How e-NAM can promote the warehousing sector

The recently launched e-NAM (National Agriculture Market) is targeted to be rolled out in 200 mandis across the nation on September 30, 2016.

In recent years, the country has seen rising efforts by the government and private companies to unify agricultural markets. It is expected that participants across the nation will trade on the e-NAM platform and that the prices of agricultural produce will be determined based on wider demand and supply perspectives while reducing the number of intermediaries.

Though it has been proposed that the electronic platform will facilitate buyers across the nation to participate in the trade, it may be possible only if the physical presence of the buyer is not essential.

For example, a trader based in Karnataka can participate in trading of apples in the markets of Himachal Pradesh only if at least two things are made certain; first, that the grade/quality of the produce being displayed for auction is reliable and that the buyer is familiar with the grading system.

Second, the buyer has to have adequate logistical support to get the produce delivered to him.

Under the prevalent practice at APMCs, farmers bring their produce and once the price is determined after auction, delivery takes place immediately.

But in the case of e-NAM, since the buyer may be participating from a distant location and the auction will decide from which APMC the produce will be bought, getting it delivered will be a limiting factor.

The concept of Warehouse Based Sell (WBS) is a potential solution to overcome such an issue and hence, a determining factor for the success of e-NAM. This system of WBS is already in practice in the country and is followed mainly by commodity exchanges. Except Karnataka, no State has notified the warehouse as a component of market.

In the case of e-NAM, if the commodities sold through APMCs are routed through warehouses, or if the APMCs make arrangements for warehousing/cold storage facilities through tie-ups locally, it will be easy for buyers to trade at any APMC without hurrying the delivery.

As followed in the case of commodity exchanges, the seller can deposit assayed and graded produce at notified warehouses and based on the warehouse receipt, trading occurs. In order to make such an arrangement available, quality storage will be needed across the nation.

This will require the active role of an agency such as the Warehousing Development and Regulatory Authority to increase awareness about accreditation of quality warehouses and to also speed up the process of accreditation.

Currently the warehousing capacity gap estimated by the Planning Commission stands at 27 million MT. Also, insufficient and inefficient infrastructure has been a major drawback of the warehousing sector in India. While obtaining accreditation with WDRA, warehouse operators need to comply with the strict norms of accreditation.

It has been observed that the warehouse operators in the country have been putting in efforts to renovate their warehouses in such a way that it fits the accreditation criteria.

Though WDRA has been operational from 2010, the number of accredited warehouses in the country was around 450-500 until 2014.

One of the reasons for the slow progress in accreditation is the shortage of accreditation agencies registered with WDRA. A total of 16 agencies are registered with WDRA, of which only nine have been actively taking up the task of accreditation.

If States amend their APMC Act to notify WDRA accredited warehouses as a component of the market yard, it is likely to result in demand for quality storage facilities. WDRA may need to register more accreditation agencies to speed up the process and ensure a surge in warehouses accredited across the nation.

The writer is associated with Nabard Consultancy Services, New Delhi. Views are personal.

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