E-trading, e-auction platforms for farm produce gaining traction

The new farm laws will give further fillip to alternative trading options outside of mandis

While there is no clarity yet on the fate of the three new farm laws, a clutch of e-auction and e-trading platforms have started consolidating their operations to provide farmers with trading options outside the ambit of regular mandis.

Though most operators admit that their growth plans have been spurred by the Covid-19 pandemic and the need for alternative trading channels, they agree that if the laws come into force, they will have a positive impact on their business. 

“The pace of routing farm products from bigger to smaller mandis has gone down in recent months. More and more players in the smaller mandis and market places are now sourcing directly from the farmers instead of buying the produce from bigger mandis,” Nukul Upadhye, CEO and founder of Bijak, an agritech B2B marketplace, told Business Standard.

Upadhye says the main reason for this is that liquidity, which was earlier available within traditional mandis, can now be accessed outside because of digitisation. 

For example, says Upadhye, earlier most traders at Khandsa mandi in Gurugram, used to buy their fruits and vegetables from Delhi’s Azadpur market, but increasingly, they are sourcing the produce from nearby farms and villages, using digital platforms. This could be due to the exigencies of the pandemic and also because of increased liquidity and ease of operations outside traditional mandis.

Prior to this, NCDEX e-Market Ltd and m-junction used to provide such online trading platforms outside the mandis. Origo Commodities, a leading player in the commodities space, is one of those that have launched an e-auction platform to facilitate out-of-mandi transactions.

Participants register digitally on the platform through their mobile phones and receive notifications on upcoming auctions. The auction process is transparent, and thanks to the digital payments, farmers can receive their money faster and directly into their accounts.

Origo’s platform offers the capability of forward auction (to sell) and reverse auction (to purchase) commodities. The buyer has to specify the place where the farmer needs to bring his produce, just like it happens in government procurement operations and other physical auctions.

“Government entities can use the platform for the sale of additional stock in the open market and also use the platform for MSP procurement from farmers, with quick digital payments for their deposits,” says Sunoor Kaul, co-founder, Origo Commodities.

To check defaults and ensure that only genuine buyers use the platform, a buyer has to make a minimum security deposit to participate in the auction. If he fails to take delivery within a specified time, then the deposit is forfeited just like in any other auction.

Origo has launched operations in six states — Madhya Pradesh, Rajasthan, Punjab, Haryana, Chhattisgarh and Delhi — and plans to expand the platform to more states in the coming months.

Stressing that buyers will have to comply with all the state laws, Kaul says, “Once the acts come into play, the farmer connect will go up manifold, which will further enhance the liquidity in the e-auction platforms.” 

In the next few years, Origo plans to route almost Rs 100 crore of its annual purchases through its digital platform.

Amith Aggarwal, co-founder and CEO, Agribazaar, is also bullish about alternative trading options. His company has set up ‘Village Fulfillment Centres’ in 25 locations across Madhya Pradesh and Maharashtra. Equipped with a quality lab, an electronic weighing area, internet connectivity, and display of the Agribazaar portal, the centres allow farmers to upload their product details and immediately find buyers. Aggarwal says that his portal will offer prices that are 6-7 per cent better that what a farmer can get in a traditional mandi.

“In a traditional mandi, there are a lot of intermediaries and a product changes hands multiple times, which increases the transaction cost. We are trying to eliminate that,” Aggarwal says, adding that he plans to take the concept to 75 more locations by December 2021. The government’s own Common Service Centre-SPV has also started an e-market portal for agri services called CSC agri.in,  where farmers can not only buy seeds, fertilisers and cattle feed, but can also sell their produce directly through the Kisan e-Mart. 

Aggarwal of Agribazaar, who recently signed an MoU with the Government of India to develop a digital agriculture platform for farmers, feels that transparency of operations, prompt payments and ease of doing business will attract farmers and traders alike to these out-of-mandi platforms.