Trading portal is not the same as a pan-India market
The government has done well to approve the creation of a portal that will integrate 585 Agriculture Produce Market Committees (APMCs)—the idea is to have price discovery for agricultural commodities across the country. Under the special fund, 250 APMC mandis would be integrated through the online platform this fiscal, another 200 in FY17 and the rest by FY18. For a country that has 2,477 principal regulated markets and 4,843 sub-markets—to use figures cited by chief economic advisor Arvind Subramanian in a recent article—that’s a great advantage. According to Subramanian, in the case of jowar, the difference in price between the most expensive and the least expensive state was as high at 282% in May; within Karnataka, in the case of jowar, the price differential was as high as 110%.
The question that arises is what prices will the national agriculture portal throw up? For any buying to take place, agricultural produce has to be graded—to whatever extent that takes place today, it happens in the mandis that have large yards for separation and grading. In the case of Azadpur mandi from which fruit and vegetables were de-listed last September, the government tried to set up various mandis under the Small Farmers Agribusiness Consortium (SFAC), but this has not worked so far—as FE reported last week, with the land titles to the very first mandi suspect, it has not taken off. With no place to bring the produce, how is it to be graded and, in the absence of this, how is the food to be priced? The SFAC has some solutions, and plans to have its affiliates go to farms and grade the produce (goo.gl/CtggzC), but this is a herculean task since, for the system to work—anonymous buyers taking produce from anonymous suppliers—it requires grading/certification that everyone trusts and an organisation that can guarantee the completion of every trade made along with physical delivery, an efficient dispute resolution mechanism for every trade that is incomplete in any sense, and a system to check online markets are not being gamed as they have been in the case of some products sold on commodity exchanges.
None of this is to belittle SFAC’s effort, just to point out that replacing the APMC mandi system is a gargantuan task, something that is not going to be established by just an SFAC with a budget of a few hundred crore rupees. For the project to work, the states also have to come on board and, so far, the major ones are not. In Delhi, de-listing vegetables from Azadpur means little till the SFAC and private mandis have large lots of land to build their storage yards. Vashi in Mumbai, India’s second-largest mandi, has not even seen any de-listing despite Maharashtra being a BJP state—it is unlikely that the creation of an online portal means farmers can bypass the Vashi mandi. Assuming the SFAC grading at the farm-level works, how are farmers from Punjab to sell to buyers in Delhi if the Punjab government levies a 14.5% tax on purchases in its mandis as compared to 11.5% in Haryana? Until the Centre gets states to agree to allow produce from the state to move without this tax and to delist products from APMCs, a national market is dead in the water; after the Shanta Kumar committee recommended moderating such taxes, as FE reported, states like Punjab refused to comply.