Agricultural Marketing and e-NAM: The Reality

eNAM logo
eNAM logo

GS III – Major crops cropping patterns in various parts of the country, different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers.

Agricultural sector is critical for growth and development of the country as 58% of the population are directly or indirectly dependent on it for their livelihood. This sector faces vulnerabilities in entire supply chain from sowing to marketing. The annual income of the farmer depends upon both the yield and price of the produce.
In order to double farmers’ income by 2022, Government has taken many initiatives to boost agricultural productivity on sustainable basis to increase yield. On the same lines a competitive market structure in the country, that will generate marketing efficiency, is mandatory for determining the sustainable prices to farmers.
In this blog, various government initiatives, problems and reforms in  Agricultural Marketing will be discussed.

Contents
Agricultural Marketing
Means of Agricultural Marketing
Regulated Market System (APMCs)
Problems in APMC
National Agricultural Market
Status of eNAM
Karnataka Model 
Challenges to eNAM

Agricultural Marketing

National Commission on Agriculture defined agriculture marketing as a process which starts with the decision to produce a saleable farm commodity and it involves all aspects of the market structure of system and includes pre and post-harvest operations, assembling, grading, storage, transportation and distribution.
It involves three functions, namely –

  • Assembling (Transportation)
  • Processing (Assaying, grading and packaging)
  • Distribution

Means of Agricultural Marketing

There are many ways by which farmers can dispose their surplus produce. They are,

  • Farmers may sell their produce to village money lender cum trader
  • Local village hats (Fortnightly or monthly village markets)
  • Mandis or Wholesale markets in small or large towns. In mandi there are brokers who help farmers to dispose their produce to wholesalers, they are called Arhatiyas
  • Cooperative Marketing Societies, which collects surplus from their members and sell to mandi collectively. This improves the bargaining powers of members and they are able to obtain better price.

Regulated Market System (APMCs)

In India agricultural marketing system is administrated by the states as per their agri-marketing regulations. Under this system, a 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.
However, there were many irregularities in APMCs and agricultural market lacked harmonisation all over India. Hence centre provided a Model APMC Act  in 2003 with motive of harmonisation and recommended states to reform their own APMC Acts, since agri-marketing is under state list. Even then APMCs had many drawbacks which hindered the marketing system.

Problems in APMC
  • Fragmentation of states into multiple market areas, each administered by separate APMC, hence regional disparities.
  • Requirement of multiple licenses for trading in different APMCs.
  • Multiple levy of mandi fees at various levels, for entry, registration etc.
  • The chain of middle men in agricultural marketing is so large that share of farmers is reduced substantially. According to one study farmers obtain only about 53% of the price of rice. 31% of share goes to middlemen and remaining 16% being the marketing cost.
  • Arhatiyas (Licenced Commission agents) take advantage of ignorance of farmers and take additional illegal charges and bribes. This lead to cartelization of market and prevents farmers from getting actual market price.
  • Poor quality of infrastructure like absence of pucca roads, poor state of warehouses and low use of technology, further makes Mandis inefficient.
  • Information asymmetry and non-transparent process of price discovery .

National Agricultural Market:

NAM is a pan India electronic trading portal which networks the existing APMC mandis to create a unified national market for agri-commodities. NAM portal provides a single window service for all APMC related information and services. This includes commodity arrivals and prices, buy & sell trade offers, provision to respond to trade offers,etc.
eNAM if implemented in full swing will break the trade cartels in APMCs and enable sustainable price discovery. It will bring all basic infrastructures, including assaying and grading machines as these are absolute necessities in an online market where two parties from different corners of state participate.
While material flow continues to happen through mandis, an online market reduces transaction cost and removes information asymmetry between buyers and sellers. It enables real time price discovery on actual demand and supply and promotes transparency in auction process.
To integrate with eNAM, states have to amend their APMC Act to

  1. provide for electronic auction as a mode of price discovery;
  2. ensure single point of levy of market fees and
  3. permit one licence for a trader that is valid across all markets in the state.

But so far, only 14 states have made the amendments. In others, eNAM is not even an option.

eNAM Reform Status of various States (Source: Kurukshetra February 2018)

Objectives of e-NAM
  • To integrate markets first at the level of the States and eventually across the country through a common online market platform, to facilitate pan – India trade in agricultural commodities;
  • To streamline marketing / transaction procedures and make them uniform across all markets to promote efficient functioning of the markets;
  • To promote better marketing opportunities for farmers through online access to more buyers, removal of information asymmetry between farmer and trader, better and real-time price discovery based on actual demand and supply of agricultural commodities, transparency in auction process, prices commensurate with quality of produce, online payment etc. that contribute to marketing efficiency;
  • To establish quality assaying systems for quality assurance to promote informed bidding by buyers;
  • To promote stable prices and availability of quality produce to consumers.
Components of eNAM :
  • A national e-market platform for transparent sale, transactions and price discovery in regulated markets, warehouses and mandis. Willing States to accordingly enact suitable provisions in their APMC Act for promotion of e-trading by their APMC.
  • 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.
  • One license for a trader valid across all markets in the State.
  • Harmonisation of quality standards of agricultural produce and provision for assaying (quality testing) infrastructure in every market to enable informed bidding by buyers.
  • Single point levy of market fees, i.e on the first wholesale purchase from the farmer.
  • Provision of Soil Testing Laboratories in/ or near the selected mandi to facilitate visiting farmers to access this facility in the mandi itself.
Implementation Agencies:

Ministry of Agriculture has mandated Small Farmers’ Agribusiness Consortium (SFAC) to act as lead implementing agency for e-NAM

States & APMCs integrated on eNAM (Source:https://www.enam.gov.in)

Status of e-NAM

The e-NAM initiative is a non-starter even two years after the launch. SO far, only 470 mandis in 14 states have been integrated with eNAM. Even in mandis linked to the platform, trade is not fully online. Most of the times it happens between the buyers and sellers physically present in the mandis.

eNAM statistics ( Source: Kurukshetra, February 2018)

Karnataka Model

Solutions to some woes plaguing the system can be found in Karnataka model
The only state that has successfully established online spot market for commodities is Karnataka.It is a pioneer in agricultural marketing reforms.
Much before eNAM was launched, the State had approved the draft Agricultural Marketing Policy, 2013.

  • The policy’s key objective was to bring in competition and give better price realisation to the farmers.
  • It encouraged investments in warehousing infrastructure, and assaying and grading facilities.
  • It also sought to give a single licence to traders and simplify the licence issue procedure.

Following this, the special purpose vehicle, Rashtriya e Market Services Private Limited (ReMS) , a joint venture between Karnataka Government and NCDEX e Markets, was set up to implement the reforms.
Today, ReMS’ UMP (unified market platform)  the online market platform for agri-commodities —links 163 mandis (of the 165) across Karnataka.
ReMS is working with CDAC (Centre for Development of Advanced Computing), Kolkata, for automation of the assaying process. As of now, CDAC has developed two assaying machines, which scan the samples and give results in lesser time; they also sync data directly to the electronic platform.
Interstate trade is already in progress across the state, as it has set up scientific quality testing labs in 40 major mandi in the State. Samples are analysed as per Bureau of Indian Standards. Around 2000 traders have participated in multiple markets in the State during the last three years.

Challenges to e-NAM

  • In order to promote the inter mandi state trade unified trade licensing is a must. But till date only few states have established the facility for the provision of these unified licenses.
  • Online payment directly to the farmer’s bank account by the buyers is another area of concern where the progress is quite slow.
Assaying Infrastructure
  • A key challenge to online trade in agri-commodities is the absence of assurance on the quality of the commodity; one has to physically examine the stock to know the quality.
  • Though the Centre provides funding to set up assaying facility, as many of the 400 plus mandis connected to eNAM today do not have the infrastructure for grading and assaying.
  • Assaying requires large manpower, especially in peak season.
  • According to Planning Commission report 2011, Only 7% of total produce sold by farmers is graded before sale.
Storage Infrastructure 
  • There is a lack of proper and sufficient storing facilities for the produce. Every year due to unscientific storage 10 to 20% of the produce is eaten away by rats.
  • As assaying is a time consuming process, produce that cannot be assayed in a single day has to be stored. Lack of storage facilities further leads to trade of goods without assaying.
  • During peak arrivals, farmers need storage to wait till they get suitable prices for the goods, but storage capacity is available only to 30% of the need.
  • Capacities of FCI, CWC, SWC, the cooperative and private sector put together was 126.96 million tonnes in 2015-16, a chunk of which is filled with government’s procurement stock.
  • Moreover the average farmer is so poor and indebted that he has no capacity to wait for better prices. He is forced to sell his output to money lender or to the trader to clear his debts.

Once storage infrastructure is created, a farmer can get a loan by pledging the goods against the warehouse receipt. This will ensure that he comes out of the clutches of the money lender, becomes a part of the formal banking system and is not put to stress during crop failure.

Awareness Generation

Awareness among farmers and traders about eNAM is crucial step before implementation of the system. While in markets such as Telangana and AP, where UMP was already in existence, the transition to eNAM was smooth; in others, it has been a challenge as the ground work for moving the users to the new system wasn’t done meticulously.
eNAM is a path breaking initiative to reform agricultural market, but still there are gaps to be filled in order ensure regular income to farmers.
To make agriculture sustainable, the grower must be ensured profit! Hence, Agricultural marketing reforms are the critical steps towards doubling farmers income.