The assent of the Union Cabinet to the creation of the National Agricultural Market makes July 1 an important day in the history of agricultural marketing reforms in India. The concept of electronic agricultural markets is not new in India. National and regional stakeholders have tested waters by establishing electronic cash and derivatives markets for trade in agricultural products.
Dot Exchanges have been offering online trading on various commodities with standardized contracts where farmers, traders, processors, exporters, importers, can buy / sell in a transparent way, with the exchanges they provide the counterparty's guarantee for trades.
This has been a marked deviation from the traditional mandi system and has helped facilitate the efficient discovery of prices and the transaction functions of the market.
Two local exchanges at the national level have achieved relatively better success in creating an uninterrupted electronic spot market mechanism, largely through the support of the exchange ecosystem of their derivatives trading counterparts. Moving one step further, Rashtriya e-Market Services Pvt Ltd (ReMS) was established as a JVC between Karnataka and the NCDEX Spot Exchange Limited. This single market platform currently integrates 51 markets and aims to cover all major 155 yards of the market and 354 subways as well.
Proposed framework
In the mandi system, farmers derive a very low share of rupee due to a long chain of middlemen and cartelization in the physical market, which adds two important costs: margins of intermediaries as well as multiple handling costs.
In addition, there are several limitations in the current framework related to the legislation on direct marketing, multiple taxes and licenses, logistics and infrastructure. These challenges in the existing system and low returns to farmers led the Center to visualize the creation of a unified National Agricultural Market (NAM). The NAM has been proposed to induce transparency in the marketing system, to take advantage of state-of-the-art technology for a well-regulated market and to enable the participation and benefits of the entire agri-food value chain, from farmer to consumer.
The proposed NAM framework provides for real-time electronic auctioning of commodities, together with integrated testing, weighing, storage and payment systems. It is proposed to issue a single license for trade throughout the country in order to promote greater participation. The analysis, weighing and IFs will be integrated with the auction in such a way that payments will be credited directly to farmers' accounts. In this context, Prime Minister Jan Dhan Yojna can be a great facilitator for facilitating payments for marginal and small farmers.
Well-equipped warehouses will be built around the main production groups.
Details will be provided on the electronic platform. It will provide a double benefit to producers, avoiding the need to bring products to the market physically and allowing them to take advantage of the financing against products stored in the warehouses, thus strengthening the framework of price risk management for the farmer.
The imposition of the GST will further facilitate the unification of isolated markets by rationalizing the tax regime. The NAM framework will greatly contribute to fostering private sector participation in marketing reforms, both for physical and soft infrastructure.