FM reposes faith in agricultural market reforms

Updated: Jul 11 2014, 19:41pm hrs
A free, fair and efficient primary agricultural market, with adequate infrastructure, will boost profitability of Indian farming and become an impetus for faster growth of Indias agricultural derivatives market. The finance minister has given a welcome policy impetus to this strategic transformation by stressing on the need for a national agricultural market, and the use of warehousing for scientific storage and post-harvest credit.

Creating a national market for agriculture across Indias 7,000-odd APMC market yards will help remove market distortions, improve price discovery, create a level field for stakeholders and promote efficiency. It will widen the supply pipeline, reduce artificial shortages, and allow processors and consumers to procure from across the country, thus helping farmers realise increased returns.

For two years, NCDEX has been working towards a one state one market framework with the Karnataka government, using NSPoTs unified market platform. It uses international best practices to offer risk management and trade fulfillment processes to farmers and traders coming to spot markets in the state. We are delighted this concept is now gaining traction at the highest levels of the central government and hope it will encourage more states to undertake similar policy reforms.

Warehousing is a vital component for the efficient functioning of modern commodity markets. In a competitive supply chain, warehouses become a hub for convergence of scientific storage solutions, post-harvest credit through negotiable warehouse receipts, pledge finance for processors, food quality testing and assaying. The proposal to set aside R5,000 crore in FY15 for development of scientific warehousing is a welcome step. The WDRA has a long-pending demand for integration of warehouse receipts with post-harvest lending. The announcement to implement this plan with vigor should go a long way in collateralised lending and expansion of finance to farmers. This will enable farmers to also use warehouse receipts from exchange-accredited warehouses to meet working capital requirements.

Returns and profitability of farmers with small and marginal holdings has been a challenge which the Budget sought to address by helping set up 2,000 farmer producer organisations. They will improve access to wider markets by aggregating their produce for cost-effective marketing. With physical infrastructure, farmers also need digital infrastructure for financial inclusion and better price information. The proposed National Rural Internet and Technology Mission and Digital India programme will provide broadband connectivity and other IT facilities at the village level. It is heartening to note that the government is planning to restructure FCI. The government has also displayed foresight by creating a Price Stabilisation Fund to protect farmers from price volatility.

Overall, the finance minister has reposed laudable faith in agricultural market reforms to overcome the ills besetting Indian farming for decades.

Samir Shah