Insights into Editorial: A pan-India market remains elusive for farmers
The centre’s promise of improving farm incomes by providing farmers with a wider network of buyers and better prices via an electronic trading platform is moving at a slow pace due to lukewarm response from states and lack of necessary groundwork.
Background:
In April, the government launched the electronic national agriculture market, or e-NAM, as a key initiative to improve farm incomes, but so far the platform has managed trading turnover of just Rs.166 crore.
Why?
This is mainly because, electronic trading has been limited to respective mandis (registered markets) within a state—meaning farmers cannot yet access sellers outside the mandi, be it within the state or across the country.
Also, states have not adopted the scheme with the spirit with which the centre launched it. Besides, many states are not showing any desire to create an alternative avenue for farmers where they can discover the true value of their produce.
What is National Agriculture Market (NAM)?
NAM is an online platform with a physical market or mandi at the backend. NAM is not a parallel marketing structure but rather an instrument to create a national network of physical mandis which can be accessed online.
It seeks to leverage the physical infrastructure of mandis through an online trading portal, enabling buyers situated even outside the state to participate in trading at the local level.
National Agriculture Market (NAM) is necessary to address the following challenges:
- Fragmentation of state into multiple market areas.
- Poor quality of infrastructure and low use of technology.
- In the traditional mandi system, farmers generally procured very less price for their crops as they had to pass through various intermediaries at the physical marketplace. This not only adds costs but also handling costs.
- In addition, the famer has to face obstacles in form of multiple tax levies and licenses and weak logistics and infrastructure in India.
NAM has the following advantages:
- For the farmers, NAM promises more options for sale. It would increase his access to markets through warehouse based sales and thus obviate the need to transport his produce to the mandi.
- For the local trader in the mandi / market, NAM offers the opportunity to access a larger national market for secondary trading.
- Bulk buyers, processors, exporters etc. benefit from being able to participate directly in trading at the local mandi / market level through the NAM platform, thereby reducing their intermediation costs.
- The gradual integration of all the major mandis in the States into NAM will ensure common procedures for issue of licences, levy of fee and movement of produce. In a period of 5-7 years Union Cabinet expects significant benefits through higher returns to farmers, lower transaction costs to buyers and stable prices and availability to consumers.
- The NAM will also facilitate the emergence of value chains in major agricultural commodities across the country and help to promote scientific storage and movement of agri goods.
What else needs to be done?
- As long as fruits and vegetables are kept outside the purview of NAM, the volatility in prices would continue, thus depriving farmers from getting better prices. Hence, even fruits and vegetables should be covered under this.
- Barriers hampering interstate transfer of agricultural commodities also have to be removed. High taxes and levies imposed by states such as Punjab, Haryana and Andhra Pradesh on agricultural commodities trade have to be brought down. This would boost interstate trade and farmers’ income.
- With very few big buyers likely to be interested in buying the small lots that farmers will have to offer, aggregators will be needed and the trick will lie in ensuring it is not the same aggregators who control the mandis that get to dominate NAM.
- Care will have to be taken, similarly, to ensure markets do not get cornered by speculators or cartels that drive prices up or down. Considerable effort is also needed for the clearance mechanism to work.
Conclusion:
For now there seems to be a disconnect. While the prime minister contends that farmers already have a national market at their disposal, ground realities show e-NAM is still in a pilot phase, far behind what was promised. The success of the platform will depend on how quickly it broadbases the crops and regions trading on it. This, in turn, depends heavily on individual State governments’ willingness to loosen their stranglehold on their APMCs and mandis, by relaxing licensing norms and reducing taxes. Given the powerful vested interests that dominate these markets, the political will to do this may be limited.
