Commodity Analysis

FPOs ask for mandi fee waiver in order to sell directly on eNAM

Rajalakshmi Nirmal BL Research Bureau | Updated on April 06, 2020 Published on April 05, 2020

A lower mandi fee will compensate for the higher transportation cost for the purchaser on eNAM   -  The Hindu

The Agriculture Ministry has allowed FPOs to list their stock from the farm gate on eNAM

The COVID-19 pandemic has made it extremely difficult to run mandis physically. To circumvent this issue, on April 2, the Ministry of Agriculture allowed FPOs (farmer producer organisations) to sell directly on the eNAM platform from the farmgate. If State governments, too, act by waiving the mandi fee for FPOs registered on eNAM, it will help move a significant chunk of primary trade to the electronic platform.

The Centre has accepted the suggestion given by BusinessLine in the article: ‘As mandis get shut, here are five ways the government can help farmers cope’, on March 25, by giving the relaxation to FPOs to directly access eNAM. But in a formal system, where FPOs are registered as companies, they are treated as entities different from farmers. They are considered as ‘purchasers’ when they aggregate the produce of farmers and are required to pay mandi fees to the APMC — the Agriculture Produce Market Committee — that runs the regulated marketyard. The mandi fee varies between 0.5 per cent and 2 per cent of the value of the traded produce.

Now, with FPOs not going to the APMC mandi yard, but using eNAM instead, it is not fair to ask them to pay the fee, say farmers. They are asking for a waiver of this fee or at least a reduction.

The question that then arises is, will State governments let go of this revenue? They can because only some of it ends up in the coffers of the State government. In Maharashtra, for instance, of the 1.05 per cent collected as mandi fee, only 0.05 per cent goes to the State government’s kitty, while the APMC keeps 1 per cent. In Madhya Pradesh, the mandi cess is 1.5 per cent and half the collection is retained by the APMC; the rest is divided between the Mandi Board and Chief Minister’s farmer welfare schemes.

Not put to proper use

APMCs have not been providing even the basic infrastructure to farmers. As per various studies, covered auction platforms exist only in two-thirds of the APMCs in the country. While only one-fourth of these markets have common drying yards, cold storage units exist in less than one tenth of the markets and grading facilities in less than one-third of the markets, per the findings of the Report of the Committee on Doubling Farmers’ Income, August 2017. However, despite this, APMCs, because of their monopoly in the primary market trade, charge a high fee.

Many independent studies done on APMCs’ role and functioning have also indicated the problem of unaccountability of money at the disposal of the APMCs and the Mandi Board.

A point to note here is that the Mandi Board in many States is controlled by the ruling State government.

The model APLM (Agriculture Produce & Livestock Marketing Act) Act, 2017 introduced by the Ministry of Agriculture & Farmers’ Welfare has clear guidelines on how the Mandi Board and APMCs should function. It also rules that the accounts of the Board shall be subject to audit under the State Local Fund Audit Act. Not many States, however, have so far adopted this Act.

Waiver can benefit farmers

Farmers want a waiver in the mandi fee now. But they are not asking for an across-the-board waiver. Says Yogesh Thorat, Chairman, Maha FPC, a consortium of 300 FPCs in Maharashtra: “We want the State to exempt the FPOs registered on eNAM and all trade happening outside the APMC from paying mandi fees…”

Yogesh Kumar Dwivedi, CEO, Madhya Bharat Consortium of Farmers Producer Company in Madhya Pradesh, says: “If the Centre wants to encourage more corporate and institutional buyers to buy directly on eNAM, they should ask Mandi Boards to waive the fee for trade on eNAM or reduce it by 70-75 per cent…” This way, the cost of buying through APMC will be higher and buyers will show more interest in buying on eNAM.

Dwivedi adds that lower a mandi fee will compensate for the higher transportation cost for the purchaser on eNAM since in order to buy on eNAM, he will have to pick up the stock from the farmgate or the warehouse of the FPO, which may be farther than the APMC.

Published on April 05, 2020

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