One nation, one market model is the reform required to deal with issues related to agricultural marketing. Discuss. (15 Marks)

Mentors Comments: 

  • The question expects us to highlight the issues with the current regime in brief, discuss what kind of model is being talked about, mention about the advantages and disadvantages of one nation, one market model. Finally, we need to provide our view on unified markets and way forward.
  • In the introduction mention that the aim is to double farmer’s income within a time frame, for which marketing of agricultural production needs to be looked at and reformed.
  • In the main body discuss in brief the issues with APMC regime. Not more than 2-3 lines.
  • Thereafter explain what do we mean by one nation, one market. Talk about e-NAM and steps taken by the government to promote it.
  • Discuss the advantages and disadvantages of such a model.
  • In conclusion, give your view on whether it would turn out to be a panacea for the agricultural sector and briefly mention way forward.

Answer:

Agriculture, which contributes 17 per cent to the $2.3-trillion economy, has remained relatively untouched by reforms with growth rates averaging below three per cent over as many decades. Lack of technology, inefficient markets and small landholdings have worsened challenges.

Measures taken by the government for a one nation one market for agricultural produce:

  • Single national agriculture market (NAM) was launched in 2016 in the country, with a view to enable farmers to get a better price and for consumers to pay a lower price for agri-produce, a win-win situation at both ends of agri-value chains.
    • It was launched with the goal of formulating a unified national market for agricultural commodities by integrating Agriculture Produce Marketing Committees or APMCs across states in India.
    • e-NAM was to help farmers find the best possible price for their produce by expanding the market nationally and eliminating middlemen. 
    • The highlight of the scheme is the single point levy of market fees, i.e. on the first wholesale purchase from the farmer

Why there is a need to ensure the creation of a one nation one market:

  • National Commission on Agriculture (1976) as well as the NCF (2006) had categorically emphasised that higher output alone will not provide higher income to farmers unless it is well marketed.
    • Recent incidents of farmers reportedly dumping their bumper produce of tomatoes and onions and emptying cans of milk into drains is clear evidence of it. So had the markets been integrated, the surplus produce would have been transferred to deficit regions. 
  • The Dalwai Committee on Doubling Farmers’ Income has pointed out that the share of farmers in consumer’s price is very low. It generally varies from 15 to 40 per cent.
    • The dominant role of middlemen among others is primarily responsible for farmers not realising a reasonable price for their produce, lowering farm income and profitability. 
  • The Committee of State Ministers, in charge of Agricultural Marketing to Promote Reforms (2013) has highlighted in its report that
    • Covered and open auction platforms exist only in two-thirds of the regulated markets
    • Cold storage units exist in less than one-tenth of the markets and grading facilities in less than one-third.

Why the measures taken by the government failed:

    • States role:
      • Most of the reported transactions are intra-mandi. Inter-mandi and inter-state trading on the platform are minimal. What this means is that the states on e-NAM have not been able to provide farmers with better price discovery in other mandis of the same state or across states.
      • E-payment facility is not available in most mandis, and that there is no competitive bidding reported in these states.
      • States alone cannot revamp the agricultural marketing sector, primarily due to paucity of funds and technology.
    • Infrastructure:
      • Even as the Centre works with States to persuade them, infrastructure such as reliable third-party certification for the product in every mandi and robust computer systems, including uninterrupted web connectivity, need to be put in place.
    • Middlemen influence:
      • The hold of the middleman, who often is also the financier of the farmer against a pledge of the produce is not completely broken.
    • The challenges posed by present-day APMCs:
      • Fragmentation of State Into multiple market areas, each administered by separate APM
      • Separate licenses for each mandi are required for trading in different market areas within a state. This means that there is a limited first point of sale for the farmer.
      • Licensing barriers leading to conditions of monopoly
      • Opaque process for price discovery
      • An overwhelming majority of farmers still rely on the same broken system of markets under APMC, which is monopolistic and rent-seeking, with high commissions, especially for perishables.
      • APMCs play dual role of regulator and Market. Consequently, their role as regulator is undermined by vested interest in lucrative trade. Generally, member and chairman are nominated/elected out of the agents operating in that market.
      • Exporters, processors and retail chain operators cannot procure directly from the farmers as the product is required to be channelised through regulated markets and licensed traders. There is, in the process, an enormous increase in the cost of marketing and farmers end up getting a low price for their produce.
    • NAM does not say anything about interstate taxes and levie.
    • Dominance of cash:
      • Critical link was creating an electronic payment system that would allow the buyer credit the proceeds directly into the farmer’s bank account. But this has not taken off, and farmers continue to be paid in cash
      • Physical trading is still taking place even in mandis that are integrated with e-NAM.

Following steps need to be taken in a concerted manner:

  • Unyielding focus on agri-market reforms starting with basics of assaying, sorting, and grading facilities for primary produce as per nationally recognised and accepted standards
  • Creating suitable infrastructure at mandi-level (like godowns, cold storages, and driers) to maintain those standards
  • Bringing uniformity in commissions and fee structures that together do not go beyond, say 2%, of the value of produce
  • Evolving a national integrated dispute resolution mechanism to tackle cases where the quality of goods delivered varies from what is shown and bid for on the electronic platform. This would require significant investments and changes in state APMC Acts. 
  • Committee on Doubling Farmers’ Income under the chairmanship of Ashok Dalwai, in its draft report, justifies the recommendation saying marketing has no boundaries. This necessitates a pan-India operation to meet the demand across the country.
    • Besides, the committee has also recommended rolling out the model Agriculture Produce Marketing Committee (APMC) Act 2017 which would facilitate single-point levy of taxes, promote direct interface between farmers and end-users, and give freedom to farmers to sell their produce to whomsoever and wherever they get better prices
  • Creation of accreditation agency to ensure quality assurance.
  • The Economic Survey suggests incremental steps as possible solutions for setting up a national market. 
    • State governments may be specifically persuaded to provide policy support for alternative or special markets in the private sector. 
    • In view of the difficulties in attracting domestic capital for the setting-up marketing infrastructure, liberalization in FDI in retail could create possibilities for filling in the massive investment and infrastructure deficit in supply chain inefficiencies. 
  • Roping in the private sector for investments would create jobs and promote efficient agri-value chains.
  • Buying the produce from farmers below the MSP should be made illegal. The ‘model price’ that these markets offer should, therefore, be replaced with MSP.  

Recognizing that a competitive market, besides adding to the welfare of the producers and consumers also plays a contributory role in poverty alleviation, the recent Budget also highlighted that farmers and consumers’ interest will be further served by increasing competition and integrating markets across the country. While these are discrete measures, a holistic policy with across-the-board reforms would enable the Indian agricultural market to cross the Rubicon and progress towards Achieving Pareto efficiency.

19 Comments
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Theertha Vijayan
Theertha Vijayan
2 years ago

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Theertha Vijayan
Theertha Vijayan
2 years ago

MOJO9c31Y00D50827870 pls check

Chester
Chester
2 years ago

Fragmentation of both market and land is the major issue.

-inter-state value added chains are essential.
-Commodity trading platform may further help in consolidation of pricing.

In challenges you can write about lack of implementation of model APMC act by states due to excessive lobbing and political motives .
Logistic infra is poor especially when the product has lower shelf life.

SAMPADA scheme for warehousing and cold storage.

way forward-
Food processing should be promoted and diversification of crop is essential. Promote mushroom, etc for exports.

Vishal Agrawal
Vishal Agrawal
2 years ago

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Vishal Agrawal
Vishal Agrawal
2 years ago
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yaksh madaan
yaksh madaan
2 years ago

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Deepanshu Gulyani
Deepanshu Gulyani
2 years ago

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Unnati Chauhan
Unnati Chauhan
2 years ago

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Abhi Shek
Abhi Shek
2 years ago
Akankhya Behera
Akankhya Behera
2 years ago

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Chester
Chester
2 years ago
Kunal Aggarwal
2 years ago
Reply to  Chester

Content lacking. Starting was good. Then, you shifted to other measures to imprve farmer income.

the question is not on increasing farmer income. The question is on one nation, one market. So, 80% of your discussion should be related to it. Only at the end conclusion, you should probably say that other measures are also required.

Discuss how such one nation, one market needs to be brought. What would be the challneges? – political, infra, economic, awareness, language barriers?

In the conclusion, when you say, fragmentation has deflated the prices – I think it is wrong, fragmentation has inflated the prices of commodities but it goes to middlemen.