Imagine two onion farmers from Hissar district of Haryana. One goes to sell his produce in a mandi in Delhi and the other in a Haryana mandi. Though they have the same quality and quantity, the farmer who sells onions in Delhi, a different state, earns '5,000 more. How? He was fortunate in getting more options – of better prices or buyers. If the other farmer too had wider options, he too would have hawked his produce to Delhi. But how can he know market conditions beforehand without depending on luck? Soon, a web portal will help farmers get the best prices across all states in the country.

The ministry of agriculture and farmers welfare had proposed a national agriculture market (NAM) scheme in July 2015. Under NAM, famers can approach different buyers for their produce, which will ensure better value for their produce and less monopoly of the regular buyers.
The government has allocated '200 crore for three years to set up an online NAM, which aims to integrate existing regulated agriculture markets in the country on a single portal. This will help buyers from one mandi to purchase farm produce from other mandis and vice versa, irrespective of their geographical location.

At present, the local agriculture produce market committee (APMC) ensures that farmers get right value for their produce and are not harassed by agents or traders. An APMC is a representative body formed by state governments for farmers. Each APMC-run market, also called regulated market, defines its own guidelines for trading in its area, for example, every market charges its own market fee from traders for transacting in their defined area or yard.  Not only that, if one wants to trade in more than one regulated mandi in a state, then commission agents and traders have to apply for licence from the APMCs of respective market areas. “For instance, in Maharashtra, APMCs of some mandis grant licence for trading only to those traders or agents who are residents of their market area,” explains an SFAC official.

In other words, regulated markets within states do not work in a unified way. Across India, there are around 7,000 regulated markets according to the department of agriculture, cooperation and farmers welfare.

“This concept of market area is therefore against the free flow nature of agro commodities from one place to another. Also, multilevel levies of market fee end up escalating the prices for the consumers, which does not benefits the farmers either,” says Vasudha Mishra, managing director, small farmers agri-business consortium (SFAC), the implementing agency for NAM.

To eliminate these restrictions in the trading system, states which have agreed to join NAM will introduce three major reforms – a precondition to the scheme. They will introduce a special provision for online trading and price discovery; will have a single licence to allow trading in more than one market area within a state, which any trader or commission agent can apply for irrespective of their geographical location; and have a single point levy of market fee, so that a particular lot of commodity transiting from one mandi to the other, within state, for trade is not liable to pay market fee again to the APMC of other market area.

“NAM is a virtual market but has a physical market at the backend, which will provide a single-window service for the APMC related information and services, including commodity arrivals and prices, buy and sell trade offers, provision to respond to trade offers, i.e., bidding, and maintaining accounts,” explains Mishra.

It will ensure free flow of agro produce from one mandi to the other, which is so far restricted by multilevel taxes and licences. Moreover, a virtual market will encourage trading in places where physical mandis do not exist, adds Mishra.

So far, the centre has received proposals from over 400 mandis from states of Gujarat, Andhra Pradesh, Telangana, Maharashtra, Jharkhand, Madhya Pradesh, Chhattisgarh, Rajasthan, Haryana, Uttar Pradesh and the union territory of Chandigarh.

“We will initially roll out the software in 585 mandis in the states ready with necessary reforms for NAM by 2018. Of these, 200 mandis will be online by September this year and next 200 by March 2017, and remaining by March 2018,” says Mishra. 

By allowing buyers of different market areas of any state to participate in trading process at a local level, NAM will eventually enhance competition in the markets, which will promise better prices to farmers, improved and transparent supply chain, less wastages due to delayed sale, and a unified national market for all, says Mishra. “There will be 20 commodities per mandi for sale on the portal. Initially, it will be non-perishable items, including grains and pulses,” she adds.

How will NAM work

For online selling, a farmer will first have to register at the NAM portal – either online by submitting an identity verification form or by visiting any APMC mandi. He will then receive a unique ID number, which will facilitate trading of his produce online. 

Every mandi will have a NAM office with a designated officer to handle portal related services. The officer will feed the details of the farmers’ produce in the portal lot-wise. Assessing of the produce will be done in the APMC lab and the certificate of approval will be uploaded.
Meanwhile, interested buyers can log on to the portal and quote their price for the product, either as a bid or for direct purchase.

Before finalising a deal, farmers can check the prices of their produce in the connected mandis. Once the deal is done an e-invoice will be generated automatically. The invoice will count the lot for the winning trader/buyer, which will include APMC market fee, labour charges, and commission agent fee (if a dealer is involved). Other taxes by the state would be levied, if any, as per their laws.

The trader/buyer will get a message or an email about the amount to be deposited in the NAM bank account in advance. Once the payment is made, NAM will transfer the farmer’s share to his bank account. After the sale, it is the buyer’s responsibility to get the goods transported to his/her place from the point of sale.

Alternatively, farmers can sell their produce outside the mandi via the NAM portal. Using their unique ID number farmers can upload details of their produce along with quality-approved certificate.

It is a particular state’s responsibility to provide accredited scientific labs nearby farms for quality assessment. “States will then decide whether they want farmers to pay for the quality check of the produce that is done outside the mandis, or they want to subsidise it for the farmers,” says Mishra.

To encourage states to adopt NAM, the government is offering free NAM software, allowance of '30 lakh per mandi for setting up of online trading facilities and five-year annual maintenance service. 

SFAC via its strategic partners Hyderabad-based Nagarjuna Fertilizers and Chemicals Limited (NFCL) and Techno Brain Global FZE, an IT company headquartered in Kenya, will provide customised technical support to the states ready to come on board. It will also help in developing software, operating and maintaining of the NAM portal. Training will be imparted to the participants of NAM portal state-wise. Moreover, NFCL will promote the use of portal by creating awareness among farmers and traders through personal interactions and advertisements.

The first state to implement the unified marketing model is Karnataka. Rolled out in February 2014, the state has got 103 of its 155 APMC markets online by December 2015.

Countering NAM

Challenging the government’s claim that NAM will stabilise the prices of agro produce, Himanshu, who's a professor of economics at Jawaharlal Nehru University, New Delhi, says trading is not the only factor determining the prices in the market. Transportation, domestic crop failure, and international prices are among the other key factors that determine the prices of agriculture commodities.

Other than that, he says, even to facilitate e-trading where physical mandis do not exist, state governments should put in place more cold storages and mini mandis for sorting, grading, and procurement of small farmers’ produce.

“Just opening a website and asking farmers to deposit their goods at a price that is determined by them is not the only way to achieve a unified market. State governments need to invest more on infrastructure. How many farmers are actually using the internet to sell their produce themselves?” he adds.

Moreover, for a fair transaction process NAM will transfer the amount received from a particular buyer directly to the farmer’s account. But connecting famers to a bank is altogether a bigger challenge.

For free flow of agriculture products, states also must agree on the movement of products without additional charges, says Sukhpal Singh, a member of the centre for management in agriculture (CMA) at Indian Institute of Management, Ahmedabad. He also says that before thinking of inter-state trading, states first need to regulate and integrate mandis at their level.

States like Meghalaya, Kerala and Jammu and Kashmir don’t have regulated mandis. Bihar abolished its APMC Act in 2006 giving leverage to private wholesale mandis that charge two percent from both farmers and buyers per transaction. “What is the use of a national market if all states cannot regulate their markets?” questions Singh.

While the government has put the proposal forward promising all necessary assistance, it depends on states how fast and efficiently they bring NAM to their agriculture markets. So far, only 11 states have agreed to interstate e-trading. Implementation of necessary steps like infrastructure building, internet connectivity, financial inclusion and digital literacy for farmers is still a major challenge, without which NAM will remain a proposal.

taru@governancenow.com

(The story appears in the February 1-15, 2016 issue)