Prime Minister Narendra Modi recently launched an online national agricultural products market platform that will integrate 585 wholesale markets across India.
- The launching of e-platform for marketing of agriculture products is being done with the aim to provide more options to farmers to sell their produce.
- This initiative is part of implementation of the roadmap for doubling income of the farmers by 2022.
What is National Agriculture Market (NAM)?
NAM is an online platform with a physical market or mandi at the backend. NAM is not a parallel marketing structure but rather an instrument to create a national network of physical mandis which can be accessed online.
- It seeks to leverage the physical infrastructure of mandis through an online trading portal, enabling buyers situated even outside the state to participate in trading at the local level.
NAM is said to have the following advantages:
- For the farmers, NAM promises more options for sale. It would increase his access to markets through warehouse based sales and thus obviate the need to transport his produce to the mandi.
- For the local trader in the mandi / market, NAM offers the opportunity to access a larger national market for secondary trading.
- Bulk buyers, processors, exporters etc. benefit from being able to participate directly in trading at the local mandi / market level through the NAM platform, thereby reducing their intermediation costs.
- The gradual integration of all the major mandis in the States into NAM will ensure common procedures for issue of licences, levy of fee and movement of produce. In a period of 5-7 years Union Cabinet expects significant benefits through higher returns to farmers, lower transaction costs to buyers and stable prices and availability to consumers.
- The NAM will also facilitate the emergence of value chains in major agricultural commodities across the country and help to promote scientific storage and movement of agri goods.
Are existing APMCs or mandis capable of handling NAM?
Experts say that infrastructure available for NAM at local markets varies from state to state. The NAM platform is being supported by agriculture ministry, which is bearing maintenance costs for each mandi.
- The integration cost for local mandis and customisation of software, training, etc, will also be paid for by the ministry as a one-time grant of around R30 lakh at the time of accepting the mandi in the national network.
- However, the running costs of the software at the local level, staff costs for quality check, etc, will be met with the transaction fee to be generated through the sale of produce.
- The key reason behind this support is to avoid any upfront investment by the mandi when it integrates into NAM, and enable it to support the running cost through additional generation of revenue.
Such a platform was necessary to address the following challenges:
- Fragmentation of state into multiple market areas.
- Poor quality of infrastructure and low use of technology.
- In the traditional mandi system, farmers generally procured very less price for their crops as they had to pass through various intermediaries at the physical marketplace. This not only adds costs but also handling costs.
- In addition, the farmer has to face obstacles in form of multiple tax levies and licenses and weak logistics and infrastructure in India.
How will NAM operate in the current form?
The 21 mandis where NAM is being formally launched would offer trading in commodities such as chana, castor seed, paddy, wheat, maize, onion, mustard and tamarind. But fruits and vegetables, where there often are prices fluctuations, are yet to be included in the NAM platform.
What needs to be done from here?
- Experts say that as long as fruits and vegetables are kept outside the purview of NAM, the volatility in prices would continue, thus depriving farmers from getting better prices.
- Barriers hampering interstate transfer of agricultural commodities also have to be removed. High taxes and levies imposed by states such as Punjab, Haryana and Andhra Pradesh on agricultural commodities trade have to be brought down; this would boost interstate trade and farmers’ income.
- With very few big buyers likely to be interested in buying the small lots that farmers will have to offer, aggregators will be needed and the trick will lie in ensuring it is not the same aggregators who control the mandis that get to dominate NAM.
- Care will have to be taken, similarly, to ensure markets do not get cornered by speculators or cartels that drive prices up or down.
- Considerable effort will also be needed for the clearance mechanism to work.
Eventually, the success of NAM will depend upon whether farmers get a higher price for their produce or not and whether this reduces price volatility—in which case, introducing a system of market-makers needs to be tried at some point in time; bringing in large retail chains will help but with the central government opposing FDI in retail, this looks tough, though it is possible the new FDI window for pure food retail may attract big food retailers. And since most state governments have a history of blocking supplies when local prices go up, it will be critical to ensure the states on the platform don’t resort to their old tricks in times of supply shortage.