By Prashansa Srivastava
In a bid to improve farmers productivity and raise remunerative prices of agricultural commodities, the Centre has planned to prohibit physical trading in any of the 455 ‘mandis’ (rural trading hubs) in 13 Indian states. These hubs will shift to the electronic National Agriculture Market (e-NaM) from September 30.
The electronic National Agricultural Market (e-NaM) is an electronic trading portal which networks the existing agricultural produce market committee (APMC) mandis to create a unified national market for agricultural commodities. It seeks to reduce the exploitation of farmers by removing the problem of information asymmetry, and by promoting transparency.
The criticisms of the APMC Act
The agriculture market in India is governed by the Agricultural Produce Market Committees (APMC) Act, which was established to bring transparency in agricultural markets, and to protect the farmers from exploitation by the middlemen. The Act mandates that all farm produce should be sold via auction at regulated markets, thereby ensuring that farmers get a fair price for their produce.
However, the APMC Act failed to benefit either farmers or consumers. As the Act limits the number of licenses issued to the traders for a market and takes away the freedom of farmers to sell their produce anywhere, it led to a collusion among the traders. The Act that was established to empower farmers, ended up making them dependent on trading cartels which controlled prices and charged large commission fees for transactions. The prices of perishable goods that were not covered under the MSP (Minimum Support Price) were determined by traders. As these markets lacked adequate infrastructure like cold storage, the farmers usually ended up selling their produce at throw-away prices.
This created a ‘license raj’ in the agriculture market, facilitated hoardings by traders, and ultimately high food inflation. The Act also curtailed the freedom of farmers to sell their produce through any means apart from the commission agents and other functionaries licensed by the APMCs. This created fragmented markets for agricultural commodities.
Loopholes of the e-NaM
The Phase-1 of the e-NaM scheme has not had promising results so far. Phase-1 involves grading the agricultural produce and taking an online auction of it. This has resulted in the same middlemen, also known as commission agents, who have been controlling the market all along, bidding for the produce. The only difference is that now this takes place online. This in no way elevates the position of the farmers, and only strengthens the position of the middlemen who are already plaguing the system.
The e-NaM scheme has also failed to take off due to the absence of superior technical equipment, deficiency of fully functional online mandis, lack of technical expertise, and the reluctance of stakeholders. This has led to the creation of an isolated and fragmented online market, something very far from the envisioned One Nation, One Market, dream with which it was started.
Is this move helpful?
The importance of using technology to revamp Indias agricultural sector cannot be overemphasised. It enables the farmers to get access to information that helps them increase yields and optimise land usage. It also helps prevent exploitation by largely taking away the role of intermediaries, and it leads to fairer and more open markets. However, by completely prohibiting the physical trading in mandis, it will discourage farmers from enrolling for the e-NaM scheme, as the service becomes digital by default. The loopholes of the scheme will become even more evident when trading online becomes the norm. This excludes the farmers who are on the wrong side of the digital divide. Digitisation in agriculture already suffers from problems like low awareness among farmers, minimal broadband penetration in rural areas, and rampant internet illiteracy. These problems must be tackled before forcing online trading on the enrolled farmers. The scheme seeks to protect bargaining power and increase the incomes of farmers. However, by prohibiting physical trading, it seems to be going against these goals.
The Centre must learn from the mistakes it made while formulating the APMC Act. If the Centre wants to achieve the goal of doubling the income of farmers by 2022, it must give them the freedom to choose the market wherein they can sell their produce, and get the highest price for it. Digitisation, by default, is not the sole solution to the woes of farmers. The Centre must, in fact, make an effort to integrate the physical mandis with the e-NaM portal by reforming the APMC Act drastically. It must first create adequate resources for online trading by farmers, and only then make it mandatory.
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