Though the share of agricultural sector in the national GDP has constantly been declining in the recent decades, unlike some developed nations, the role of this age old occupation is still intact in nurturing the livelihood of millions especially in rural India. Hence, the recent farmers act is appreciable initiative to ensure private participation to form competitive market for agricultural produce which in turn going to benefit for both producers, as well as consumers, in the absence of price makers.
Meaning and definition of competitive market
It is a type of maket where there are large number of participants involved to buy and sell same identical products without brand loyalty. It means that everyone is price takers, and there is hardly any scope for monopolistic elements to affect prices of commodities. In short, in the competitive market, market power is evenly distributed among the all participants, including buyers and sellers. Nowadays, in the world, agriculture market is the best example of competitive market where monopolistic elements are largely abscent.
Price takers and price makers
In any market establishment, market power is the deciding factor of prices. It means that whosoever holds market power, has great influence on the prices of commodities or things.
When a participant has great ability to influence the prices of market of anything, it is called price makers. For example, in the monopolistic market, certain participants have market power to influence prices.
But, when, the market power is evenly distributed among the all participants, then, everyone becomes price takers. It happens only in the perfect competitive market where large number of participants are involved to buy and sell same identical products without much differentiation.
Rationale behind new farmers act
It has widely been acknowledged that the Indian farmers aren’t getting theirs due, despite toiling efforts and investment, owing to large scale corruption and nuxes between commission agents and middlemen. In simple words, commission agents and middleman have considerable influence on the commodities in the APMCs or mandis. At the same time, large number of local politicians used to support these nuxes.
The new farmers act is about to ensure the private participation so that the farmers could become equal price takers. This act also empowers farmers to sell theirs produce in any mandis — private or public as per theirs convinent. As per the government sources, it is all about to address the issue of corruption in the agro-market and boosts farmers income, in accordance with election manifesto.
Possible impacts of farmers act
As per the new law, the private participation is going to challenge the hegemony of commission agents. Further, due to more buyers, no one could affect the prices of commodities but demand and supply of the market. In this way, as per the government sources, the new farmers act is going to establish the competitive market for farmers produce. Nevertheless, will it be fair to hand over the responsibility of farmers welfare on the mercy of profit seeking private tycoons ? Or, is it enough to double the farmers income within short span of time ? Overall, one possibility cannot be ruled out that this establishment is going to benefit one on the cost of other, and they may be producers or consumers. But, let’s see whether this competitive market for agricultural produce will help or backfire..