Helping farmers wade through pricing maize

Written by ANJANI SINHA | Anjani Sinha | Updated: Dec 31 2011, 19:18pm hrs
Bihar is one of those states that has the potential to become the food bowl of the country. It is bestowed with a huge spread of the Ganga belt, which is most fertile for growing grains, fruit and vegetables. However, the problems faced by the Bihar farmers are in terms of lack of market linkages. Earlier, the state had the APMC Act in force, but the APMCs were functioning more like local quasi-political bodies, rather than actually conducting any mandi auction to help the farmers. As a result, the government scrapped the Act three years ago, but the scenario continues to be the same. Earlier also, there was no mandi auction taking place and farmers continued to be exploited by local traders. The same scenario continued even after scrapping the Act. Since government agencies, such as Nafed and FCI, are not active in Bihar in procurement of grains, there was no institutional support available to support the farmers.

Against this backdrop, the National Spot Exchange (NSEL) commenced its operation in Bihar in 2009. Initially, it focused on maize, setting up its centre at Maheshkoont, Bhagalpur, etc, which are major maize-producing areas. At that time, production of maize in Bihar was around 1.5 million tonnes. But the farmers were getting a price much below the minimum support price fixed by the government. The price offered by local traders was around R720-730 per quintal, which was much below the MSP. Under this scenario, NSEL commenced its operation. It created a direct linkage between farmers and exporters based in Kolkata, Delhi, Mumbai, etc. The exporters got the comfort of NSELs quality certification and guarantee. Farmers got the advantage of higher prices, due to avoidance of any intermediary and direct linkage with the exporters. NSEL levied a transaction fee of 0.5 % on the exporters, while no transaction fee was levied on the farmers. As a result, the farmers price realisation went up from R700-720 to R900, after commencement of NSEL operation.

The commencement of NSEL operation had manifold impact on the overall maize economy in Bihar. Even though NSEL handled not more than 15% production of maize in Bihar, this had an impact on the entire crop.

The general price level offered to the farmers also went up due to competitive forces. Due to price transparency in the electronic markets, farmers across Bihar became more aware about correct price levels. They became more demanding, even while selling to local traders. NSEL provided a reference price to all such farmers. This helped even such farmers in Bihar who were located away from NSEL delivery centres. For them, it was not feasible to sell their produce on the NSEL platform, but, still, they derived benefit from the initiative. NSEL also commenced free SMS service to farmers, whereby it invited the farmers to register their mobile numbers with NSEL to get maize price discovered on NSEL platform on a daily basis for free. The impact of all such initiatives was an overall increase in price realisation by the farmers.

The Bihar government also noticed the impact of the NSEL initiatives. It has now decided to support these initiatives by providing drier machines, so that maize having higher moisture content can be dried and maintained in good condition. National Spot Exchange is also actively involved in providing market-related inputs and intelligence report to the government. This year, Bihar farmers are facing problem in respect of paddy and potato, for which the government invited NSEL to provide some practical solutions. NSEL has submitted its proposals, which are under active consideration by the government.

* The author is MD & CEO, National Spot Exchange