From Plate to Plough: Pieces of a market

A single national agriculture market, promised by the BJP in its 2014 manifesto, remains a pipe dream. Can the government reform the broken APMC structure in the last year of its term?

Written by Ashok Gulati , Shweta Saini | Updated: May 28, 2018 6:48:35 am

An overwhelming majority of farmers still relies on the same broken system of markets under the APMC, which is monopolistic and rent-seeking, with high commissions, especially for perishables. (Illustration: CR Sasikumar)

In its 2014 Lok Sabha election manifesto, the BJP promised to evolve a single national agriculture market (NAM) in the country with a view to enable farmers to get a better price and consumers to pay a lower price for agri-produce, a win-win situation at both ends of the agri-value chain. After four years, it is only legitimate to ask how far the government has moved on this front. The short answer is very little. An overwhelming majority of farmers still relies on the same broken system of markets under the APMC, which is monopolistic and rent-seeking, with high commissions, especially for perishables.

In this article, which is the third in a series to evaluate the performance of Modi government in the agri-food space since May 2014, we track the government’s progress on agri-marketing reforms.

It may be interesting to note that it was during Atal Bihari Vajpayee’s tenure as prime minister that some reforms in domestic agri-markets were attempted when a model Agricultural Produce Marketing (Regulation) Committees (APMC) Act 2003 was suggested to the states. As many as 22 states have adopted it in some form, yet it failed to transform the agri-marketing structure in India. The system kept suffering from highly fragmented markets with insufficient infrastructure. Levies and intermediation fees remained high and uneven across states and APMC licensees monopolised trade, leading to rent-seeking and a lower share for farmers in the consumer’s price.

It was against this backdrop that the BJP’s 2014 election manifesto promised to create a unified national agricultural market (NAM), which would reduce the costs of intermediation and wastages, benefiting farmers as well as consumers. In April 2016, a NAM scheme was launched. The Union government budgeted Rs 200 crore for two years and proposed a one-time grant of Rs 30 lakh (later increased to Rs75 lakh in Budget 2017-18) to every mandi which joined the NAM platform. There were three preconditions for any state to come on-board the NAM: They had to ensure (i) one trading license for the entire state, (ii) have a rationalised single levy/market-fee, and (iii) ensure electronic trading/auction. But satisfying these pre-conditions necessitated reforms in the APMC Act and so, rightfully, the government came out with the Agricultural Produce and Livestock Marketing (Promotion and Facilitation) (APLM) Act 2017. It shifted the focus from regulation (under APMC) to promotion and facilitation (under APLM), setting the right tone for agri-marketing reforms.

How far has it moved and whether farmers and consumers have gained from it is the moot question.

As per the Dalwai Committee Report 2017-18 (Volume IV), there are close to 29,547 marketing points. Of these, 22 per cent or 6,615 are regulated markets under the APMC and 22,932 are regional periodical markets (RPMs). On an average, a farmer gets a regulated market in the radius of about 12 km and an RPM in a radius of about 7 km. Out of these 6,615 markets, the NAM scheme aimed to bring 585 markets (9 per cent) on the e-market platform by the end of the financial year 2017-18. Quite commendably, as on March 2018, all targeted mandis, that is, 585 that are in 16 states (see infographic) and two Union Territories (Chandigarh and Puducherry) have been integrated with the NAM platform.

But these 585 mandis brought only 90.5 lakh farmers on the platform, that is less than 7 per cent of the 14 crore Indian farmers. Close to 17 MMTs of quantity, worth Rs 42,265 crore (cumulatively, since the platform’s inception), is reported to have been traded on the platform. But this value is only about 2 per cent of India’s total agricultural output. Besides, this value is also artificially inflated by adding the value of MSP procurement operations by states like Haryana. By including such transactions made at a fixed price (MSP) by a fixed buyer (procurement agency) onto the e-NAM platform, the true spirit of e-NAM —. of free and competitive marketing — fades.

Additionally, as per the Department of Agriculture Cooperation and Farmers Welfare, most of the reported transactions are intra-mandi. Inter-mandi and inter-state trading on the platform is minimal. What this means is that the states on e-NAM have not been able to provide farmers with better price discovery in other mandis within the same state or across states. The Department also acknowledges that the e-payment facility is not available at most mandis and that there is no competitive bidding reported in these states. This clearly implies that the monopoly of the APMCs continues unabated even in the 18 states/UTs and the aim of creating a truly unified NAM with an efficient price discovery mechanism is still a far-fetched dream.

And it may not materialise even in the next five years unless the following steps are taken in a concerted manner: One, there must be an unyielding focus on agri-market reforms starting with the basics of assaying, sorting and grading facilities for primary produce as per nationally recognised and accepted standards. Two, suitable infrastructure at mandi-level (like godowns, cold storages, driers, etc) to maintain those standards must be created. Three, uniformity must be brought into commissions and fee structures that together do not go beyond about 2 per cent of the value of the produce. And finally, a nationally integrated dispute resolution mechanism must be evolved to tackle cases where the quality of goods delivered varies from what is shown and bid on the electronic platform.

These steps will require significant investments and changes in the state APMC Acts. This is feasible, provided Prime Minister Narendra Modi takes a lead and presses for it, bringing uniformity in agri-marketing rules and infrastructure in at least the 22 states where the NDA holds office today. Roping in the private sector for investments would create jobs and promote efficient agri-value chains. This can be the biggest gift PM Modi can give to Indian peasants. Will he do it before the 2019 elections? Only time will tell.

Gulati is Infosys Chair Professor for Agriculture and Saini is Senior Consultant at ICRIER

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