Marketing reforms: India's agri-marketing system needs an upgrade

The Union Ministry of Agriculture and Farmers’ Welfare recently circulated a draft “National Policy Framework on Agricultural Marketing”, inviting public comments and suggestions. Despite vast improvements in agricultural output and productivity over the years, agricultural marketing has not evolved with time.  Agricultural reforms should, therefore, not remain limited to factor-market reforms, but should also include efforts to liberalise constraints to marketing.  This will benefit all stakeholders, including farmers and consumers. In this context, the draft policy calls for the need to achieve barrier-free trade in agricultural produce under a uniform pan-Indian framework. 

There are 7,057 regulated wholesale markets established under the Agricultural Produce Market Committee (APMC) Acts of states and Union Territories (UTs). However, the average density of these markets is just one in 407 square kilometres (sq km), much lower than the prescribed norm of one in 80 sq km. Moreover, only 1,410 markets are linked to the electronic-national agriculture market (e-NAM) network from 23 states and four UTs, while more than 1,100 markets remain non-functional.  Further, around 450 markets have little or no infrastructure and are operating in unfavourable conditions. In this regard, the draft policy has done well to propose measures like increasing the reach of farmer-consumer markets so that farmers can directly sell their produce in retail to the consumers, developing grameen haats into Grameen Agricultural Markets (GrAMs), especially in hilly and the Northeast regions, and strengthening high-level precision facilities oriented to agri-processing and exports at district and state levels.

  To digitise the marketing process to reduce information asymmetry and bring about transparency, the policy has also recommended consolidating and expanding e-NAM beyond APMC markets to public and private purchase centres and grameen haats.  More importantly, the policy has called for increased private-sector participation, preferably in public-private partnership (PPP) mode, to address the infrastructure gap in APMC markets, along with the creation of an “Empowered Agricultural Marketing Reform Committee” of state agricultural marketing ministers on the lines of the empowered committee of state finance ministers on goods and services tax to push the states to adopt the reform provisions in the state APMC Acts.

  Several farmer organisations have raised concerns that increased private-sector participation may lead to monopolisation to the detriment of the farmers and reduce their bargaining power. However, allowing direct farm-gate purchases of farm produce by bulk retail buyers without having to go through the state-notified mandis or pay the various levies and fees that these markets charge can ultimately tilt the terms of trade in farmers’ favour in the long run. Establishing a quarterly “Ease of Doing Agri-trade” index, as recommended by the draft policy, will also foster healthy competition among states. Notably, the draft policy acknowledges that, since agricultural marketing is a state subject under Entries 14 and 28 of List-II (State List) of the VII Schedule of the Indian Constitution, both the state and Union governments will have to work together. After having to withdraw farm laws in the past, the government has done well to adopt a consultative and persuasive way to push agricultural reforms.  Nonetheless, there is a need to invest in better storage and marketing infrastructure, including decentralised storage and warehouse facilities, and resurrect derivatives trading for agri-commodities in the country.