Opinion

Converging eNAM network with private mandis

Sunil Khairnar | Updated on February 17, 2021

Integrating markets   -  Murali Kumar K

This can be the key to efficient price discovery so that farmers are ensured best realisation for their produce

The National Agriculture Market (NAM) was envisaged as a pan-India electronic trading portal launched on April 14, 2016 completely funded by Central Government and implemented by Small Farmers Agribusiness Consortium (SFAC).

The eNAM portal works to network the existing APMC (Agriculture Produce Marketing Committee)/Regulated Marketing Committee (RMC) market yards, sub-market yards, private markets and other unregulated markets to unify all the nationwide agricultural markets by creating a central online platform for agricultural commodity price discovery.

It is critical to converge the private mandi infrastructure envisaged under ‘The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act 2020’ with eNAM. The private mandi infrastructure will take time to come up even after the rules for this Act are framed. The development of private mandi infrastructure needs a big push from the government. Among the three reforms, this Act has the highest potential for quick impact on the ground.

It will take some time for the new private markets to come up and liquidity in terms of volume of transactions might take even longer. To raise farm incomes, it makes a lot of sense to create a unified market out of the eNAM infrastructure with buyers and sellers being able to access each other beyond the confines of the APMC mandis.

Agri e-marketplaces

There is also need to layout the blueprint of the market architecture on how the future of the Indian agricultural commodity market would look like five years from today. There are already online e-commerce marketplaces run by players like Bijak, AgriBazar, Agri10X, and Kalgudi.

All these market places are at different stages of evolution and are expected to scale up in the long term. There is a need to put in place a regulatory architecture and framework at this nascent stage of the electronic market places. The existing mandis under the eNAM infrastructure as well as the new private mandis need to plug into multiple pan national electronic markets for efficient price discovery and multiple choices so that farmers are ensured best price realisations for their produce.

A rough parallel can be drawn with the emergence of a national electronic e-commerce market places run by players like Amazon, Walmart, and Reliance retail that are trying to get kirana stores and the other retail outlets plugged into their own respective pan national level marketplaces.

Kirana stores in the cities may get plugged into all the three markets if it serves their purpose. This will also be the case with private mandis being set up all over India. Major private sector investments into mandis close to the growing centres are unlikely. Corporates prefer to deal with farmers through collectives such as FPOs and Cooperatives. Corporates would be keen to make large investments nearer the larger consumption centres which could act as hub markets for the private mandis which will function as the spokes.

The benefits of privately run electronic markets would include lower cost due to competition, incentives for the private sector to innovate and attract volumes pushing the National and Unified Market goals, high visibility to government on prices, volumes and stocks due to centrally regulated nature of the market.

Multiple compliance requirements could be a barrier for participation at a national level, so compliance should be made simple. One option could be to use eNAM to capture the compliance requirements of States that adopt the platform, generate necessary documents (like sales invoices, permits, etc.) and returns to be submitted to authorities and ensure that the buyer does not face any burden in this regard. With a suitable design, pan India participation can be achieved, with compliance with individual State legislation and National Market rules.

The Centre could allow States to define rules for Primary Transactions within the National Markets and the Centre could focus on the governance of the National Electronic Markets and rules for secondary and cross-State transactions.

Given SEBI’s pan India presence, it could scale up its presence into all the districts in quick time which may be required to supervise functioning of the hubs and spokes of the national electronic market places.

It would also be very expensive to create a new regulator just for agricultural spot markets. SEBI could function as regulator for commodity (agri/non-agri) derivatives and also electronic markets at a national level, given the linkages between derivatives and spot markets.

These market places may be treated as nascent Market Infrastructure Institutions (NMII) until they reach a threshold of a thousand crore of transactions on an annual basis. The NMII organisations could have light touch regulation with lower compliance burden as compared to full-fledged market infrastructure institutions. In case of regulatory oversight they could be treated the way the RBI differentiates between Small Finance Banks and the universal banks.

These steps would help in grounding of benefits of the current wave of reforms and converging them with earlier progressive initiatives like eNAM which would make direct benefit of reforms reach the farmers.

The writer is an agriculture expert and runs a number of NGOs in the sector

Published on February 17, 2021

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