Why common agri market is a long way off
Besides legal and constitutional issues, there is a huge shortage of regulated markets for farmers to sell their produce
After many failed attempts by previous regimes, the Narendra Modi government is again working towards a common national market for agriculture commodities through multiple ways.
The Electronic-National Agriculture Market platform (e-NaM) and the new model APMC Act are together meant to realise the ultimate objective of a national market where farm commodities can be sold and purchased without any restriction and barrier.
A common pan-India agriculture market is envisioned as one where price discovery would be purely on the basis of demand and supply and will not be held hostage to the numerous cartels and groups that currently operate to the detriment of both the consumers and farmers.
A 2011 paper by the Mumbai-based Indira Gandhi Institute of Development Research, based on research done on fruit and vegetable supply chains in Delhi, Mumbai, Bengaluru and Kolkata, found “on an average there are five to six intermediaries between the primary producer and the consumer.”
The total mark up in the chain added up to 60-75 per cent. As a result, the primary producers receive only 20-25 per cent of the consumer price.
A committee is also working in the Union finance ministry to integrate the spot and derivative markets in commodities and e-NaM is expected to be an important part of it as announced by Finance Minister Arun Jaitley in the 2017-18 Budget. Challenges in connecting markets Though at a conceptual level a common market could lead to real benefits both for the consumers and farmers, beyond that, says experts, the entire concept is riddled with multiple challenges and complexities and could open the door for manipulation unless checked.
So how exactly the Centre hopes to realise this idea? The e-NaM is meant to digitise trading in over 585 mandis across the country in the next few years.
A very basic prerequisite for getting the Central grant of over ~75 lakh per mandi under e-NaM — ~30 lakh for setting up the platform and the remaining for upgrading facilities and waste management plant — is that states must first amend three basic rules that guide their mandis: a common trading licence for all traders, e-auction platform for price discovery of agricultural produce, and single point levy of market fee.
The conditions are meant to ensure that e-NaM becomes more than just an electronic platform to trade and lays the foundation of a truly national spot market.
Since e-NaM was launched a little over a year ago, 18 states have adopted the electronic market platform, while 13 have altered the three main rules necessary to get the Central grant.
In all, 585 mandis out of the total of 7,320 across the country will be brought under e-NaM in the next few years.
Though the objective is to gradually bring all mandis onto the electronic platform and to ensure all trades are conducted through the system, in reality much of this is still to be realised.
E-NaM has become operational in multiple locations but in the absence of either multi-location trader licences or partial fulfilling of the regulations, the mandis in many places haven’t been fully integrated even within the states or even within the same district, leave alone nationally.
In many places under e-NaM, trading that so far was happening in physical open-cry auctions is being done digitally.
While in states like Haryana and Himachal Pradesh, inter-mandi trade has been permitted and traders have been issued three types of licences, such experiments are still few in numbers. In fact, some analysts say that in some mandis where the e-NaM platform has been installed, farmers and traders are just keying in their daily trade on completion to ensure that targets are met.
The Central government nonetheless is hopeful that gradually all mandis and APMCs which opt for the e-NaM platform will stop physical trading altogether and the system will stabilise. The model mandi Alongside e-NaM, the Central government has also framed a new model APMC Act for states to adopt, the first such exercise since 2003 when the previous APMC model Act was framed.
Agriculture marketing being a state subject, Centre can’t legislate on issues which are outside its domain, making the model Act a mere recommendation.
The model Act has numerous provisions and for the first time tries to treat the entire state as a market yard instead of just the mandi, besides opening the door for private mandis, farmer-operated markets, multiple licences for buying and selling directly from farmers, temporary licences for bulk purchasing etc.
The amendments, according to the Central government, will take away the overarching powers of APMCs in granting licences and regulating trade, something which it found to be a clear case of conflict of interest.
However, critics believe that the entire idea of common agriculture market and APMC Act amendments is to open multiple sourcing options for big multinational companies undermining the interest of growers.
“Why does India need a common national agriculture market which will lead to uniform price of farm commodity when the cost of production of the same variety is different in different geographies,” food policy expert Devender Sharma says.
According to him, a uniform national price for a farm commodity might be good for corporations but for farmers it will hurt their livelihood.
Furthermore, he says, the concept of private mandis is flawed. In some states just six per cent farmers sell their produce through regulated APMCs; the rest use private mandis and still their economic condition hasn’t improved.
“If private mandis were so efficient why is there distress among farmers? The Centre instead should try to expand the APMC network,” he says.
On e-NaM, Sharma says that despite having e-NaM, a farmer died in Nizamabad in Andhra Pradesh just twodays back as he was unable to bear the shock of the price crash. “This clearly shows that e-NaM is no guarantee for a good price for farmers,” Sharma says.
Sukhpal Singh, chairperson for Centre for Management in Agriculture in IIM Ahmedabad, also discounts the idea of a national common agriculture market, though for different reasons.
He says that beyond a point integration of agriculture markets spread across geographies selling varied items is impossible as there are a number of legal and constitutional issues involved that are difficult to address.
“The idea of a whole country as a market is a long way off as different states have different priorities, while in mandis themselves, monopolies need to be broken,” Singh says.
On e-NaM, Singh said that unless there is a big push, just integrating 585 of the over 7,000 regulated markets is not even 10 per cent of the eco-system.
India, with a vast variety of fruits and vegetables grown in extremely different landscapes, totalling over 550 million tonnes, a network of just over 7,000 regulated markets is clearly inadequate.
Conservatives estimates show that not less than 45,000 regulated markets are needed in India to ensure that all the fruits and vegetables produced in the country get a proper market to sell.