National Agriculture Market (e-NAM)

On April 14 2016, Prime Minister launched National Agriculture Market (NAM) as a pan-India electronic trading portal for farm produce which creates a unified national market for agricultural commodities by integrating the existing Agriculture Produce Market Committee (APMC) markets. This portal provides a single window service for all APMC related services and information, such as commodity arrivals and prices, provision for responding to the trade offers, buy and sell trade offers, among other services.

Implementation Agency

Small Farmers’ Agribusiness Consortium (SFAC) is the lead promoter of NAM. SFAC is a registered society of Department of Agriculture, Cooperation & Farmers’ Welfare (DAC&FW) under Ministry of Agriculture and Farmer Welfare. SFAC through open tender selects a Strategic Partner (SP) to develop, operate and maintain the NAM e-platform. SFAC implements NAM with the technical support of SP and budgetary grant support from DAC&FW. DAC&FW meets the expenses on software and its customization for the States and is providing it for free. DAC&FW is also giving a grant as one time fixed cost up to Rs.30 lakhs per Mandi (other than to the private mandis) for installation of the e-market platform.

Around 6500 APMCs operate throughout the country of which 585 district level mandis in States/UTs desirous of joining are planned to be linked by NAM. 400 mandis are planned to be integrated by March 2017 and the remaining by March 2018.

Funds Allocation

The Cabinet Committee on Economic Affairs had approved a Central Sector Scheme for Promotion of National National Agricultural Market through Agri-Tech Infrastructure Fund (ATIF). The government has allocated Rs. 200 crore to the newly created ATIF. With this fund SFAC will implement NAM for three years from 2015-16 to 2017-18.

Salient Features of NAM

  • It will enable farmers to showcase their produce through their nearby markets and facilitate traders from anywhere to quote price.
  • It provides for a national e-market platform for transparent sale transactions. States desirous to join has to accordingly enact suitable provisions in their APMC Act.
  • Liberal licensing of traders / buyers and commission agents by State authorities. There are no pre-conditions asking for physical presence or possession of shop /premises in the market yard. One license for a trader will be valid across all the markets in that State.
  • Single point levy of market fees, i.e on the first wholesale purchase from the farmer.
  • Harmonisation of quality standards of agricultural produce and infrastructure for quality testing is made available in every market to enable informed bidding by buyers. At present, Common tradable parameters have been developed for 25 commodities.
  • Provision of Soil Testing Laboratories in/ or near a mandi has been provided to be used by the visiting farmers.
  • States can have their own electronic platforms and can decide on linking them to NAM.

Current Status of agricultural marketing

As per the Economic Survey 2014-15, India has 2,477 principal regulated primary agricultural markets in the country. These markets are governed by APMC Acts and administered by a separate Agricultural Produce Marketing Committee (APMC) which has its own marketing regulations. This set up hinders the free flow of agricultural commodities from one market to another. Further multiple handling of commodities and multiple levels of mandi charges only ends up in escalating the prices for the consumers without commensurate benefit to the farmer. In addition it leads to inefficiencies in price discovery.

Present Challenges

Present agriculture marketing system has many challenges such as:

  • fragmentation of State into multiple market areas, each administered by separate APMC,
  • multiple levy of mandi fees,
  • requirement for multiple license for trading in different APMCs,
  • conditions of monopoly due to barriers in licensing,
  • poor infrastructure and low use of technology,
  • information asymmetry and opaque process for price discovery,
  • Higher market charges and movement controls, etc.

With nearly 58 per cent of the population depending upon agriculture sector for their livelihood, the unification of markets both at State and National level is imperative.

Implications / Benefits for various stakeholders

  • Buyers like large retailers, processors or exporters will be able to source commodities from any mandi in India. Their physical presence and dependence on intermediaries will not be needed, thereby reducing the intermediation cost.
  • Local traders can get access to larger national market for secondary trading.
  • NAM will ensure open price discovery and better returns to farmers as there is no state or national price.
  • Farmers get more options for selling their produce. The market size for farmers would increase as he won’t be limited to a captive market.
  • A farmer in south India can now sell his produce on the NAM to a trader in the west/north/east India based on price.
  • NAM will increase the number of traders and the competition among them increases. This translates in to stable prices and availability to the consumers.
  • There will be reduction in book keeping and reporting system as it will be generated automatically.
  • Monitoring and regulation of traders and commission agents becomes easy.
  • Transparency in the process eliminates the scope of manipulation of tendering/auctioning process.
  • Market allocation fee will increase due to accounting of all transactions taking place in the market.
  • It will reduce the manpower requirements as the tendering/auctioning process is carried out electronically. For instance, the system declares the winner of lots within few seconds.
  • It eliminates information asymmetry as all the activities of an APMC can be known directly from the website.
  • NAM aims to improve the marketing aspect of the agriculture sector.
  • With one license for the entire state and single point levy, an entire state becomes a market and the market fragmentation within the same state gets abolished.
  • It will improve the supply chain of commodities and reduces wastages.

Various Constraints

  • All though the system looks simple, for farmers it may not be as simple as expected. Most of the farmers have the habit of selling their yield to a local produce aggregator than taking their crops to the mandis. Even if some farmers take them to mandis, their yield would be very small to excite distant buyers bidding online. In this context, the possibility for better price discovery is quite limited.
  • Quality variations in commodities at both the state and national level pose a challenge. For example, wheat in Punjab and Haryana is of medium quality whereas those from Madhya Pradesh and Gujarat are of superior quality.
  • Electronic platforms like NAM would be a right platform only for trade standardized commodities and for the rest it may not be.

Way Forward

Farmers can still resolve the above problems and reap benefits if they can find ways to aggregate their produce on their own bypassing local produce aggregator. In this, the cooperatives and famer produce organizations can play a facilitating role to aggregate commodities.

Reforms are also needed covering all facets of agricultural sector such as soil health, traditional farming, irrigation, extension services, fertilizers among others to make the sector attractive. This will create huge employment opportunities, ensure surplus production of all commodities and effective functioning of NAM.

Reforming agricultural markets requires sincere effort and effective participation of all the stakeholders.

Obligation of states for successful implementation

The states must ensure that reforms in their APMCs are carried out both in letter and spirit. To make the initiative successful, the states must undertake the following reforms:

  • Provision for electronic auction for price discovery.
  • Provide a single license to be valid across the state.
  • Provision for a single point levy of market fee.

It should also be noted that only those states/UTs which fulfill the above three prerequisites will be eligible for assistance under this scheme.

The Government’s decision to create National Agriculture Market (NAM) e-platform for farmers will remove inter-state barriers in moving farm produce and can be a game changer provided the prerequisites are fulfilled by states. These two most important prerequisites include – (1) amendment of the state Agricultural Produce Marketing Committee Act (APMC) Acts and (2) physical logistic support to farmers which would enable them to move their crops. We note here that some 12 states have already amended their APMC Acts.

What the Karnataka model has to offer?

Rashtriya electronic Market Scheme (ReMS) (The Karnataka model) is a first such initiative in the country which is a joint initiative of the government of Karnataka and NCDEX e-Markets. It was launched in February 2014 and this has at present linked 130 markets in 3 states. The reforms in the state was considered successful and led to the establishment of an autonomous body called ReMS Private Limited for this purpose. This body is in charge for the entire process unification and implementation of this initiative.

In spite of its success, the gains to farmers are not substantial. All the stakeholders have some concerns which compound their fears resulting in slow gains. For example, the commission agents fear that unification of markets will adversely affect them as farmers can directly enter the details of their commodities in the e-platform and sell them to the highest bidder. Farmers fearing loss of income are not using the assaying facilities. These fears act as impediments to the progress of the reforms.

In sum, the Karnataka model offers some pointers related to the implementation of similar schemes. For one, it is clear that without the active involvement of all the stakeholders, the gains and the pace of reforms would be minimal. Secondly, reforms relying solely on technical solutions without allaying the fears of stakeholders may not yield the desired impact.