Creating a national agriculture market

The e-nam platform only caters to 7% of the Indian farmer population, and handles only about 2% of the total value of agricultural output of the country

As many as 22 states have adopted it in some form, yet it failed to transform the agri-marketing structure in India.
As many as 22 states have adopted it in some form, yet it failed to transform the agri-marketing structure in India.

In its 2014 Lok Sabha election manifesto, the BJP promised to evolve a single national agriculture market (NAM) in the country, with a view to enable farmers to get a better price and for consumers to pay a lower price for agri-produce, a win-win situation at both ends of agri-value chains. After four years, it is only legitimate to ask how far the government has moved on this front. The short answer is very little. An overwhelming majority of farmers still rely on the same broken system of markets under APMC, which is monopolistic and rent-seeking, with high commissions, especially for perishables.

In this article, the third in the series of articles that we are writing to evaluate the performance of the Narendra Modi government in agri-food space since it came to power in May 2014, we track the progress on agri-marketing reforms.

It may be interesting to note that it was during the tenure of Atal Bihari Vajpayee as prime minister that some reforms in domestic agri-markets were attempted, when a model Agricultural Produce Marketing (Regulation) Committees (APMC) Act 2003 was suggested to states. As many as 22 states have adopted it in some form, yet it failed to transform the agri-marketing structure in India. The system kept suffering from highly fragmented markets with insufficient infrastructure; levies and intermediation fees remained high and uneven across states; APMC licensees monopolised trade, leading to rent-seeking and lower share of farmers in the selling price.
It was against this backdrop that the 2014 election manifesto of the BJP promised to create a unified national agricultural market (NAM), which would reduce costs of intermediation and wastages, benefiting farmers as well as consumers. In April 2016, a scheme of NAM was launched. The central government budgeted Rs 200 crore for two years and proposed a one-time grant of Rs 30 lakh (which was later increased to Rs 75 lakh in Budget 2017-18), to every mandi willing to join the NAM platform. There were three preconditions for any state to come on board the NAM: they had to ensure (i) one trading licence for the entire state, (ii) one rationalised single levy/market-fee, and (iii) an electronic trading/auction. But, satisfying these pre-conditions necessitated reforms in the APMC act and so, rightfully, the government came out with the APLM 2017, or the Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act. It shifted the focus from regulation (under APMC), to promotion and facilitation (under APLM), setting the right tone for agri-marketing reforms.

How far it has moved and whether farmers and consumers have gained from it is the moot question that must be asked to assess its performance.

As per the Dalwai Committee Report 2017-18 (Volume IV), there are close to 29,547 marketing points. Of these, 22% or 6,615, are regulated markets under the APMC and 22,932 are regional periodical markets (RPMs). On an average, a farmer gets a regulated market in the radius of about 12 km and a RPM in a radius of about 7 kms. Out of these 6,615 markets, the NAM scheme aimed to bring 585 markets (i.e. 9%) on its e-market platform by the end of financial year 2017-18. Quite commendably, as on March 2018, all targeted mandis, i.e., 585 that are in 16 states and 2 UTs, (Chandigarh and Puducherry), have been integrated with the NAM-platform.

But, these 585 mandis brought only 90.5 lakh farmers onto the platform, which is less than 7% of the 14 crore Indian farmers. Close to 17 MMTs of quantity worth Rs 42,265 crore (cumulative since platform’s inception), is reported to have been traded on the platform. But, this value is only about 2% of India’s total value of agricultural output. Besides, this value is also artificially inflated by adding the value of MSP-procurement operations by states like Haryana. By including such transactions made at fixed prices (MSP) by a fixed buyer (procurement agency) onto the e-NAM platform, the true spirit of e-NAM, i.e. of free and competitive marketing, fades.

Additionally, as per the department of agriculture cooperation and farmers welfare, most of the reported transactions are intra-mandi. Inter-mandi and inter-state trading on the platform are minimal. What this means is that the states on e-NAM have not been able to provide farmers with better price discovery in other mandis of the same state or across states. The department also acknowledges that e-payment facility is not available in most mandis, and that there is no competitive bidding reported in these states. This clearly implies that the monopoly of the APMCs continues unabated even in the 18 states/UTs, and the aim of creating a truly unified NAM with an efficient price discovery mechanism is still a far-fetched dream. And, it may not materialise even in the next five years unless the following steps are taken in a concerted manner: (i) unyielding focus on agri-market reforms starting with basics of assaying, sorting, and grading facilities for primary produce as per nationally recognised and accepted standards; (ii) creating suitable infrastructure at mandi-level (like godowns, cold storages, and driers) to maintain those standards; (iii) bringing uniformity in commissions and fee structures that together do not go beyond, say 2%, of the value of produce; and (iv) evolving a national integrated dispute resolution mechanism to tackle cases where the quality of goods delivered varies from what is shown and bid for on the electronic platform. This would require significant investments, and changes in state APMC Acts. This is feasible, provided PM Modi takes a lead and presses for it, bringing uniformity in agri-marketing rules and infrastructure in at least all the 22 states where NDA rules today. Roping in the private sector for investments would create jobs and promote efficient agri-value chains. This can be the biggest gift PM Modi can give to Indian peasants. Will he do it before the 2019 elections? Only time will tell.

Ashok Gulati is Infosys Chair Professor for Agriculture and Shweta Saini is Senior Consultant, at ICRIER

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