In his Budget speech, Finance Minister Arun Jaitley stressed the need to create a National Common Agricultural Market and work with the States to increase the incomes of farmers by passing the incidental benefit of moderating price rises.

The national common market will be the backdrop for standardised and transparent trade practices across States under one single licensing system to break the entry barriers, monopoly and cartelisation that have crept into the functioning of the current agricultural marketing system. The national common market is expected to bring more transparency due to wider participation, uniform market fees structure and uninterrupted inter-State movement of commodities.

Currently, agricultural commodities are traded in mandis established and regulated under the State Agriculture Produce Marketing Committee (APMC) Act. These mandis are accessed predominantly by local traders. Thus, farmers have no other alternative but to sell their produce to them through the licensed commission agents in the mandi.

APMC fails to upgrade

Over the years, APMCs have acted as a trading platform for farmers and traders. They handle huge volumes (in the peak arrival season) and varieties of agricultural commodities throughout the year with optimum efficiency. They ensure fair price for the farmers by monitoring the auction process. However, APMCs have failed to modernise the distribution network and shorten supply chains irrespective of whether they generate good revenue or not (through cess and other market fees). This would have potentially, improved the returns to the investment made by the farmer.

APMCs are expected to develop alternative marketing channels for producers by providing direct access to remote traders, bulk buyers, wholesale traders, star export houses and processing units through the technological intervention. To offer alternative marketing channels and bring transparency in the trading process, the government has approved ₹200 crore to promote development of a common national market for agricultural commodities through e-platforms.

E-platforms – what and how?

E-platforms are the online market place which provides real time connectivity and data transfer of the trades happening in the mandi. It offers to disseminate real time market information which assists in marketing decisions, regulates competitive market process and simplifies marketing mechanisms for the participants. It also increases the competitiveness by allowing common registration of market intermediaries.

Karnataka implemented e-platform facilities through the single licensing system for 51 main market yards and offers automated auction and post auction facilities. However, APMCs of other States should look to implement e-platforms in phases. In the initial phase, mandis should digitise daily arrivals data, auction prices and trade volumes for one or two main commodities. Real time arrivals data collection should be done by licensed commission agents while the APMC staff should record auction prices and trade volumes. The price and trading information must be broadcast to stakeholders such as farmers, traders and other registered members on a real time basis. Mandis, on the other hand, should build the infrastructure for grading, sorting, weighing, storing, etc.

In the later phases, mandis should go in for online bidding of commodities. Registered traders, bulk buyers and processors can participate from remote locations. Online biddings are acceptable for standard lot size in the case of quality certified commodities as done in electronic commodity exchanges. Successful bidders should be provided with the post-auction facilities such as transportation, warehousing, commodity funding, etc.

Alternate channels

State APMCs, need to provide more alternatives other than regulated wholesale markets/mandis so that the producer can opt for most remunerative option. Bulk buyers and processors should be allowed to set up seasonal procurement centres in various places during the peak season. Similarly, the Farmers Producers Organisations and local aggregators should be given free hand to sell their produce to the registered buyer of any State APMC. However, the buyer has to declare the quantity he/she is buying and the price through e-platform, monitored by the State APMCs.

States to step-in

Now that the Centre has proposed for setting up the national agriculture market, the States have to take quick steps to modernise existing infrastructure. They have to step-in and take initiatives to deploy e-platform and options to provide alternate marketing channels. They are required to adopt the Model APMC Act and somehow facilitate ownership of alternative markets to accelerate private investment and help build a national common market. Modernising existing mandis certainly attract more participation, creates competition and strengthen the marketing of the agricultural produce in the country.

The writer is Asosciate Director – Commodities & Currencies, Angel Commodities Broking. Views are personal

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