Electronic National Agriculture Market and its Future

Electronic National Agriculture Market (eNAM) –

State level political will decide its fate?

By:

Vijay Sardana

 On 14^th April,2016 eNAM was formally launched.

National Agriculture Market (NAM), an official version of the most controversial and now defunct National Spot market, is a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities.

The NAM Portal provides a single window service for all APMC related information and services. This includes commodity arrivals & prices, buy & sell trade offers, provision to respond to trade offers, among other services. While material flow (agriculture produce) continue to happen through mandis, an online market reduces transaction costs and information asymmetry.

Existing Indian agriculture marketing structure is classic case of how inefficiencies can be created in value chains to protect vested interest and to keep competition away. Indian agriculture market in letter and spirits are against the global concept of unified market.

Currently agriculture market is administered by the States as per their agri-marketing regulations, under which, the State is divided into several market areas, each of which is administered by a separate Agricultural Produce Marketing Committee (APMC) which imposes its own marketing regulation (including fees). This fragmentation of markets, even within the State, hinders free flow of agri commodities from one market area to another and multiple handling of agri-produce and multiple levels of mandi charges ends up escalating the prices for the consumers without commensurate benefit to the farmer. Still state governments are not keen to reform these inefficient systems due to vested interest of policy makers.

NAM is an attempt to address these challenges by creating a unified market through online trading platform, both, at State and National level and promotes uniformity, streamlining of procedures across the integrated markets, removes information asymmetry between buyers and sellers and promotes real time price discovery, based on actual demand and supply, promotes transparency in auction process, and access to a nationwide market for the farmer, with prices commensurate with quality of his produce and online payment and availability of better quality produce and at more reasonable prices to the consumer.

So far only 21 mandies are covered as pilot project. NAM is being deployed in selected 585 regulated wholesale markets in States/UTs desirous of joining the e-platform. Small Farmers’ Agribusiness Consortium (SFAC) is operating the NAM with technical support from the Strategic Partner (SP). 400 mandis will be integrated by March 2017 and remaining 185 by March 2018. Department of Agriculture, Cooperation & Farmers’ Welfare (DAC&FW) is meeting expenses on software and its customisation for the States and is providing it free of cost. DAC&FW is also giving a grant as one time fixed cost subject to the ceiling of Rs.30.00 lakhs per Mandi (other than to the private mandis) for related equipment / infrastructure in 585 regulated mandis, for installation of the e-market platform. State Governments will suggest names of APMCs where this project would be initiated.

According to official website, components of NAM are a national e-market platform for transparent sale transactions and price discovery initially in regulated markets. Biggest concerns still there is no law to force the states to deliver as per the uniform law in the country. According to NAM, willing States to accordingly enact suitable provisions in their APMC Act for promotion of e-trading by their State Agricultural Marketing Board/APMC. There is no time bound action plan.

NAM envisages liberal licensing of traders / buyers and commission agents by State authorities without any pre-condition of physical presence or possession of shop /premises in the market yard. If this is the intention of the government, licensing system be made online. Why still this is at the discretion of the state authorities.

NAM system says one license for a trader valid across all markets in the State. Why this can’t be for the whole country? When we are promoting free trade agreements at global level, why we can’t enforce unified trade license within country.

Harmonization of quality standards of agricultural produce and provision for assaying (quality testing) infrastructure in every market to enable informed bidding by buyers. Common tradable parameters have so far been developed for 25 commodities. Who will provide and manage vital infrastructure like cleaning, sorting, grading and storage facilities is not clear. In absence of these basic facilities, it will difficult for buyers to trust about the quality and delivery of the material as promised at the time of transaction. Who will make the laboratories and warehouses accountable in case they issue fake or misleading reports? This the biggest concern because this was the major loophole in National Spot Market, which led to Rs. 5,600 Crores disaster.

Single point levy of market fees, i.e on the first wholesale purchase from the farmer. This is a good step, but it should be uniform across all the states otherwise traders will avoid mandies with high taxes.

State's Obligations for Successful Implementation

In order to facilitate both - unification of market and online trading, it is necessary for the States to undertake reforms prior to seeking assistance under the scheme in respect of (i) a single license 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. Only those States/UTs that have completed these three pre-requisites will be eligible for assistance under the scheme. The States must ensure that the reforms are carried out both in letter and spirit through appropriate and unambiguous provisions in the APMC Acts and rules. Besides the State Marketing Boards/APMCs must enable the promotion of the e-auction platform. The States will need to ensure that the mandis that are integrated with NAM makes provision for requisite online connectivity, hardware and assaying equipment.

One another aspect which is very critical in ensuring success of NAM is uniform loading, unloading, assaying charges and online sharing of quality testing laboratory reports, warehousing receipts and weighing receipts.

Other political challenges like trucks and labor unions will prevent smooth running of organization.

Jandhan aadhar card number account of all farmers and traders should be mandatory for payments in mandies to prevent hoarding and black money generation.

In fact there is need to develop a new set of service provided for handling activities in linked mandies on behalf of buyers located far away.

Will it happen only time will tell. Overall NAM is a good beginning but state level political considerations will decide its success.

NAM reforms will also be a test case to understand, what is more important for the state government - local politics or farmers’ interest.