1. Reforming agricultural markets: Here is how to rescue eNational Agriculture Market

Reforming agricultural markets: Here is how to rescue eNational Agriculture Market

The original sin which scuttled any hope of NAM ever taking off was to locate the platform within the APMC mandi system, and not establish it as the latter’s competitor

Published: August 18, 2017 4:12 AM
National Agriculture Market, enam, online National Agriculture Market, agricultural market, agricultural market india, india agricultural market, agricultural market reform More than 15 months after its launch, it appears that officialdom has decided to resort to time-tested techniques of window-dressing to declare success on the e-NAM front. (Reuters)

Sandip Das’s excellent story in this paper last month, based on his visit to the Karnal mandi in Haryana, brought to light the sorry fate of the much-touted National Agriculture Market (e-NAM), the electronic portal for trading in agricultural produce launched by the prime minister in April last year. The story once again highlights the distance between policy announcements and implementation, ever the bane of developmental interventions in India. More than 15 months after its launch, it appears that officialdom has decided to resort to time-tested techniques of window-dressing to declare success on the e-NAM front.

In Haryana, as the FE story revealed, procurement of wheat under minimum support price (MSP) operations is being shown as e-NAM trading. This makes a mockery of the concept, as there is only one buyer (the government) and a fixed price (MSP). So, where is the multiple buyer-transparent-price-discovery chain which e-NAM had promised? I can safely vouch for the fact that such practices by mandi officials cannot happen without the direction and approval of senior officials. Informal inquiries reveal that the ministry of agriculture did not even bother to ask for a report from the state after FE carried the story.

It would be an error to assume, however, that the too-clever-by-half modus operandi adopted by Haryana is an exception. Not a single state has tried to use e-NAM to break the stranglehold of the APMC-controlled mandis over agricultural marketing. And this is not surprising, given the resistance shown by states across the country to the e-NAM concept from the time it was introduced. In fact, the opposition began from the time the idea of building an electronic national agricultural market was first broached. As the then MD of Small Farmers’ Agribusiness Consortium (SFAC), which was tasked by the ministry of agriculture in early 2015 with developing the model, I had a ringside seat in all the discussions till I left SFAC in November 2016, just before the model was finally approved.

In the first presentation at the ministry, we talked about building e-NAM on the lines of the Bombay Stock Exchange (BSE) or National Stock Exchange (NSE). That is to say, we proposed that anyone meeting a basic set of requirements (such as minimum godown space, quality assaying facilities, internet connectivity and a basic financial net worth) would be authorised to plug into e-NAM from anywhere in the country and engage in trading of agricultural produce. This is how BSE and NSE function, and while they deal with an intangible product like dematerialised shares of companies, elements such as access, transparent price discovery, delivery and settlement were possible to replicate in the case of e-NAM dealing with physical farm produce.

e-NAM was envisaged as a parallel platform, albeit a virtual one, to compete with the physical mandis run by the APMCs. It would offer farmers and traders an alternative to sell their produce to a wider regional and national market with a larger number of buyers participating. This competition between e-NAM and APMC-run mandis was expected to improve the choices available to farmers, and eventually help to reform the APMC mandi system in becoming more transparent, allow greater competition and create facilities for grading of produce.

But the idea was considered “too radical” and promptly shot down in the first meeting itself. A few representatives of states invited to the initial discussions also expressed their intense opposition to the idea of creating a parallel marketing structure which would divert business away from the APMC mandis. Several pointed out that agriculture, including agriculture marketing, was a subject in the state list of the Constitution, and the Centre could not override the powers of the states in developing NAM.

Given the push-back, the proposal was modified to locate the NAM portal exclusively within the existing mandis and states were allowed to decide the pace at which they would link the APMC mandis to e-NAM over a period of time. This, in my personal view, is the original sin which scuttled any hope of e-NAM ever taking off as a significant competitor to the mandi system. Since the states managed to convince the Centre that e-NAM could only function under the rules framed under the APMC Act, key decisions such as the number of traders to be registered, the commodities to be traded on e-NAM, whether or not to allow traders from outside the state to participate, etc, were left in their control.

This explains why not a single state, among those that have joined e-NAM, has allowed traders from outside to participate in electronic bidding on e-NAM. In fact, most states have not even permitted traders in other districts of the same state to participate in e-NAM trading outside their own district. So, far from creating a seamless, unified national market for agriculture produce, as e-NAM was grandly supposed to do, not even an integrated state-wide market has been created anywhere. The monopoly of the APMC mandis continues unchecked, with their long legacy of restricted competition among a handful of traders, opaque price discovery methods and poor service level to farmers.

Only producers of agricultural goods have the misfortune of suffering a legally mandated monopoly marketing channel; it would be unthinkable today if the same practices were applied to manufactured products or even services like software. Interestingly, no such restrictions exist in the case of milk or poultry products or sugar; in fact, had milk been a commodity listed for compulsory trading in mandis under the APMC Act, we might never have had the White Revolution.

Recent eruptions of farmer anger in Madhya Pradesh, Maharashtra and other states are reminders that farmers are desperate and need long-term solutions. Yet, all that governments can come up with are short-term balms like loan waivers. It’s like a doctor offering a pain killer to a patient suffering from heart disease. Without reforming basic factor markets for land, capital, labour and produce, these short-term solutions will suffer from shrinking efficacy.

That is why e-NAM is so important and why the Centre needs to pull its considerable weight with the states. The latter have chosen to protect a few thousand traders controlling the mandis rather than the crores of farmers who would stand to benefit from an open and transparent marketing system. With the huge bills for fertiliser subsidy, grain procurement, public distribution system, social welfare schemes and rural roads being picked up by New Delhi, there are enough levers with the Centre to persuade the states to loosen the suffocating hold of the APMC mandis on marketing of agri-produce. e-NAM is up and running and requires only the same focus from the Centre which delivered the GST despite greater odds. Is anyone interested?

Pravesh Sharma
Former IAS officer

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