Storm brews in food bowl

Storm brews in food bowl

40,000 commission agents on warpath in Punjab against direct pay to farmers.

40,000 commission agents on warpath in Punjab,say will boycott procurement against Centre’s order on direct payment to farmers; threat a blessing in disguise,say farm experts

The issue of making direct payments to farmers for their produce sold in the mandis is all set to rock Punjab once again,with the commission agents threatening to boycott procurement of grains for the Central pool in case the Government of India does now withdraw its order.

Agriculture experts,however,see no problem in commission agents staying away from the process. “A blessing in disguise. no one needs them. This threat will be a boon for both the farmers and the Centre,” says Dr P S Rangi,Consultant,Punjab Farmers Commission and a well-known agriculture expert.

The issue that had been lying on the backburner for close to six years gained prominence again after officials of the Government of India,at a recent meeting related to the Food Security Act in New Delhi,verbally asked the Punjab Department of Food and Civil Supplies to ensure that the farmers were paid directly through cheques by the procurement agencies — bypassing the commission agents.


Punjab has nearly 40,000 licenced agents who earn a 2.5 per cent commission from the crop transaction taking place in about 145 principal market yards (mandis that have offices of market committees). In addition,there are 400 sub-yards (mandis) and 1,600 purchase centres.

The state handles 110 lakh tonnes of wheat and 150-160 lakh tonnes of paddy. With a total transaction of Rs 35,000 crore taking place in a year,the commission agents are said to pocket Rs 897 crore each year. Apart from this,the agents are also recovering their loans to the tune of around Rs 40,000 crore from the farmers at an interest rate of 18 per cent.

In 2006,the Punjab Farmers’ Commission had recommended that these commission agents should be weeded out of the process and the 2.5 per cent commission should be passed on to the farmers. The then Congress government headed by Captain Amarinder Singh issued a notification regarding direct payment to farmers,but it was never implemented as the state went to polls.

In 2007,when the Shiromani Akali Dal (Badal) government took over,it assured that the notification would be implemented and also submitted an affidavit in the Punjab and Haryana High Court in this regard. However,citing the issue of mechanism not being in place,the government asked the commission agents to make the payments to the farmers through cheques. At the same time,for the last three crop seasons,the Food Corporation of India,which procures the food grains,has been insisting that it can directly make payments to the farmers and should be allowed to do so in Punjab. However,the state government has forced the FCI to toe its line each time,bowing to the pressure of the commission agents who are a strong lobby.

Ravinder Singh Cheema,a Badal loyalist and president of one faction of the Arhtiya Association of Punjab who was made the vice-president of Punjab Mandi Board,explains his side: “The government cannot handle so many cheques. The allegation that we exploit the farmers is wrong. Like any other trade,there is a huge competition among our community too. If one agent harasses a farmer,he can go to another. A strong time-tested bond exists between the farmers and the commission agents,which is just not based on exchange of money. We lend money to those small farmers who do not have anything to pledge as security. Where will these small farmers go? No bank is ready to entertain them.”

Rangi,however,rubbishes the claims. “As per law,no commission agent can loan money. Their licences do not allow this,which means this Rs 30,000 to Rs 40,000 crore is illegal money. If the commission agents claim that this is the amount that they have loaned to farmers,this means all that farmers earn in one year,which is close to Rs 35,000 crore,goes to the agents who recover money from the farmers,leaving nothing with them.”

Rangi says these agents had decided that they would charge 18 per cent rate of interest from farmers,but they have reports that this interest is as high as 24 per cent at some places. “Our researches have shown that these agents or middlemen are of no use to either the government,which is the buyer,or the farmers who are the sellers,” he says.

According to Rangi,the agents are “simply exploiting the farmers” and that “they have to go”. “The claim that they lend money to small landless farmers is also false because present trends show that landless farmers do not till land any more. They tend to rent out their land to big farmers who are the growers. These agents are using armtwisting tactics and know well that their mechanisms are outdated and exposed,” he adds.

Payment system in other states

Almost all foodgrain producing states function through intermediaries. In Madhya Pradesh,payments to farmers on crop procured is directly deposited in the farmers’ bank account. The intermediary in case of MP,are the primary cooperative societies,who have to first credit the entire payment to the farmer’s account. Any loan recovery can only be made later. This model may be followed by the FCI and other states also,to bring in transparency,says the report of Agricultural Costs and Prices for 2012-13. In Bihar and UP,though procurement is done through commission agents,they are paid a commission of 2 per cent,and payment for the produce is made by the FCI and state agencies directly.

Punjab and Haryana have the most well-evolved system of procurement wherein state agencies and the FCI operate in mandis through agents who are paid the highest commission of 2.5 per cent. In Assam,FCI has recently started purchasing rice directly from farmers,after strong persuasion by the government. But farmers have to take their rice to the nearest FCI depot,where uncertainly prevails upon storage space. At many places,it is still the middlemen who dictate the prices.