12 Apr

Agri-Marketing Reform

< General Studies Home Page

Contents

1. e-NAM
2. Gramin Agriculture Markets (Grams)
3. Agri-Infrastructure Fund
4. Krishi UDAN 2.0

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• Efficient Agri-marketing is crucial for:
  1. Ensuring proper prices for farmers; Lower prices for consumers; Stimulating agro-based and food processing industrial growth.
  2. Reduced subsidy burden for government.
• However, the Agri development in India has ignored the potential of marketing and has continued to follow its old trajectory. Since, agri-marketing is a state subject, it is stuck in a tussle between Centre and states.
• How has the system functioned so far? -> The APMC System and its issues
  • The Agri markets in India are mainly regulated by the state Agriculture Produce Marketing Committee (APMC) laws. These laws enable state governments to regulated wholesale markets and marketing practices. APMC Acts make in mandatory for farmers to sell their produce only to licensed merchants (can also be called government approved merchants) at Mandis set up by State Agriculture Market Boards.
• What was the need of APMC Laws / Regulated Markets (Mandis)
  • In the absence of any market regulations, the farmers were being exploited by traders and intermediaries.
  • The regulated Mandis prevented the exploitation by ensuring fair prices through bidding process at these regulated markets.
• Current Situation
  • India currently has around 2500 principle regulated primary agricultural markets in the country which are governed by state APMC Acts and administered by a separate Agricultural Produce Marketing Committee.
  • APMCs regulate the trade of farmers by
    • Providing licenses to buyers, commission agents, and private markets.
    • Levy market fees or any other charges on such trade.
    • Provide necessary infrastructure within their market to facilitate trade.
  • Trade is allowed withing the APMC mandis or between two APMC mandis situated in the same state.
• How these Mandis have served farmers: These APMCs have ensured that fruits of Green Revolution reach farmers.
  • Reduction in exploitation by intermediaries – not allowed to sell products outside the mandi
  • Good Price: Sale through auction -> best possible prices available.
• But, present APMC structure has led to many challenges/limitations
  • Price Fixing, Cartelization by licensed traders;
  • Information asymmetry and opaque process for price discovery.
  • Undue deduction in the form of commission charges and market fees.
  • Fragmentation of agri-market
  • Hindered private investment in agri-marketing -> Poor Infrastructure and low use of technology
    • As according to APMC acts, only state governments could set up these Mandis.
• To remove the above limitations, the central government has taken many steps:
  1. Model APMC Acts
  2. Bihar has completely done away with APMC act and Kerala had never implemented it. Maharashtra is also trying to liberalize the state APMC law.
  3. Promotion of e-NAM by central government for promotion of unification of markets both at state and national level.
  4. Development primary markets / submarkets as GrAMs (Gramin Agriculture Markets) with improved infrastructure
  5. Creation of Agri Market Infrastructure Fund (AMIF) for development and upgradation of Gramin Agriculture Markets.
• The three farm laws and their repeal [2020 and 2021]
  1. The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 [FPTC]
     • It sought to create an ecosystem where farmers and traders enjoy the freedom of choice to sale and purchase of farmer’s produce. The law granted freedom to farmers and buyers to transact in agriculture commodities even outside APMC mandis ensuring competitive alternative trading channels to promote efficient, transparent, and barrier free inter-state and intra-state trade.
     • It also allowed electronic trading and abolished market fees, cess or levy.
     • It allowed electronic trading and e-trading platform could be set up by companies, partnership firms, or registered companies.
  2. The Farmers’ (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act [FAPAFS], 2020
     • The act provided for national framework for contract farming which protects and empowers the farmers in their engagement with agri-business firms, whole sellers, processors etc.
     • The act regulated the farming agreement and ensured a guaranteed price and mechanism for determining the guaranteed price.
     • It had also established a well-defined, fast tracked, dispute settlement system with SDM as adjudication authority and DM as the appellate authority.
  3. the Essential Commodities (Amendment) Act, 2020 [ECA]
     • It sought to remove commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes from the list of essential commodities. The amendment was aimed at ending the era of frequent imposition of stock-holding limits except under extraordinary circumstances.
       • As per this law stock limit could be imposed only if there was huge prize fluctuations (100% price rise for horticulture crops or 50% increase in retail price on non-perishable agri-good).
• Some committees/reports which had recommended similar changes in the APMC system.
  • Expert Committee on Strengthening and Development of Agriculture Marketing – Chairman: Shri Shakerlal Guru (June 2011)
  • Report on Task Force on Employment Opportunities – Chairman: Shri Montek Singh Ahluwalia (2001)
  • Model Act on Agriculture Marketing Reforms – Chairman: Shri R.C.A Jain (July 2001)
  • Model Act on Agriculture Marketing (Sep 2003)
  • Serving Farmers and Saving Farmers – First Report – National Commission on Farmers – Chairman: Dr. M.S. Swaminathan (2004)
  • Final Report of Committee of State Ministers, in-charge of Agriculture Marketing to Promote Reforms
  • Budget 2017-18
  • Standing Committee on Agriculture, Ministry of Agriculture and Farmers Welfare : Agriculture Marketing and Role of Weekly Graamin Haats (2018-19)
  • Several Economic Surveys
• Why farmers protested?
  • Doubts about MSP regime weakening due to private markets and players
  • Unregulated markets may be problematic for farmers.
  • Lack of Focus on Marketing Infrastructure -> APMC Mandi infra may deteriorate -> the changes may have resulted in gradual erosion of the quality of trading infrastructure as was seen in case of Bihar after APMC Act was repealed in 2006.
  • In Contract Farming it had been seen that small and marginal farmers are generally on the losing side with highly one-sided contracts, delayed payments, undue rejections and outright cheating besides poor enforcement of contracts. Further, the adjudication of dispute was left in the hands
    of executive.
  • There was a gross communication failure on the part of the Central government to explain to farmers what these laws are, and how they are intended to benefit them.

1) E-NAM

• Introduction: e-NAM
  • e-NAM is a pan India electronic trading portal for farm produce which creates a unified national market for agricultural commodities by integrating existing APMC markets and other market yards. It was launched in April 2016.
  • The Small Farmers’ Agribusiness Consortium (SFAC) acts as the leading implementing agency of e-NAM. It operates and mantains the platform with the help of a strategic partner, NFCL
  • This portal provides a single window service for all APMC related services and information, such as commodity arrivals and prices, provision of responding to trade offers, buy and sell trade offers, among other services.
  • Under e-NAM, the Government provides free software and one time assistance of Rs 75 lakh per mandi for computer hardware and IT infrastructure.
    • The hardware includes quality assaying equipment and creation of infrastructure for cleaning, grading, sorting, packaging and compost unit, etc.
• Salient Features
  • It provides for a national e-market platform for transparent sale transaction.
  • It enables farmers to showcase their produce through their nearby markets and facilitate traders from anywhere to quote price.
  • Liberal licensing of traders / buyers and commission agents by state authorities.
  • There are no preconditions for physical presence or possession of shop / premises in the market yard.
  • One license for the trader would be valid all across the country.
  • Single point levy of the market fee, i.e. on the first wholesale purchase from the farmer
  • Harmonizing the quality standards of agricultural produce and infrastructure for quality testing is made available in every market to enable informed bidding by buyers. At present, Common tradeable parameters have been developed in 25 commodities.
  • States desirous to join has to accordingly enact suitable provisions in their APMC Act.
    • The amendments include a single point levy of mandi fee, unified trade license valid across all mandis of the state, and provision for e-auction facilities.
  • States can have their own electronic platform and can decide to link them to NAM.

Budget 2024-25: About E-NAM: There has been an integration of 1,361 mandis under e-nam, supporting trading volume of around 3 lakh crores.

2) GRAMIN AGRICULTURE MARKETS (GRAMS)

• About GrAMs (According to Budget 2018-19)
  • Existing 22,000 rural haats will be upgraded to Gramin Agriculture Markets (GrAMs).
    • In these GrAMs physical infrastructure will be strengthened using MGNREGA and other government schemes.
    • These GrAMs will be electronically linked to e-NAM and exempted from regulations of APMCs. This will provide farmers with facilities to make direct sale to consumers and bulk purchasers.
    • An Agri-Infrastructure Fund with a corpus of Rs 2000 crore will be set up for developing and upgrading the agricultural market infrastructure in the 22000 Grameen Agricultural Markets (GrAMs) and 585 APMCs.
    • Prime Minister Gram Sadak Yojana Phase – III will ensure these GrAMs are connected to major link roads.
• How will it benefit farmers?
  • GrAMs will serve as multi-purpose platforms for assembly, aggregation and local retail; It will enable flow of market intelligence and thus better price realization for farmers; even small and marginal farmers will benefit from E-NAM; improved infrastructure;
  • Thus, GrAMs will provide systematic linkage access points to realize the vision of Unified National Market by bringing primary post production activities to farmers at village level.

3) AGRI-INFRASTRUCTURE FUND

• It is a central sector scheme which provide a medium to long term loans for investment in viable projects for post-harvest management infrastructure and community farming assets.
  » Loans to be disbursed for only 6 years (2020-21 to 2025-26)
  » Interest subvention and credit guarantee assistance will be given until 2032-33.
• Intended beneficiaries: Rs 1 lakh crore to be provided by banks and financial institutions to:
  • Primary Agriculture Credit Societies (PACS), Marketing Cooperatives Societies, FPOs, SHGs, Farmers, Joint Liability Groups, Agri-entrepreneurs, Startups, Central/State Agency or Local Body Sponsored PPP Projects.
• Benefits
  • Interest subvention of 3% per annum upto a limit of 2 crore. This subvention will be available for a max period of 7 years.
  • Further, Credit Guarantee Coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan of upto Rs 2 crore.
    • FPOs created under FPO promotion scheme of Department of Agriculture, Cooperation, & Farmer Welfare (DACFW) will also get Credit Guarantee
  • The Fee for this coverage will be paid by the government.
  • Moratorium for repayment under this financing facility may vary subject to minimum of 6 months and a maximum of 2 years.
• The implication of government will not be of more than Rs 5,000 crore in the form of Interest Subvention subsidies. Budget 2021-22 have announced that APMCs can get access to Agriculture Infrastructure Funds for augmenting Infrastructure Facilities.

7) KRISHI UDAN 2.0

• Introduction:
  » The integration of Agriculture and aviation is possible in three ways:
  • Evolutionary possible use of biofuel for aircraft in future
  • Use of drones in agriculture sector
  • Greater integration and value realization of agricultural products through schemes like Krishi UDAN. Krishi UDAN 2.0 is focused on this third way.
• Agri-UDAN 2.0:
  • Krishi UDAN 2.0 lays out a vision of improving value realization by optimizing and integrating agri-harvesting and air transportation. This would contribute to agri-value chain sustainability and resilience under different and dynamic conditions.
  • It is focused on facilitating and incentivizing movement of Agri-produce by air transportation.
  • It would be implemented at 53 airports across the country mostly focusing on NE, tribal regions and Hilly region and is likely to benefit farmers, agri forwarders and Airlines.
  • A pilot version would run for 6 months and later changes would be implemented as per the learning.
• Key Highlights:
  • Promoting movement of agri-produce by air transportation -> Waiver of landing, parking and some other charges on selected airports of AAI.
  • Strengthening Cargo related infrastructure at airports and off airports: Focus is on developing a hub and spoke model and a freight grid. Airside transit and trans-shipment infrastructure will be created at Bagdogra and Guwahati airports, and at Leh, Srinagar, Nagpur, Nashik, Ranchi and Raipur as part of the focus on NER, Tribal and Hilly districts.
  • Other Concessions have been sought: States have been requested to reduce Sales Tax to 1% on ATF for freighters/ P2C aircraft as extended in UDAN flights.
  • Resources-Pooling have been planned. It includes collaboration with other government departments and regulatory bodies to provide incentives and concessions to enhance air-transportation of Agri-Produce.
  • Technological Convergence: Development of E-KUSHAL (Krishi UDAN for Sustainable Holistic Agri-Logistics) platform to promote information dissemination to all stakeholders. This will also help in coordination, evaluation and monitoring of the scheme. Furthermore, integration of E-Kaushal with e-NAM has also been proposed.
  • The strategic selection of airports is primarily focused on northeast region.
  • Airports have been selected keeping in mind the whole country.