eNAM helps best price discovery for farmers

Agriculture is a state subject. Most of the states have Agricultural Produce Market Committees (APMCs) as first sale points for farmers for their agricultural produce since early 1960s. In these markets there is asymmetry in market information and power with more information concentrated with commission agents and traders than with farmers. This asymmetry in information is leading to exploitation of farmers by middlemen. In the recent years, the Government of India is laying more emphasis on market reforms with the introduction of Model APMC Act, 2003.

• Interested states required to amend their APMC Acts
• A single licence should to be valid across state
• A single point levy of market fee is necessary
• They need to allow electronic auction as a mode for price discovery.
• Only 17 states so far fully or partially amended APMC Acts to join eNAM

Many states are in the process of implementing the model APMC Act with provisions like private markets, direct marketing, contract farming, consumers markets, farmers markets, single levy, single licence and provision of e-auction to increase competition and for better functioning of agricultural markets. Latest is electronic-National Agricultural Markets (eNAM). Under eNAM, in the first stage physical trade will be replaced by electronic trade in 585 mandis, later on all stand-alone e-mandis will be electronically linked.

eNAM improves transparency in price discovery, reduces possibility of formation of cartels among the traders as bidders from the outside jurisdiction of APMC markets can participate in the e-bidding. It also facilitates direct bidding by big food retailer chains, exporters and agro-processing industry for agricultural commodities. For example, a cotton miller in Mumbai can bid for the cotton put up for sale in the e-market of Warangal district of Telangana.

This will increase the price received by the farmers in local E-markets. A study by National Agricultural Marketing Institute on e-markets in Karnataka, where e-markets are implemented since 2012, clearly shows that there is increased price realisation by farmers and increased market arrivals in e-markets when compared to non-e-markets. Preliminary evidence shows that farmers share in consumer rupee is increased in e-markets in Karnataka. Currently, in e-markets in Karnataka, about 5-15% of the bids are coming from outside the mandis, which increase competition among traders.

eNAM will be rolled out on demand in states who have fulfilled the following reforms in their APMC Act, viz: (i) Single licence to be valid across the state; (ii) Single point levy of market fee; and (iii) Provision for electronic auction as a mode for price discovery. Currently, only 17 states have fully or partially amended APMC Acts to join eNAM, but only 10 states are implementing eNAM as of today. All states should participate in the eNAM to facilitate integration of markets across the states for efficient price discovery at national level. States like Bihar and Kerala are without any APMC Acts and they are yet to frame regulations.

There is a need for preparing road map for each state separately, as the capacity to absorb ICT technology in APMCs varies significantly from state to state. For example, Bihar and Odisha states may be slow in implementation of eNAM, as they lack necessary infrastructure and skills at all levels compared to Karnataka. If eNAM is implemented successfully in these 585 mandis to convert them into a network of e-markets, they integrate these local markets in to one national market and help in efficient price discovery.

There is a need for encouraging public-private partnerships in the eNAM. There is also a need to adopt best practices across the globe. China, whose agricultural market structure is more or less similar to that of India, successfully interlinked its agricultural markets. Flower markets in Holland and fish markets in Thailand are some of the best markets in the world.

The visible results from implementation of eNAM will take about five years or more for results visible on the ground. But long term policy is essential for the benefit of the farmers. As it is visible from Karnataka e-mandi experience, even after five years since 2012, even today many e-mandis are implementing partially.

Among traders and commission agents, there was a fear of coming under the tax loop with the increased online transaction. Awareness needs to be generated among traders to alleviate these fears. There is a need for educating about the benefits of the e-Mandis (NAM) to all stakeholders, so that all will support this gigantic task for the benefit of long-term gains in terms of efficient world class agricultural markets in India. (Writer is Principal Scientist at Indian Agricultural Research Institute, New Delhi)

By Dr A Amarender Reddy