A National Agriculture Market Beyond Mandis

National Agricultural Market

When it comes to marketing surplus agricultural produce in India, approximately 30% is traded through regulated agricultural markets, popularly known as Agricultural Produce Market Committees (APMC) or Mandis.

Below are three national-level agri initiatives and one state-level initiative that have significantly impacted the creation of a National Agricultural Market (NAM) in the recent past.

A. National-level Initiatives

 1. Price Support Schemes:

When it comes to Price Support Schemes (PSS) that help stabilise the prices of essential commodities, there are two key players in the Indian market – the Food Corporation of India (FCI) for Paddy and Wheat, and the National Agricultural Cooperative Marketing Federation of India (NAFED) for Pulses and Oilseeds.

It is estimated that these two entities cover less than 10% of the total farmers in the country, with a major chunk of the beneficiaries coming from the states of Punjab, Haryana, Uttar Pradesh, Gujarat, Andhra Pradesh, Telangana, Rajasthan, Madhya Pradesh and Chhattisgarh.

2. Forward Markets for Price Discovery:

Regulated by the Securities and Exchange Board of India (SEBI), Forward Markets (also known as Commodity Exchanges) are the key market infrastructure institutions that play a credible role as effective price discovery mechanisms. The National Commodity & Derivatives Exchange Ltd. (NCDEX) is the leading Agricultural Commodity Exchange in India.

While Commodity Exchanges play a pivotal role in enhancing farmers’ incomes through transparent price discovery, there are very few agri commodities like Chana, Soybean, Castor, RM Seed, Turmeric, etc. that are traded through these Exchanges.

Despite playing an active role in transforming the agriculture marketing landscape in India for more than 15 years, Commodity Exchanges in India unfortunately do not yet have a complete buy-in from the Central Government. This contrasts with China wherein the Government actively supports Commodity Exchanges.

Leveraging Commodity Exchanges for trading of mass crops like Paddy, Wheat, Sugar, Maize, Tur, Milk Powder, etc. would not only help the farmers, but also the Government in reducing its PSS costs and widening its reach to cover more farmers.

3. e-NAM:

The Electronic National Agriculture Market (e-NAM) is the Central Government’s flagship program. Aimed at creating a National Agricultural Market (NAM) platform for regulated agri markets, the stated objective of e-NAM is ‘Doubling Farmers’ Income (DFI)’.

It was announced in July 2015 by the Hon. Agriculture Minister, Shri Radha Mohan Singh, at a national workshop on ‘Unified Agriculture Markets – The Karnataka Model’ in Hubballi, Karnataka, that was attended by more than 180 delegates from various states in the country.

In his Lok Sabha speech on 7th August, 2018, the Hon. Agriculture Minister reiterated that the three essential reforms the states must carry out in their respective APMC Acts to ensure e-NAM’s success are:

1) e-Trading

2) Single point levy of market fee, and

3) Unified single trading license for the entire state.

While not even once has the Agriculture Ministry mandated that e-NAM is a “Government Portal” per se, the on-ground reality indicates that the program is treated like an extension of an electronic trading portal rather than as a market development program.

At present, the e-NAM portal simply acts as a frontend with an online auctioning software running in the backend. APMCs that wish to be a part of the e-NAM ecosystem are merely expected to download the software and initiate e-trading to qualify as an e-NAM-enabled APMC / Mandi.

As on Sep 2018, e-NAM has covered more than 585 markets on its own and 164 markets of Karnataka using the first level of interoperability. The visible impact on the farmers’ income of e-NAM markets is yet to come though. Interoperability rules and regulations, including the default settlement mechanism, needs to be further articulated for a more interoperable national market.

B. State-level Initiative

The Unified Market Platform (UMP) of Rashtriya e Markets and Services Ltd. (ReMS) – a Joint Venture company with equal shareholding between the Karnataka Government and NCDEX e Markets Ltd. (NeML), is an apt example of a ‘state-first’ approach of creating a State Agricultural Market (SAM) by seamlessly interlinking all Local Agricultural Markets (LAM) in the state.

While the Central Government has already overachieved its target of linking 585 Mandis across the country with e-NAM, as on date the UMP (popularly known as “The Karnataka Model”) remains the only SAM that is cohesively interoperable with e–NAM. Though other states like Rajasthan, Maharashtra and Uttar Pradesh have their own e-market platforms for Mandis, they are yet to become interoperable.

The Way Forward

The creation of a true National Agricultural Market demands working out an institutional, interoperable mechanism between various state and central level initiatives. The temptation to overlook the central objective of enhancing farmers’ income at the cost of showing higher numbers should be resisted.

An interoperable mechanism of primary and secondary markets using PSS, Forward Markets, e-NAM and state level initiatives like Karnataka’s SAM – the UMP of ReMS, have the potential to transform livelihoods of millions of farmers, especially Smallholder Farmers (SHFs).

It is imperative that an apex body is entrusted to create an effective NAM. Since, only diverse interoperable SAMs can truly create a NAM, there is definitely a room for each individual initiative rather than giving prominence to only one or the other initiative.

 

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