have to delicately balance the critical management of the pandemic considering that a large section of the labour force are chronically ill with the potential of large scale infection and at the same time provide immediate gainful employment. Keeping in mind that approximately 80 percent of the labour force are in the rural areas and the overdependence in the public healthcare facilities which are often inadequate in terms manpower and resources the States would need to have a relook at their strategies. A robust and coordinated policy with special attention to the age group of 25-59 age would be required especially in those States which have a considerable section of their labour force with chronic ailments. We do understand that formulation of a comprehensive and pragmatic healthcare policy is a time consuming process but the need to have one is becoming all the more urgent and critical especially when we are entering ‘Unlock 1.0’.

Palash Baruah is Senior Research Analyst National Council of Applied Economic Research (NCAER) New Delhi and D L Wankhar is a retired Indian Economic Service Officer. Views and opinions expressed are personal

Surveys show that the govt’s support schemes do not reach such households. Direct cash transfers and universal PDS will help

As details of the stimulus package recently announced by Nirmala Sitharaman begin to emerge it appears that there is a serious mismatch between the areas and groups most affected by the Covid-related lockdown and the shape of the subsidies. The people who are most affected by the threats of the disease and income reduction — the urban informal-sector workers — are the least likely to receive the benefits. While movements are being relaxed it is unlikely that red-zone districts particularly those in large metros like Delhi and Mumbai will quickly return to normal.

The uncertain curves of the coronavirus epidemic have translated into even greater uncertainties for those without secure earnings. Most of the nation’s workforce earns its livelihood in a highly diverse informal sector — the underbelly of the economy where a day off essentially means a day without any earnings. This is the population that most needs support in the immediate period creating precarity.

Deepening of insecurities

Data collected by the NCAER National Data Innovation Centre through a scientifically-designed rapid telephone survey of 1756 households conducted between April 3-6 and another survey of 1885 households conducted between April 23-26 help identify the nature of these vulnerabilities. Samples included both urban and rural residents from the Delhi NCR region in three districts of Delhi four districts of Haryana two districts of Rajasthan and three districts of Uttar Pradesh. Results from the Delhi NCR Coronavirus Telephone Surveys (DCVTS) show that the impacts of the lockdown are most intense among families relying on daily wages or those without secured salaried jobs.

The DCVTS households contain a mix of salaried workers (36 per cent in both permanent and casual employment contracts) cultivators (22 per cent) petty business owners (20 per cent) and casual-wage workers (18 per cent). In late April a vast majority (82 per cent) of the households reported some level of reduction in income or wages in the two weeks before the survey with the reduction being the highest for casual-wage workers and small businesses. More than two-thirds (72 per cent) of the casual workers reported that their income and wages had suffered “very much” in this period much higher than regular salaried workers (41 per cent) or farmers (34 per cent).

While most of the respondents supported the lockdown most of the casual workers (63 per cent) were keen to return immediately to seek work once the lockdown restrictions were lifted regardless of the likelihood of contracting disease. This desperation and insecurity aren’t limited to the casual wage-earning workforce but are stark even among those with salaried jobs. Over a third (38 per cent) of the salaried workers — mostly those in the ‘gig economy’ spanning across insecure service sector jobs in e-commerce hotels/restaurants etc — either did not receive any salary received a partial salary or lost their job during the lockdown.

Inadequate relief measures

In the face of dwindling incomes and uncertain livelihoods public relief measures are critical lifelines. Data on relief measures tell a story of a glass half full. The DCVTS-2 findings suggest that 52 per cent of the families in rural areas of the NCR and 42 per cent of those in urban areas received extra rations in the form of grains and pulses. Almost two out of every three households that suffered a major dent in incomes during the lockdown received some form of these additional rations. About 29 per cent households received additional cash transfers from the government during the lockdown.

However nearly half of the poor households in the bottom one-third of the ‘asset ownership index’ did not receive any cash assistance (asset ownership index is similar to the NFHS wealth index based on ownership of vehicles cooking gas toilet indoor water etc). The amount of cash assistance was also modest. In the month before the second survey 50 per cent of the households receiving cash (median) received ₹1000 or less in villages and ₹500 or less in urban areas. Only 19 per cent households received both additional rations and additional cash benefits with large differences between rural (25 per cent) and urban households (12 per cent). More than one-third of the households that had their incomes significantly reduced due to the lockdown needed rations but didn’t receive any. Among urban poor households 46 per cent did not receive additional rations in spite of their need for it. For households having salaried workers who did not receive their full salary for the month of March 38 per cent needed additional rations but did not receive it.

As containment measures focus on infection levels it is clear that metro cities like Delhi almost entirely classified as “red zone” may be the slowest to return to normalcy. Rural areas are a notch better due to combination of less stringent restrictions existing government mechanisms for direct transfer of cash to beneficiaries of programmes such as MGNREGA the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) better coverage of PDS and financial inclusion schemes such as the Jan Dhan Yojana. Thus urban-focussed safety nets may need to be enhanced.

Policy responses

Majority of the DCVTS-2 respondents — especially casual-wage workers and salaried workers who did not receive their full salary — are waiting for the lockdown restrictions to be relaxed. But the switchover to the pre-Covid state is unlikely to be immediate. Given the likelihood of a phased responsive plan for the post-lockdown period targeting relief measures appropriately will be important.

The most immediate and direct source of support required — as the DCVTS-2 findings highlight — is to ensure expanded and effective coverage of relief measures for the most hard-hit families. A major component of this should be cash support amounting to at least 20 days of the usual minimum wage. This can be implemented in districts defined as red zones while movement restrictions are in place. Additionally the PDS needs to be expanded to cover more individuals and items. The recent package includes provision of rations to migrant workers for two months with the national portability of ration cards to be implemented by August. But this does not meet the urgent need of the hour. The time may have come for a simple universal PDS using Aadhaar cards which can be implemented immediately. Expanding PDS to include pulses edible oil dried milk powder and biscuits will increase food security.

In urban areas once the lockdown conditions are relaxed and economic activities resume there will be further need for economic stimuli apart from targeted interventions. These include urban employment guarantee programmes for casual-wage workers whose usual sources of work may not return immediately. Small businesses and home-based enterprises would allow for social distancing while providing livelihoods. Hence they should be extended support under an employment guarantee programme where they can claim some part of the wages paid to their employees.

This would help kickstart the economy. The packages being developed for MSMEs should prioritise micro enterprises where most of the workers are employed. These combination of measures during and following the lockdown would be critical to avoid insecurities.

Sumit Mazumdar is a Research Fellow at the Centre for Health Economics University of York. Santanu Pramanik and Sonalde Desai are at the NCAER National Data Innovation Centre. Views are personal.

If Bihar’s example is anything to go by simply repealing the APMC Act is not enough to benefit farmers. There is a need to move from notional to functional FPOs

In the Covid-19 relief package finance minister Nirmala Sitharaman has focused on a number of capacity building measures for the agriculture sector—such as the Agriculture Infrastructure Fund for strengthening the so-called farm-gate infrastructure including logistics and storage support for perishable farm produce formalisation of micro food enterprises support for marine aquaculture animal husbandry and herbal cultivation and an additional emergency working capital to farmers through NABARD among others. Most of these are part of the recommendations of the DFI committee that have been lying with the finance ministry for quite some time.

The FM also took this opportunity to reform the Agriculture Produce Marketing Committees (APMC) structure and the creation of an enabling legal framework for farmers. The expectation is that reforming/repealing the Act will enhance price realisation for farmers by deregulating select agriculture food stuffs including cereals pulses edible oils oilseeds onions and potato. The formulation of a central law to bring about agriculture marketing reforms is expected to provide marketing flexibility to farmers to sell their product at their chosen market where the price is high. The private investment will flow into the sector for creating capacity in storage etc—this is currently not forthcoming due to the presence of the APMC Act. This is another overdue recommendation of the DFI committee.

While there are fallacies in the APMC Act repealing/reforming it is only a small part of the game. More concrete steps are needed to derive benefits from it. What is certain is that in the present crisis private investment is unlikely to flow for capacity building in agri-infrastructure. It will be at least a year before private investment will flow. More worrying is that private investment may not flow at all and farmers may be worse off if we go by Bihar’s example!

Let me explain. The Bihar government took a bold decision to repeal the APMC Act in 2006. Traders are allowed to purchase agricultural commodities directly from farmers and the market fee is not levied on purchases.

Did these reforms improve price efficiency in the Bihar’s agri-markets? With the abolition of the APMC Act one would expect that the state’s grain markets are integrated within Bihar and also with national markets. Farmers are free to sell to traders in any part of Bihar and elsewhere in the country. This would imply that there is effective price transmission between the grain markets within the state and hence better price is received by farmers. Sadly NCAER’s study Agricultural Diagnostics for the State of Bihar in India indicates that this did not happen till 2019 a span of nearly 13 years.

After the APMC Act was abolished in 2006 it was expected that private investment would take place creating new markets and strengthening facilities in existing ones. On the contrary the situation at the ground level has not improved. Focus group discussions with farmers and traders revealed that agricultural markets are located far away from the villages. It has also been reported that the storage cost in private warehouses is very high and it is difficult for most farmers particularly marginal and small ones to afford it.

Even after the repeal of the APMC Act over 90% of the output of crops including paddy wheat maize lentil gram mustard and banana is sold within the village to traders and commission agents. Farmers reported that they do not get a fair price for their agricultural produce. Most farmers reported that their poor economic conditions and the need for immediate cash after harvest compel them to sell to traders at a lower price. Further government market facilities are not available near the village. Even if farmers take their produce to a distant market yard they face the problem of paying extra (bribes) to commission agents.

Farmers also cannot store produce at their homes due to lack of space and necessary storage conditions—doing so would risk spoilage of grains. Therefore they are forced to sell at the price that traders are willing to offer. Of course the situation is worse in Bihar due to the low level of participation of government agencies in procurement. This situation may be obtained in other states of India too if government procurement activities come to a standstill due to the repeal of the Act.

As such the bargaining power of a farmer is minuscule vis–a-vis a trader’s. To increase their bargaining power the government needs to promote and strengthen farmer producer organisations (FPOs). Group marketing not only reduces the length of marketing channels and marketing costs but also increases farmers’ voice. There is a need to move from the stage of “notional FPOs” to “functional FPOs”.

Contract farming provides a secure market with assured prices for agricultural products. This is important particularly for the growing of perishable products such as vegetables. While the FM has been proactive in reforming the APMC Act she could well have introduced the Model Contract Farming Act. This would have provided a level playing field for both producers and agro-commercial firms.

The author Sanjib Pohit is Professor at the National Council of Applied Economic Research. Views are personal.