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Breaking down barriers

Important moves towards a single agricultural market

Business Standard Editorial Comment  |  New Delhi 

The nearly decade-old proposal to create a national agriculture market (NAM) finally seems to be making some headway. It would change how farm commodities are traded in the country. Based on online transactions through a national e-platform, this transparent mode of marketing would help tame agricultural inflation by cutting down on intermediaries and narrowing the price gap between producing (read surplus) and consuming (deficit) areas. Over half a dozen states have already agreed to knock down trade barriers as the first step towards formation of the unified farm market, and many more are expected to come on board soon. A time-bound programme announced by the agriculture ministry for developing NAM envisages linking 250 mandis by September 2016 and all 585 mandis by 2018. The Centre has already approved funds for states like Gujarat, Maharashtra, Telangana, Jharkhand and Chhattisgarh, to cover the cost of the needed software and its customisation in the participating markets. Karnataka is already running a unified market by interconnecting 51 of 155 major market-yards and over 350 sub-yards through an e-platform. This model is to be upscaled to the national level to create the NAM, with the Small Farmers' Agribusiness Consortium (SFAC) acting as the nodal agency.

If run properly - and this is a formidable "if" given the tendency to fall back on socialist-era recipes to control prices through trade restrictions - the new system can allow farmers to sell their produce wherever they get a good deal. Buyers could source their supplies from wherever they like. There will be a single licence valid for all states and single-point payment of market fees. With an all-India jurisdiction, the electronic platform can facilitate better price discovery. More importantly, it can spur private investment in agricultural marketing, as has happened in Karnataka, and is vitally needed elsewhere as well.

The idea of a unified farm market has been floating around since the early 2000s. It was included in the National Policy for Farmers brought out in 2007. However, since agricultural marketing is a state subject under the Constitution, the states' role is critical in this venture's success. This is especially so because the agricultural produce marketing committees (APMCs), which operate regulated mandis, have considerable political clout and do not want to forego their hold on marketing of farm produce. The unified e-market has been conceptualised in a way that may not attract much hostility from APMCs. Their interests have not been entirely disregarded. According to the SFAC, a transaction on the e-platform would be deemed to have taken place through the mandi where the seller would normally have brought his produce. Thus, the APMC concerned would continue to earn the mandi fee even if the transaction does not happen in its market yard. With this critical issue having been addressed by the government, it can be hoped that states would have no hesitation to join the NAM for the benefit of both farmers and consumers.

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First Published: Sun, January 03 2016. 22:38 IST