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The Smallholder in the Agriculture Market Reforms in India
Smallholders suffer from low marketable surplus, poor holding capacity, low bargaining power and huge transaction cost in marketing their produce. Agricultural markets in India have been subject to reform processes with the stated intention of improving market access and participation for the primary producers. The three legislations introduced in 2020 are the latest in that direction. This article critically analyses market reforms in India with respect to smallholders’ bargaining position. It also provides insights on the ways and means to improve market participation and the bargaining position of smallholders.
The author acknowledges the valuable inputs received from Richa Govil who teaches at Azim Premji University, Bengaluru on the draft version of the manuscript.
Agriculture in developing countries is characterised by the predominance of smallholders, and India is no exception. Small and marginal holdings account for 86.08% of the total operational holdings and 46.94% of the total operated area in the country (GoI 2019a). The data on ownership holding for the country also reflects this, with 85.41% of total ownership holding under marginal and small category covering about 53.28% of the total area owned (NSSO 2013). The 126 million marginal and small famers, operating on an average size of holding of 0.6 hectares (ha), accounts for roughly about 40% of the total marketable surplus (GoI 2017).
The earnings of a farmer are determined by the first point of sale. The traditional marketing channels in India are state, cooperative and private trade. The total number of agricultural markets in India is 28,994, comprising 7,190 regulated markets and 22,505 rural primary markets (GoI 2011). The regulated agricultural markets cater to about two-fifths of the marketed farm produce. Pattern of market access across major crops shows small and marginal farmers to have poor access to regulated markets (Sharma and Wardhan 2015). The low market density resulting in highly fragmented markets for agricultural commodities is a major constraining factor. The development of market infrastructure in the country has not been in tandem with the demand for markets. The National Commission on Farmers (NCF) of 2004 had recommended availability of regulated markets within a radius of 5 kilometre (km), with an average coverage area of 80 square kilometre (sq km). The current coverage of regulated markets ranges from 114 sq km in Chandigarh to 11,215 sq km in Meghalaya, with an all-India average of 496 sq km (GoI 2019b). To meet the NCF standards, the country would need 41,000 regulated markets compared to the current 7,190.
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