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LATEST NEWS UPDATES | Open sesame

Open sesame

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published Published on Apr 18, 2016   modified Modified on Apr 18, 2016
-The Hindu Business Line

A national platform for agri-produce can be a game-changer. But persuading States is key

Most political regimes in India brand themselves as pro-farmer, and so it is ironic that the country’s market for agricultural produce is among its least liberalised. Given the perishable nature of agri-produce, the farmer is already up against structural constraints such as lack of scale economies and the rudimentary state of storage and logistics infrastructure, in marketing his produce. But State laws such as the Agricultural Produce Marketing (APMC) Act add to his woes. Originally enacted to protect farmers from exploitation by middlemen, APMC Acts have essentially whittled down the bargaining power of farmers by forcing them to make the first sale of their produce only through local mandis, requiring them to use only licensed commission agents, and levying high taxes and charges on the sale proceeds. This is why the creation of a National Agriculture Market (NAM), an electronic platform that hopes to remove some of these barriers, link up the hundreds of mandis and allow farmers to explore new markets, is significant. The Centre flagged off a pilot of this platform, with 21 mandis from eight States coming on board. This number is planned to be expanded to 585 mandis by March 2018.

NAM, once fully operational, may unleash three key benefits. One, farmers, while they may not be entirely freed of middlemen, will get to access market intelligence on a cross-country basis for their crops, allowing them to negotiate better prices. They can also explore transactions with potential buyers before transporting their produce to the market. Two, with a single-point levy and single licence mooted for nationwide trading, fragmented produce markets may get integrated, leading to better price discovery. Spot prices discovered on NAM can also provide a solid underpinning to the futures contracts traded on the commodity exchanges. This has been the Achilles heel of these exchanges so far. Three, bulk buyers of agri commodities such as the Food Corporation of India may be able to conduct e-procurement operations across regions, at transparent prices. However, despite all this, the Centre’s claim that e-NAM would double farmers’ incomes is premature. The success of the platform will depend on how quickly it broadbases the crops and regions trading on it. This, in turn, depends heavily on individual State governments’ willingness to loosen their stranglehold on their APMCs and mandis, by relaxing licensing norms and reducing taxes. Given the powerful vested interests that dominate these markets, the political will to do this may be limited. It is noteworthy that only 21 of the over 2,500 mandis nationwide have come on board the NAM at this stage.

Apart from engaging with the States on this issue, the Centre can expedite the adoption of NAM by helping out the affiliated mandis with additional transportation, warehousing and grading infrastructure that can draw in more farmers. The present promises of software support and Rs. 30 lakh per mandi may not be incentive enough. Surely, the Centre can spare far more than the Rs. 200 crore it has so far earmarked for this game-changing initiative.

The Hindu Business Line, 17 April, 2016, http://www.thehindubusinessline.com/opinion/editorial/open-sesame/article8486438.ece?homepage=true


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