India targets middlemen in food chain as inflation bites

India targets middlemen in food chain as inflation bites
Vendors wait for customers at a wholesale vegetable market in the old quarters of Delhi.

Every few weeks farmer Jay Narayan Singh hauls onions and potatoes in a hired lorry to a wholesale market an hour's drive from his home in the country's northern plains, only to sell his vegetables at a quarter of the prices retail consumers pay.

A law that dates back more than 50 years forces Singh and millions of other farmers to sell produce in regulated markets where middlemen take a hefty cut, boosting the cost of fruit and vegetables sold from handcarts and corner shops.

"The market is nothing but a haven for a clique of middlemen who indulge in profiteering, depriving both farmers and consumers of a fair price," Singh said.

As food inflation nears 10 per cent, the new government of Prime Minister Narendra Modi faces accusations that it is doing no better at reining in prices than the Nehru-Gandhi dynasty's Congress party, which suffered its worst election defeat in May. 

Determined to avoid a repeat of the inflation scourge that contributed to the Congress downfall, Modi is taking aim at the Agriculture Produce Marketing Committee (APMC) Act.

The law aims to protect farmers from exploitation by rich landlords, and requires all produce to be sold through regulated markets in most of the 29 states.

Even big retailers, such as Reliance Industries (RELI.NS), Wal-Mart Stores Inc (WMT.N), Shoppers' Stop (SHOP.NS) and Britain's Tesco Plc (TSCO.L), can only buy through wholesale markets governed by the Act.

But critics say too many people in the supply chain seek a cut, which exaggerates price rises during India's frequent supply disruptions because of a perennial shortage of storage.

Modi's food and finance ministers are now pushing states to let fruit and vegetable farmers sell to anyone they want, ending a practice that governs more than 7,000 wholesale markets.

"Allowing direct purchases will be a win-win proposition," said farmer Ved Prakash Sharma, as he oversaw labourers unloading sacks of vegetables at the Hapur wholesale market, about 60 km from the Indian capital, New Delhi.

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