Will NAM really be a game changer?

It will cut middlemen and ensure better prices to farmers, but implementation is key

With the launch of the National Agriculture Market (NAM) by Prime Minister Narendra Modi on April 14, a nationwide electronic trading portal for agri commodities is now a reality. NAM seeks to electronically integrate 585 government-regulated wholesale agriculture markets in phases, with 200 APMCs joining it by September 2016. Another 200 mandis will join the NAM e-platform by March 2017 and the rest 185 by March 2018. It will work on the principle of one licence for one State, single-point levy of taxes/charges and online auctioning for price discovery.

The present system forces farmers to sell their produce only at nearby mandis through commission agents. The result: farmers don’t get more than 20-30 per cent of the prices paid by retail consumers. With NAM in place, farmers will have access to many more buyers, including from outside a State. Thus, a farmer can choose from where and to whom he wants to sell his produce. Similarly, buyers will have more freedom to choose from where they want to buy. With middlemen mostly out of the scene, NAM is expected to create a pan-India common market with freer inter-State movement of agri commodities.

Real-time monitoring of prices and transparency in operations, such as weighing, pricing, billing and presence of a competitive marketing platform, will lead to better price discovery. That, along with the application of uniform quality standards, will bring price parity across different markets in the country. That will address the problem of very high prices of specific commodities in some places and very low prices at others. This will check large fluctuations in prices, and ensure surety of income to farmers. It will reduce the gap between farm to fork prices (the prices farmers get and prices paid by retail consumers).

Challenges

The “One nation one (farm) market” concept can turn out to be the biggest agricultural reform, if executed as envisaged under NAM. However, as things stand today, there are many complications that need to be sorted out to make it work smoothly.

Despite being termed as a national market, it covers only 585 markets out of over 7,000 wholesale markets. All major markets need to be brought under NAM to realise its full potential.

Necessary amendment in APMC laws by remaining States should also be made. Most States ban the movement of commodities when local prices surge. As a part of NAM, States should refrain from restricting the inter-State movement of agri produce.

Most farmers sell their crops to local commission agents as they are their main sources of credit supply. NSSO surveys say that even for MSP-led procurement supported crops, such as paddy and wheat, not more than one-tenth of farmers sell to state/cooperative institutions. If this reality doesn’t change, NAM’s benefits may remain limited to big farmers rather than helping small and marginal farmers. Institutional credit will have to replace credit from local traders/money lenders for encouraging small farmers to access NAM for selling their produce.

Farmers also sell produce to local traders to avoid extra transportation cost. Besides, some farmers who visit mandis carry too small volumes to attract the big buyers. That makes the role of aggregators critical. Another challenge is lack of basic infrastructure. More than 80 per cent of Indian mandis don’t have the required quality checking, grading, assaying and warehousing set-up. It’s important to note that under NAM, farmers will be selling to distant online buyers. As a result, there will be a lag between the time of sale and time of delivery. That makes the availability of quality warehousing important. Buyers and sellers will be dealing with (almost anonymously) complete strangers for transactions. Thus, meeting the agreed quality standards will be crucial.

The way forward

The idea of creating a nation-wide common market for agri commodities as proposed under NAM is a step in the right direction. It will stabilise agri prices across States, cut middlemen and ensure better prices to farmers. However, its implementation faces the challenge of bringing States and other stakeholders on board.

The writer is VP and Head, Agriculture, Food and Retail, at Biznomics Consulting

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