People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 05

January 29, 2012


Minimum Support Prices and Regulation of Forest Produce Markets


Archana Prasad


THE Panchayat (Extension to Scheduled Areas) Act 1996 (PESA) was the first to assert the rights of panchayats over minor forest produce (MFP). However, hardly any state implemented the provisions of this act seriously, and the Left and other organisations fighting for tribal rights continuously demanded that forest produce gatherers must be given ownership rights and minimum support prices (MSP) in order to enable them to have a decent living. As a result of these struggles, the Forest Rights Act of 2006 established rights over the MFP, even though the focus of its implementation was on land rights. The report of the committee set up by the Ministry of Panchayati Raj under the chairmanship of T Haque on the “Ownership, Price Fixation, Value Addition and Marketing of Minor Forest Produce” needs to be seen in this context. The report, which was submitted on May 11, 2011, has suggested that a Central Price Fixation Commission be set up to set minimum support prices (MSP) for 14 economically important minor forest produce. It also makes recommendations concerning the transformation of minor forest produce trade in order to induce fair pricing mechanisms, and suggests ways and measures for making state agencies more viable. These recommendations are particularly important because the revenue potential of minor forest produce is much higher than timber, especially in states like Odisha, Chhattisgarh, Jharkhand and Andhra Pradesh, which, together with Madhya Pradesh, account for nearly 90 per cent of its production and sale, most of which was done to large industry through a multi-layered trading system. In 2010, such produce was estimated to be supporting at least 275 million people, of which more than 80 per cent were tribal people. The recommendations of the committee have to be evaluated keeping this factor in mind.




These forest produce collectors were tied to the market through two processes. The notified nationalised forest produce of different states were procured by state agencies and auctioned in the open market. Such a method of procurement of forest produce was termed as 'state monopoly' and was seen as being one of the main structural features that drove down the procurement prices of such forest produce. In Andhra Pradesh the state supported Girijan Cooperative Society controls the trade of 25 forest produce; the Minor Forest Produce Corporation controls trade in three products in Chhattisgarh. and in Madhya Pradesh state supported cooperative societies control the trade of four products. The Haque committee analyses the working of such agencies and concludes that most of these corporations and federations were financially unviable because they did not have the requisite infrastructure and had high administrative costs. In states such as Maharashtra and Andhra Pradesh, such state cooperatives preferred to deal with both forest and agricultural produce as they do not find trading in MFP profitable. This often leads to black-marketing and the operation of illicit trade mafias. The committee argues that monopoly over the trade of lucrative forest produce would not provide a solution to the problem of marketing.


At the same time, the report also acknowledges that the 'free market' will not solve the problem of free pricing. A majority of the minor forest products, many of which are economically important like aonla, chironji and others, are traded in the open market. Marketing of these products was a result of generalised marketing practices where small traders went to weekly markets, purchased forest produce along with other products like rice and sold them to the middle traders who have connections in the wholesale markets and controls cold storages and other infrastructure. Since forest produce collectors belong to economically vulnerable sections, the collectors are forced to make distress sales of such produce and very low prices. Thus mahua may be sold to traders at prices substantially lower than the market rate during the season of its collection, and bought back at a higher price by the same collectors for their own domestic uses in seasons when it is scarce. Such distress sales are not only characteristic of minor forest produce sales but also of sale of rice and other such products. Hence the Haque committee is correct in analysing that the 'free market' as exploitative.




In its recommendations, the committee opines that there is a need to create “competition” within the forest produce market by ensuring the “formation of self-help groups/cooperatives and producer companies.” It holds that this would be the key to elimination of traders and exploitation in the long run. But it falls short of stating what form of market regulation is needed to protect the interests of these forest produce collectives and how they will get the infrastructure and capital to compete with bigger companies.


The committee further states that though minimum support price for 14 economically important produces will be set by a central mechanism, it will be administered and defended by state corporations. In its recommendations, it states that the central government must provide support for designated agencies in order to defend the minimum support price and meet their administrative costs. However, it also suggests that these agencies “should be strengthened to trade in MFP on adequate scale by way of providing skilled manpower, finance and infrastructure. In fact, all such government supported agencies should function autonomously in a professional manner.”


While many of these suggestions are welcome, these recommendations of the committee can be supplemented by strengthening the links between collectives of gatherers and these corporations. These links can form the basis of the strategic regulation of the market and making cooperatives of gatherers and producers financially viable through budgetary and infrastructural support for value addition and skill enhancement.




One of the major recommendations of the committee is about the formation of a Central Price Fixation Commission for fixing the minimum support price for 14 economically important forest produce. The commission should consist of one chairperson and three other members whose main mandate would be to fix the MSP as a benchmark and set up quality standards for certification of forest produce. The commission, it is suggested, should also be responsible for formulating guidelines, monitoring and evaluating the scheme for providing MSP after taking the following factors into account: (i) labour time used in the collection, (ii) the prevailing wage rate, (iii) transportation cost, if any (iv) market prices and (v) demand-supply analysis.


The committee also stipulates that the gatherers of MFP should not be “paid less than the existing minimum wages under the MGNREGA or minimum wages in agriculture sector.” This recommendation is a step forward in meeting the long-standing demand of the Left and democratic forces for providing a minimum support price for the forest produce.


In doing this, however, the committee accepted one important assumption: it treated MFP collection as ‘unskilled labour.’ However, studies and analyses of the forest produce gathering and pre-sale processing practices suggest that most collectors use their traditional and local knowledge to identify, locate and gather produce. They also possess a considerable amount of experience and skill in adding value and using simple techniques for drying and decorticating produce. Hence the setting of MSP is not to be seen merely as an “anti-poverty measure,” but also as a way of recognising the skills and knowledge of forest produce collectors. This knowledge and skill needs to be accounted for if a socially just MSP is to be set.




Since this report is a result of the efforts of the Ministry of Panchayati Raj, it is not surprising that the committee makes a strong case for the role of Gram Sabhas in the control over and management of MFP. It outlines the legal changes that state governments need to make if their laws are to be compatible with the provisions of PESA and Forest Rights Act. It also states that all corporations as well as federations that “undertake MSP operations have to be accountable to the Gram Sabha.”


Therefore the organisational structures of these bodies should ensure transparency and accountability and suggest that “district panchayats can become focal points for monitoring the activities of Corporations/Federations, including redressal of grievances.” In these respects, the report of the Haque committee can be used as a good instrument in the democratic movement’s struggle for the rights of forest produce gatherers. There is a need to do a greater analysis of its implications and thereafter press for the implementation of many of its positive recommendations.