National Agriculture Market or e-NAM IAS Target

National Agriculture Market or e-NAM

30 Jul 2020

Category : National Issue

Topic: National Agriculture Market or e-NAM

National Agriculture Market or eNAM is an online trading platform for agricultural commodities in India. The market facilitate farmers, traders and buyers with online trading in commodities. The market is helping in better price discovery and provide facilities for smooth marketing of their produce. Over 90 commodities including staple food grains, vegetables and fruits are currently listed in its list of commodities available for trade. The eNAM markets are proving popular as the crops are weighed immediately and the stock is lifted on the same day and the payments are cleared online. In 2018, some attractive features like MIS dashboard, BHIM and other mobile payments, enhanced features on the mobile app such as gate entry and payment through mobile phones and farmers database is helping adoption even more. The present trading is done mostly for intra-market, but in phases, it will be rolled out to trade in inter-market, inter-state, creating a unified national market for agricultural commodities.
The NAM Portal provides a single window service for all APMC related information and services. This includes commodity arrivals & prices, buy & sell trade offers, provision to respond to trade offers, among other services. While material flow (agriculture produce) continue to happen through mandis, an online market reduces transaction costs and information asymmetry.

Issues associated with currently practiced Regulated Market

  • Under this regulation, farmers depend on middle man and no exporter or processor could buy directly from farmers. It discouraged processing and exporting of agricultural products.
  • Under the act, the state Government could only set up markets, and private players reluctant due to cumbersome and regulatory web thus preventing private players from setting up markets and investing in marketing infrastructure.
  • Formation of cartels b/w vested interest with links to political networks resulting in price variations.
  • An increased number of middlemen so farmers not get right price consumer pay high price formed a virtual barrier between the farmer and the consumer. this system cause middle men to reap huge benefits at the cost of poor and consumer
  • The licensing of commission agents in the state regulated markets has led to the monopoly of the licensed traders acting as a major entry barrier for new entrepreneurs. this led quality compromise and hinder market competition which encourage sellers to provide quality service at competitive price to remain relevant in market.
  • The fragmentation of markets within the State hinders the free flow of agro- commodities from one market area to another and multiple handling of agri-produce and multiple levels of mandi charges end up escalating the prices for the consumers without commensurate benefit to the farmer.

Solution to handle these Problems

Consequently, the inter-ministerial task force on agricultural marketing reforms (2002) recommended the APMC Act be amended to allow for direct marketing and the establishment of agricultural markets by the private and co-operative sector to provide more efficient marketing and creating an environment conducive to private investment. In response, the Union Ministry of Agriculture proposed a model act on agricultural marketing in consultation with State governments for adoption by the States. (Here note that agriculture is a state subject and hence Central government can only give guidelines. It is within the powers of state government to decide whether to make amendments or not.)

Also e-NAM helpful to addresses these challenges

  • Creating a single market Pan-India through online trading portal across the country.
  • Promoting uniformity.
  • Rationalizing procedures across the unified markets and simplification so that farmers not face difficulties.
  • Spreading awareness and using communication channel between the buyers and sellers and promoting real time price finding on the basis of actual demand and supply.
  • Promotes transparency in auction process and elimination of nexus b/w mandi syndicate and few rich.
  • Providing an accessible nationwide market for the farmer with equal prices for the quality of his produce.
  • Availability better quality produces at more reasonable prices and online payment to the consumer.

Objective of e-NAM

  • A national e-market platform for transparent sale transactions and price discovery initially in regulated markets. Willing States to accordingly enact suitable provisions in their APMC Act for promotion of e-trading by their State Agricultural Marketing Board/APMC.
  • Liberal licensing of traders / buyers and commission agents by State authorities without any pre-condition of physical presence or possession of shop /premises in the market yard.
  • One license against current practices of following multiple licenses (for every state or even every mandi) for a trader valid across all markets in the State.
  • Synchronisation of quality standards of agricultural commodities and facility for assessing (quality testing) infrastructure in every market to facilitate informed bidding by buyers.
  • Soil Testing Laboratories facility in/or near the particular mandi to help visiting farmers to access this provision in the mandi itself.
  • Single point levy of market fees, i.e. on the first wholesale purchase from the farmer.

The salient features of Model APLM Act, 2017

  • Abolition of fragmentation of market within the State/Union Territory (UT) by removing the concept of ‘notified market area’ and the APLM Act provides for the recognition of a State/UT as a single market.
  • Besides, cereals, pulses and oilseeds, the Act seeks to provide for geographically restriction-free trade transaction of agricultural produce including commercial crops like cotton, horticultural crops, livestock, fisheries and poultry.
  • Disintermediation of food supply chain by integration of farmers, processors, exporters, bulk retailers and consumers
  • Creation of a conducive environment for setting up and operating private wholesale market yards and farmer-consumer market yards, so as to enhance competition among different markets.
  • Promotion of direct interface between farmers and processors/ exporters/ bulk-buyers/end users so as to reduce the price spread bringing advantage to both the producers and the consumers.
  • Enabling declaration of warehouses/silos/cold storages and other structures/space as market sub –yard to provide better market access/ linkages to the farmers.
  • Giving freedom to the agriculturalists to sell their produce to the buyers and at the place and time of their choice, to whomsoever and wherever they get better prices.
  • Promotion of e-trading to enhance transparency in trade operations and integration of markets across geographies.
  • Provisions for single point levy of market fee across the State and unified single trading licence to realise cost-effective transactions.
  • Promotion of the national market for agriculture produce through provisioning of inter- state trading licence, grading and standardization and quality certification.
  • Rationalization of market fee and commission charges.
  • Provision for Special Commodity Market yard(s) and Market yard(s) of National Importance (MNI).
  • Full democratization of Market Committee and State/UT Marketing Board.

Advantages of e-NAM

  • For farmers, NAM promises more options for selling their produce and competitive returns.
  • For local traders, NAM will provide access to larger national market for secondary trading.
  • For bulk buyers, processers, exporters, NAM will enable direct participation in the local mandi trade, reducing intermediation cost.
  • Stable prices and availability to consumer.
  • For mandis, NAM benefits in terms of reduction in book keeping and reporting system, against current practice of manual book keeping better monitoring and regulation of traders and commission agents;
  • Completely transparent system which eliminates any scope of intentional/un-intentional manipulation of tendering / auctioning process; improvement in the market fee collection by means of accounting all the transactions that are taking place in the market;
  • Reduction in manpower requirements as tendering / auctioning process takes place through the system; (this system helps to declare the winner for the lots within few seconds even for thousands of lots in the market); analysis and forecasting of the arrivals and prices; availability of the activities of each APMC on the website directly
  • Farmers can sell their products even in other countries
  • Help in government vision of financial and digital inclusion.
  • Control inflation which help economy on other fronts like Current account deficit, fiscal deficit etc

Path is not easy to implement and execute e-NAM

  • Scattered agriculture market and each mandi administered by their own APMC requirement for multiple licence for trading in different APMCs
  • Even farmers have to take multiple licence to sell product in same state

  • Nexus b/w vested interest and conditions of monopoly due to:
    • licensing-raj,
    • poor infrastructure
    • low use of technology
    • electricity and internet connectivity
    • forget talk about remote location which is far from basic requirements,
    • absence of cold chain, and
    • storing place for products

So farmers has no choice instead to sell products on cheap prices. Poor and illiterate farmers, lack of knowledge and financial and digital illiteracy at the same time spreading rumours by vested interests, 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.

State’s Requirements for Successful Implementation

In order to facilitate both - unification of market and online trading, it is necessary for the States to undertake reforms prior to seeking assistance under the scheme in respect of
  • a single license to be valid across the State abolish old practice of multiple licenses
  • single point levy of market fee and
  • provision for electronic auction as a mode for price discovery.

Only those States/UTs that have completed these three pre-requisites will be eligible for assistance under the scheme. The States must ensure that the reforms are carried out both in letter and spirit through appropriate and unambiguous provisions in the APMC Acts and rules. Besides the State Marketing Boards/ APMCs must enable the promotion of the e-auction platform. The States will need to ensure that the mandis that are integrated with NAM makes provision for requisite online connectivity, hardware and assaying equipment.

Karnataka Model

  • The only state that has successfully established online spot market for commodities is Karnataka and Karnataka is pioneer in agricultural marketing reforms.
  • The policy’s key objective was to bring in competition and give better price realisation to the farmers.
  • It encouraged investments in warehousing infrastructure, and assaying and grading facilities.
  • It also sought to give a single licence to traders and simplify the licence issue procedure.
  • Following this, the special purpose vehicle, Rashtriya e-Market Services Private Limited (ReMS) , a joint venture between Karnataka Government and NCDEX e Markets, was set up to implement the reforms.
  • Today, ReMS’ UMP (unified market platform) the online market platform for agri-commodities across Karnataka.
  • Interstate trade is already in progress across the state, as it has set up scientific quality testing labs in 40 major mandi in the State. Samples are analysed as per Bureau of Indian Standards. Around 2000 traders have participated in multiple markets in the State during the last three years.

Government steps in sync with e-NAM

  • Financial inclusion by opening bank accounts of the unbanked person especially poor people
  • Financial inclusion with objective of financial literacy and spreading awareness among the farmers and consumers about current practice and govt policy
  • Digital India, merger of banks
  • Promoting investment in the agriculture sector including FDI
  • Strict vigilance on corrupt practice like hoarding of commodity by the vested interest
  • Dialogue with state govt and try to make consensus, so promoting cooperative federalism

Conclusion

Eventually, the success of NAM will depend upon whether farmers get a higher price for their produce or not and whether this reduces price volatility—in which case, introducing a system of market-makers needs to be tried at some point in time. Bringing in large retail chains will help but with the central government opposing FDI in retail, this looks tough, though it is possible the new FDI window for pure food retail may attract big food retailers. And since most state governments have a history of blocking supplies when local prices go up, it will be critical to ensure the states on the platform don’t resort to their old tricks in times of supply shortage.