Without Delhi and Vashi mandis, a limited exercise
Prime minister Narendra Modi is on the right track in wanting a National Agriculture Market (NAM) which allows people to buy and sell farm produce from across the country and, since it will be on an e-platform, it is meant to facilitate farmers getting a higher price once the middlemen are eliminated. What he will launch today—an e-platform integrating 21 mandis in eight states, including three in Gujarat and five each in Uttar Pradesh and Telangana—will, however, be a pale shadow of this. The reason for this is Modi’s inability to cajole even states run by the BJP or its allies to go along with his vision. As a result of Maharashtra not allowing Vashi in Mumbai to join—after Azadpur in Delhi, Vashi is the country’s second-largest mandi for fresh fruits and vegetables—NAM will not have the volatile fruits and vegetables segment on offer in the first phase of its execution. While the plan is to integrate 585 mandis—200 by September this year, then another 200 by March 2017 and the remaining 185 by March 2018—on the e-platform, there are several other areas where important restrictions remain. Both Haryana and Punjab, which are ruled by the BJP/allies, levy a 14.5% mandi tax which, in effect, makes it very expensive to buy from them—neither state has agreed to lowering this levy.
While the exercise is still an important one—and it is to be hoped states like Delhi or those ruled by the BJP will come along eventually—the government will have to put in a lot of effort to ensure NAM works in even its current form. With very few big buyers likely to be interested in buying the small lots that farmers will have to offer, aggregators will be needed and the trick will lie in ensuring it is not the same aggregators who control the mandis that get to dominate NAM. Care will have to be taken, similarly, to ensure markets do not get cornered by speculators or cartels that drive prices up or down. Considerable effort will also be needed for the clearance mechanism to work. Right now, the plan is that each mandi on the platform will have external assayers who will grade produce which will be bid for. Once the bidding is done, the produce will be dispatched to the buyer—transporters are plugged into the NAM platform—and the payment made once the buyer is satisfied with the quality of the produce he gets. It is not clear how a dispute over quality is to be resolved and who is to be the guaranteeing party, but a dispute resolution mechanism is a part of NAM. Eventually, the success of NAM will depend upon whether farmers get a higher price for their produce or not and whether this reduces price volatility—in which case, introducing a system of market-makers needs to be tried at some point in time; bringing in large retail chains will help but with the central government opposing FDI in retail, this looks tough, though it is possible the new FDI window for pure food retail may attract big food retailers. And since most state governments have a history of blocking supplies when local prices go up, it will be critical to ensure the states on the platform don’t resort to their old tricks in times of supply shortage.