i

STATUS OF MARKETING INFRASTRUCTURE UNDER ELECTRONIC NATIONAL AGRICULTURE MARKETS : A Quick Study

राष्ट्रीय कृषि और ग्रामीण षिकास बैंक

National Bank for Agriculture and Rural Development

आर्थिक षिशे्लिण और अनुसंधान षिभाग, प्रधान कायािलय, मुंबई

Department of Economic Analysis and Research, Head Office, Mumbai

2018

Title

: Status of Marketing Infrastructure under

Electronic National Agriculture Markets -

A Quick Study

Written and Published by : National Bank for Agriculture and Rural

Development,

Department of Economic Analysis and Research,

Head Office, Mumbai

Date of Publishing : November 2018

Design and Printing :

Place of Printing : Mumbai

Number of copies :

Contact : Plot No. C-24, G-Block, Bandra-Kurla Complex,

Bandra (East), Mumbai – 400051

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©2016 National Bank for Agriculture and Rural Development

Unless otherwise stated in this document, no part of this document may be reproduced or

transmitted in any form by any means without the written authorization from NABARD.

Disclaimer: The usual disclaimer about the responsibility of the National Bank as to the facts

cited and views expressed in the paper is implied

Status of Marketing Infrastructure under Electronic National

Agriculture Markets - A Quick Study

राष्ट्रीय कृषि और ग्रामीण षिकास बैंक

National Bank for Agriculture and Rural Development

आर्थिक षिशे्लिण और अनुसंधान षिभाग

Department of Economic Analysis and Research

प्रधान कायािलय

Head Office

मुंबई, Mumbai

2018

CREDIT LIST OVERALL DIRECTION Dr. U. S. Saha, Chief General Manager, Department of Economic Analysis and Research (DEAR), HO GUIDANCE Dr K.J.S. Satyasai, General Manager, DEAR, HO FIELD STUDY Shri K. L. Prabhakar, Deputy General Manager TABULATION OF DATA AND DRAFTING OF REPORT Shri K. L. Prabhakar, Deputy General Manager

Status of Marketing Infrastructure under Electronic National

Agriculture Markets

Contents Introduction ................................................................................................................................................... 1

1.2 Need for improving farmer’s access to markets through provision of Marketing Infrastructure.. 2

Table 1: Harvest and post-harvest losses of various agricultural commodities in 2012-13 (in percentage at

national level) ................................................................................................................................................ 3

Figure 1 – Post-harvest losses for major groups of agricultural and allied produce (2012-13) ..................... 3

Figure 2 - Comparison of total sectoral losses during 2005-06 and 2012-13 (calculated for 2014 prices) .... 4

1.3 Objectives of the Study ........................................................................................................................... 4

1.4 Methodology of the Study ...................................................................................................................... 4

2. Reforms in Agricultural Marketing .......................................................................................................... 5

2.2 The Model APMC Act ......................................................................................................................... 6

2.3 Shortcomings of the APMC acts ...................................................................................................... 6

2.4 Model APLM Act, 2017 ....................................................................................................................... 7

2.5 Need and concept of a National Agricultural Market........................................................................ 7

Table 2 - Reform status as on 31/12/2016 .................................................................................................... 9

2.6 Unified Market Platform – Karnataka Model ................................................................................. 10

2.7 Agri-marketing Reforms in Maharashtra ........................................................................................ 12

Table 3 – No. of direct marketing licences issued during the last three years ............................................ 13

Table 4 – No. of private marketing licences issued during the last four years ............................................ 13

4. Contract Farming ............................................................................................................................. 13

3 E-trading of agricultural commodities ................................................................................................... 16

3.2 Concept of E-trading ......................................................................................................................... 16

Online platforms currently available ...................................................................................................... 17

3.3 Unified Market Platform (UMP) ...................................................................................................... 17

Figure 3- Process flow of e-auction under UMP .................................................................................. 18

Diversified uses of UMP ............................................................................................................................... 18

Challenges in ReMS ...................................................................................................................................... 18

3.4 National agricultural market (eNAM).............................................................................................. 19

Table No. 5 - Details of wholesale, Rural Primary, Regulated Markets and those selected under eNAM in

different States (as on 31.03.2015) ............................................................................................................. 20

3.5 Field level observations on the use and perceptions of e- trading platforms ................................ 21

3.6 Benefits to farmers ........................................................................................................................... 22

3.7 Areas for further improvement ........................................................................................................ 23

4 Status of Marketing Infrastructure in selected States ........................................................................... 25

4.2 Status of Marketing Infrastructure in Karnataka ........................................................................... 25

Table No. 6 - Value of Notified Commodities Transacted in the APMCs. .................................................... 26

Table No.7- Collection of Market Fees and Licence Fees by APMCs. .......................................................... 26

Table No.8 - Status of marketing infrastructure available in APMCs ........................................................... 27

Table No.9 -Requirement of Marketing Infrastructure in Karnataka ........................................................... 28

Table No.10 - Requirement of Marketing Infrastructure in Karnataka ........................................................ 28

4.3 Status of Marketing Infrastructure in Maharashtra ....................................................................... 28

Table No.11 -Income/ Expenditure of APMCs in Maharashtra .................................................................... 29

Table No.12- Annual surplus generated by the APMCs ............................................................................... 29

Table No.13 -Classification of APMCs in Maharashtra ................................................................................. 29

Table No. 14 -Value of Notified Commodities Transacted in the APMCs. ................................................... 30

Table No. 15- Requirement of Marketing Infrastructure in Maharashtra ................................................... 30

Table No. 16 - Requirement of Marketing Infrastructure in Maharashtra .................................................. 31

4.4 Unit Costs of Investments in APMCs ............................................................................................... 31

Table No. 17 - Unit Cost of investments in APMCs ...................................................................................... 31

Table No. 18 - Unit costs for hardware for E trading and office automation ............................................... 33

4.5 Potential for financing Marketing Infrastructure in APMCs/ PRAMs ................................... 33

Table No. 19 – Potential for financing marketing infrastructure in APMCs/ PRAMs ................................... 33

4.6 Creation of Agriculture Marketing Infrastructure Fund (AMIF) .................................................. 34

Table No. 20 - Requirement of funds for financing marketing infrastructure ............................................. 34

5. Summary and Conclusions..................................................................................................................... 36

5.2 Reforms in Agriculture Marketing .................................................................................................. 36

5.3 Findings of Quick Study .................................................................................................................... 37

5.4 Agri-marketing Infrastructure requirement ................................................................................... 38

5.5 Creation of Agriculture Marketing Infrastructure Fund (AMIF) .................................................. 39

1

1. Introduction

Agricultural marketing includes all activities involved in the movement of farm

produce from the producer to the ultimate consumer. Hence operations like collecting,

grading, processing, preserving, transportation and financing are included under

Agricultural marketing. The agricultural value chain involves a number of participants

like farmers, intermediaries (aggregators and commission agents), wholesalers and

retailers. In addition, the farm produce is subjected to risks arising out of supply and

demand conditions, seasonality, poor transportation and storage facilities. All these

factors affect the final price realized by the farmer. Thus, the role of agricultural

marketing is very crucial for development of this sector.

Regulation of agricultural commodity markets in India is under the state

administration. Each state has its own Agricultural Produce Market Committee

(APMC) Act to regulate physical trading of commodities. Buyers and sellers assemble

at regulated market yards, which are governed by a market committee. All wholesale

trading in that area has to be undertaken at the designated regulated market yard only.

The market committee is responsible for facilitating transparent trade and ensuring

proper price discovery for the agricultural commodities traded in the regulated

market.

However, several lacunae exist in this system which hinders the proper functioning of

the regulated market. There are a number of market intermediaries. Grading and

sorting of the agricultural produce seldom happens. Weighing is done manually.

Trading happens through auctions which function either through closed or open

tender systems. Traders and intermediaries often form cartels and lower the prices of

the commodities. Most of the market committees have failed to provide a competitive

platform to farmers and to develop the necessary physical infrastructure to ensure

smooth trading. In addition, farmers do not receive timely payments after sale of their

produce and most often do not get the right price too. The agricultural marketing

system has to be modernized to improve the price realized by the farmer.

The agricultural marketing policy of India has aimed to address the issues related to

market inefficiencies through regulatory mechanisms (Agricultural Produce Market

Regulation Act-APMC Act), ensuring legal provisions like the Essential Commodities

Act; and creation of market infrastructure and institutions. However, the inefficiencies

in the agricultural marketing system have continued to persist. There have been large

gap in the development of the storage infrastructure, transportation, mechanization,

grading standards, export promotion, processing industry support and market

intelligence in India which requires upgradation.

Market Intelligence or the dissemination of market information is an important area

which could play a significant role in farmers’ decision making regarding the

production and marketing decisions of agricultural commodities by the farmers.

Availability of accurate, timely and adequate market related information enables

2

farmers in informed decision making as to when and where to sell their produce

(Acharya, 2003). In a comprehensive study of agricultural marketing system in India

during the last fifty years (Acharya, 2004) several problems associated with regulated

markets have been identified. These include, lack of basic amenities in primary or

periodic markets (haat / bazaars), low density of regulated markets in some states-

farmers have to travel long distances, weak governance of APMCs - management not

professional, licensing systems creates entry barrier to new trader / buyers, multi-

point levy of market fee (varies from 0.5 to 2%) and multiple licensing system,

restrictions on movement of goods inter-state and even intra-state etc.

Agricultural marketing in India is facilitated through a network of regulated markets

established under the APMC Act. The objective of such intervention was to ensure

regulation of marketing practices and protect the farmers from the exploitation of

intermediaries. However, there is an argument that over a period, market regulation

has taken the form of restrictive and monopolistic trade and the balance of power in

transactions has moved in the favour of middle men and traders (Chand, 2012). As a

result, the prices realized by the farmers still remain low. In fact, Acharya (2006)

attributes the failure of agricultural marketing system in India to excessive state

intervention.

1.2 Need for improving farmer’s access to markets through provision of

Marketing Infrastructure

The agricultural marketing system of the country is characterized by various short

comings like heavy sale of agricultural commodities at village level immediately after

the harvest, absence of on-farm grading of produce, poor packaging, insufficient

marketing infrastructure, long marketing channels, existence of various malpractices

in the marketing of agri-produce, non-transparent price discovery mechanism, lack of

market information system, low marketable surplus especially of small and marginal

farmers, etc. Regulated Markets in the form of Agricultural Produce Marketing

Committees (APMCs) were established in various States to address these issues.

Despite several advantages bestowed on the farmers through APMC regulation, these

acts prohibited direct sale by farmers outside the market yard, cartelization by market

functionaries like traders, commission agents and labour and complete control of

government on establishment, development and supply of market services leading to

inefficiencies. The auctioning process is entirely manual and cumbersome resulting in

lack of transparency and delayed payment to farmers.

According to a study conducted by the ICAR-CIPHET on harvest and post-harvest

losses in major crops and commodities in India, the total loss in agriculture,

horticulture and livestock sector sum up to Rs.91,787 crore during 2012-13, as

compared to Rs. 62,875 crore during 2005-06 (calculated using average wholesale

prices of various commodities for 2014) (ICAR-CIPHET, 2015 and Nanda, 2012) as

per the commodity-wise details given in Table No. 1.

3

Table 1: Harvest and post-harvest losses of various agricultural commodities in 2012-13 (in

percentage at national level) (Rs. Crore)

Commodity % Post harvest loss range in Monetary

value

% of total

sectoral

loss Farm

operations

Storage

channels

Overall total

loss

Cereals 3.9 – 4.78 0.75 – 1.21 4.65 – 5.99 20706 23

Pulses 4.69 – 7.23 1.18 – 1.67 6.36 – 8.41 3877 4

Oilseeds 2.54 – 8.95 0.22 – 1.61 3.08 – 9.95 8275 9

Fruits 6.04 – 11.9 1.31 – 3.98 7.76 – 15.88 15818 17

Vegetables 3.22 – 9.41 0.78 – 3.03 4.58 – 12.44 14848 16

Plantation crops 0.99 – 7.29 0.2 – 1.4 1.19 – 7.89 9299 10

Livestock produce 0.71 – 9.61 0.21 - 4 0.92 – 10.52 18967 21

TOTAL 91787

Source: ICAR-CIPHET, 2015, Gopal Naik, 2017 and Nanda, 2012

Sectoral break-up of the losses in 2012-13 and its comparison with losses in a previous

study conducted in 2005-06 are depicted in Figures 1 and 2. In terms of total loss,

cereals have large amount of losses mainly due to its large size of production.

Perishables such as livestock produce, vegetables and fruits contribute significantly to

the post-harvest losses primarily due to near absence of cold chains.

Figure 1 – Post-harvest losses for major groups of agricultural and allied produce (2012-13)

Source – Figure created using values of sectoral losses from ICAR-CIPHET Reports Assessment of Quantitative Harvest and Post-Harvest Losses of Major Crops and Commodities in India, 2015.

Figure 2 also suggest that these losses are increasing over time. Sharper increase in the

losses can be observed in livestock produce. Table 1 provides details on losses in

individual products. Post-harvest losses are smaller (about 5 per cent) in the case of

23%

4%

9%

17%16%

10%

21%

Sectoral breakup of total losses (year 2012-13)

Cereals Pulses Oilseeds Fruits

Vegetables Plantation Crops Livestock Produce

4

most cereals, oilseeds and plantation crops, compared to other category of products.

In the oilseed category, only soybean has high post-harvest loss mainly accounted by

the on-farm losses. Fruits and vegetables have high loss percentages mainly due to

their perishability. In cases such as apple, guava, tomato and marine fish, the

percentage losses exceed 10 per cent.

Figure 2 - Comparison of total sectoral losses during 2005-06 and 2012-13 (calculated for

2014 prices)

Source – Figure created using values for sectoral losses from ICAR-CIPHET Reports (ICAR-CIPHET, 2015.)

(Gopal Naik, 2017), (Nanda, 2012)

1.3 Objectives of the Study

The main objectives of the proposed study are:

i. To study the current agriculture marketing arrangements after modification

of APMC Act and introduction of NAM/ UMP in select States.

ii. To study the price discovery mechanism in the new markets.

iii. To assess the Marketing Infrastructure facilities related to assaying,

sorting/grading, packaging and other related storage/ transport

infrastructure in the new markets across the States for eNAM to be effective.

iv. To analyse the problems / constraints faced by farmers in selling their

produce in the new system vs old system.

v. To suggest steps that can be taken by NABARD for creation of Agri Market

Infrastructure Fund.

1.4 Methodology of the Study

The study was conducted in two States viz., Karnataka and Maharashtra where UMP/

eNAM is under active implementation. It is based on both primary and secondary data

collection. The state level data on status of implementation of marketing reforms,

status of marketing infrastructure in APMCs was collected from State Agricultural

Marketing Boards of both the States by visiting their Head Offices. Secondary data is

also sourced from published Annual Reports, websites etc. All the stakeholders of

Tumkur APMC in Karnataka and Indapur APMC in Maharashtra, about 10 farmers,

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Cereals Pulses Oilseeds Fruits Vegetables PlantationCrops

LivestockProduce

Per

cen

tage

Lo

ss

Sector

Comparison of total sectoral losses - 2005-06 vs 2012-13 (calculated for 2014 prices)

Percentage loss during 2005-06 Percentage loss during 2012-13

5

four traders/ commission agents, warehouse service providers attached to these

APMCs were visited and information collected from them through a semi structured

interview schedule designed for the purpose of study.

2. Reforms in Agricultural Marketing

Agriculture is an important sector of Indian economy as it contributes about 17 percent

to the total GDP and provides employment to over 60 percent of the population. Indian

agriculture has registered impressive growth over last few decades. The foodgrain

production has increased from 51 million tonnes (MT) in 1950-51 to 253 million tonnes

in 2014-15. The production of oilseeds (nine-major oilseed) has also increased from 5

MT to 27 million tonnes during the same period. The rapid growth has helped Indian

agriculture mark its presence at global level. India stands among top three in terms of

production of various agricultural commodities like paddy, wheat, pulses, groundnut,

rapeseeds, fruits, vegetables, sugarcane, tea, jute, cotton, tobacco leaves, etc .

In-spite of this formidable growth in Indian agriculture, it is suffering from inherent

problems on marketing front. The agricultural marketing system of the country is

characterized by various short comings like heavy sale of agricultural commodities at

village level immediately after the harvest, absence of on-farm grading of produce,

poor packaging, insufficient marketing infrastructure, long marketing channels,

existence of various malpractices in the marketing of agri-produce, non-transparent

price discovery mechanism, lack of market information system, low marketable

surplus, etc.

The government has recognized the importance of efficient marketing of agricultural

produce for overall development of the sector and has taken a number of initiatives

from time to time to overcome these problems and to strengthen and upgrade the

agricultural marketing system in the country. The most important intervention has

been the imposition of public control over entire marketing system through

establishment of regulated markets. Based on a Model Act circulated by the central

government, almost all major states enacted APMC legislation.

The regulation was introduced to overcome the problems faced in traditional

marketing system by ensuring mechanism for proper sale of produce, weighment,

grading and standardization, market information, market charges in proportion to the

services provided, prompt payment without any un-authorized deduction etc. The

market regulation brought its impact in terms of

providing higher prices and better returns to farmers

reduction of market charges and

providing amenities at the time of sale of the product to the farmer in the

vicinity

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2.2 The Model APMC Act

Since the State Acts created fragment markets for agricultural commodities and

curtailed the freedom of farmers to sell their produce other than through the

commission agents and other functionaries licensed by the APMCs, the Ministry of

Agriculture developed a model APMC Act, 2003 and has been pursuing the state

governments for over a decade to modify their respective Acts along the lines of the

Model APMC Act, 2003.

The Model APMC Act

(a) provides for direct sale of farm produce to contract farming sponsors;

(b) provides for setting up “Special markets” for “specified agricultural commodities”

– mostly perishables;

(c) permits private persons, farmers and consumers to establish new markets for

agricultural produce in any area;

(d) requires a single levy of market fee on the sale of notified agricultural commodities

in any market area;

(e) replaces licensing with registrations of market functionaries which would allow

them to operate in one or more different market areas;

(f) provides for the establishment of consumers’ and farmers’ markets to facilitate

direct sale of agricultural produce to consumers; and

(g) provides for the creation of marketing infrastructure from the revenue earned by

the APMC.

2.3 Shortcomings of the APMC acts

Despite several advantages bestowed on the farmers through APMC regulation, these

acts prohibited direct sale by farmers outside the market yard, cartelization by market

functionaries like traders, commission agents and labour and complete control of

government on establishment, development and supply of market services leading to

inefficiencies. The market infrastructure was inadequate. In addition, several

limitations envisaged to be removed by regulation are still prevailing like late payment,

deduction for spot payment, and non-issue of sale slips, etc. Each state has its own

APMC act and the licensing requirements prohibit traders from other states

participating in the local markets thus precluding the benefits of better price discovery

to the farmers. Thus, relevance of regulated markets, once conceived as panacea of all

ill for the farmers in the marketing of their produce, have declined due to existence of

various malpractices. Certain traits associated with the regulated markets like public

control on establishment and development of markets, their monopoly in supply of

services and facilities, presence of unfair trade practices and absence of liberalization

of licenses to traders and market functionaries due to presence of strong market

functionaries association; many times does not allow markets to perform their basic

functions.

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2.4 Model APLM Act, 2017

In 2017, Government of India have come up with the Model Agricultural Produce and

Livestock Marketing, (Promotion and Facilitation) Act, 2017. As per New Model

Agricultural Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017,

the new definition of market area restricting the power of the market committee to

enforce regulation in the principal market yards and submarkets yards only, is

something in tune with the concept of unified market for agricultural produce. This

will go a long way towards removing the entry barriers and trade barriers in the

agricultural marketing system of the country. This will also make marketing system

more competitive by attracting new players and do away with the monopolistic and

oligopolistic tendencies of the present players of the APMC markets. The inclusion of

Livestock in the title of the new Model Act is a step needed for covering the sector

explicitly. In some states the livestock and livestock products are not notified

commodities. This will help in introducing good marketing practices in the livestock

sector. The new Model Act will end the monopoly of APMC by allowing more players

to set up markets and create greater competition at the markets. The market fee caps

under the new Model Act (including developmental and other charges) at not more

than 1 per cent for fruit and vegetables, and 2 per cent for food grain. It caps

commission agents’ fee at not more than 2 per cent for non-perishables and 4 per cent

for perishables. This will bring efficiency in supply chain and build a transparency in

trade operations and an equitable environment for marketing. The new legislation will

also have provision for promoting online or spot (e-national agriculture market)

agriculture market platforms and ensure that all these measures are revenue neutral

for States.

2.5 Need and concept of a National Agricultural Market

Agriculture marketing is administered by the States as per their agri-marketing

regulations, under which, the State is divided into several market areas, each of which

is administered by a separate Agricultural Produce Marketing Committee (APMC)

which imposes its own marketing regulation (including fees). This fragmentation of

markets, even within the State, hinders free flow of agri-commodities from one market

area to another and multiple handling of agri-produce and multiple levels of mandi

charges ends up escalating the prices for the consumers without commensurate benefit

to the farmer. To address these challenges the 2014 budget recognized the need for

setting up a National Agricultural Market (NAM). Conceptually NAM would interlink

various markets within the state and the country by creating a unified market through

online trading platform, both, at State and National level and promotes uniformity,

streamlining of procedures across the integrated markets, removes information

asymmetry between buyers and sellers and promotes real time price discovery based

on actual demand and supply, promotes transparency in auction process, and access

to a nationwide market for the farmer, with prices commensurate with quality of his

8

produce and online payment and availability of better quality produce and at more

reasonable prices to the consumer.

The main objectives of the Scheme are -

(i) to integrate markets first at the level of the States and eventually across the country

through a common online market platform, to facilitate pan - India trade in

agricultural commodities;

(ii) to streamline marketing / transaction procedures and make them uniform across

all markets to promote efficient functioning of the markets;

(iii) to promote better marketing opportunities for farmers / sellers through online

access to more buyers / markets, removal of information asymmetry between farmer

and trader, better and real-time price discovery based on actual demand and supply of

agri-commodities, transparency in auction process, prices commensurate with quality

of produce, online payment etc. that contribute to marketing efficiency;

(iv) to establish quality assaying systems for quality assurance to promote informed

bidding by buyers; and

(v) to promote stable prices and availability of quality produce to consumers.

The scheme being linked to agricultural marketing reforms, the States / Union

Territories (UTs) need to undertake mandatory reforms in their Agriculture Produce

Market Committee ( APMC) Acts in respect of following three areas to avail the

assistance under it -

(i) single trading license to be valid across the State;

(ii) single point levy of market fee across the State; and

(iii) provision for e-auction / e-trading as a mode of price discovery to be facilitated by

the State Agriculture Marketing Department / Board / APMCs / Regulated Market

Committees (RMCs), as the case may be.

In order to have more focussed and result oriented efforts on marketing reforms, the

Ministry of Agriculture, Department of Agriculture, Cooperation & Farmers Welfare

(DAC&FW) further identified 7 essential areas of market reforms which could be

pursued with the States in a focused manner.

(i) Establishment of private market yards/ private markets managed by a

person other than a Market Committee;

(ii) Establishment of farmer/consumer market by a person other than Market

Committee (Direct sale in retail by the farmers to the consumers);

(iii) Direct wholesale purchase of agricultural produce by processors/ exporters/

bulk buyers, etc at the farm gate

(iv) Provision for Contract Farming;

9

(v) Unified single license/ registration for trade transaction in more than one

market;

(vi) Provision for e-trading; and

(vii) Single point levy of market fee across the State.

Table 2 - Reform status as on 31/12/2016 S.

No

Area of Reforms States adopted the suggested area of market reforms

1 Establishment of private market yards/ private markets managed by a person other than a market

committee.

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Himachal Pradesh, Karnataka, Maharashtra, Mizoram, Nagaland, Orissa (excluding for paddy / rice), Rajasthan, Sikkim, Telangana, Tripura, Punjab, UT of Chandigarh, Jharkhand, Uttarakhand, West Bengal.

2 Establishment of direct purchase of agricultural produce from agriculturist (Direct Purchasing

from producer)

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Haryana (for specified crop through establishment of Collection Centres) Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Mizoram, Nagaland, Rajasthan, Sikkim, Telangana, Tripura, Punjab (only in Rule ), UT of Chandigarh (only in Rule ), Jharkhand, Uttarakhand and West Bengal.

3 Establishment of farmers/ consumers market managed by a person other than a market committee (Direct sale by the producer)

Arunachal Pradesh, Assam, Chhattisgarh, Gujarat, Goa, Himachal Pradesh, Karnataka, Maharashtra, Mizoram, Nagaland, Rajasthan, Sikkim, Tripura, Jharkhand, Uttarakhand and West Bengal.

4 Contract Farming Sponsor shall

register himself with the Marketing Committee or with a prescribed officer in such a manner as may be prescribed.

Andhra Pradesh, Arunachal Pradesh, Assam, Chhattisgarh, Goa, Gujarat, Haryana Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Madhya Pradesh, Mizoram, Nagaland, Orissa, Punjab (separate Act), Rajasthan, Sikkim, Telangana, Tripura and Uttarakhand.

5 To promote and permit

e-trading

Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand , Haryana, H.P., Karnataka, Rajasthan, Sikkim, Goa, Madhya Pradesh, Maharashtra, Mizoram, Telangana, Uttarakhand and Uttar Pradesh

6 Single point levy of market fee

across the State

Andhra Pradesh, Rajasthan, Gujarat, Goa, Haryana, Himachal Pradesh, Chhattisgarh, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Mizoram, Nagaland, Sikkim, UT of Chandigarh, Punjab, Telangana , Uttar Pradesh and Uttarakhand

10

7 Single trading license valid across the State

Andhra Pradesh, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Rajasthan, Madhya Pradesh, Maharashtra, Mizoram, Nagaland, Telangana, Sikkim and Uttar Pradesh.

2.6 Unified Market Platform – Karnataka Model

Karnataka Government constituted a Committee on Agricultural Marketing Reforms

on 27.3.2013, based on the recommendations of the Committee, amended the APMC

Rules 2004 on 4.9.2013. Major recommendations of the Committee are:

Introduction of comprehensive electronic auction system in APMCs

Introduction of technology in all activities including weighment, payment,

filing of returns, payment of market fee, charges, etc.

Encouragement to warehouse based sales

PACS and TAPCMS to act as aggregators

Capacity Building

Exemption from payment of market fee for private markets, direct purchase

centres, contract farming

All these recommendations were accepted and incorporated in the amended

Karnataka Agricultural Marketing Policy 2013. Some of the provisions are given

below:

1. Regulated markets—

a) These markets currently operating across the state, would adopt technology

required for setting up a comprehensive electronic auction system for transparent

price determination.

b) A state wide networked virtual market would be established by linking various

regulated markets and warehouses, provided with assaying & grading facilities and

other necessary infrastructure

2. Increasing Competition—

a) As an immediate measure, licensing procedures would be simplified and a single

unified licence would be made applicable for participants.

b) Conditions that restrict participation would be removed to increase competition in

the auction of the agricultural produce.

c) Administrative processes with regard to licence would be simplified and automated

for improved efficiency

3. Private markets –

a) Private markets would be encouraged on a level playing field for providing an

alternate facility for marketing of agricultural produce while being part of the

networked market.

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b) Farmers and other participants would have the choice to offer/ sell in any regulated

or private market in the state.

c) Private markets and regulated markets would compete to provide services to

farmers and other participants.

4. Quality standards for Demand creation—

a) Initiate steps for laying down quality standards for various agricultural

commodities and for creating infrastructure for sampling and assaying the produce in

markets and warehouses, to facilitate quality based trading of the produce; and

b) Undertake capacity building programmes to create awareness on quality standards

amongst various participants and its importance for creating demand in the domestic,

regional and international markets.

5. Empowering Farmers

a) Enhancing the bargaining power of farmers to improve price realization

and shorten the food value chain;

b) Providing alternate and safe storage options;

c) Facilitating pledge loans to farmers to avoid distress sale;

d) Enabling effective dissemination to farmers;

e) Simplifying processes and online timely payment to farmers;

f) Enabling the farmers to decide when to sell the produce and at what price, with a

right to reject the price offered.

6. Market Development

a) Encouraging public private partnership;

b) Developing effective and reliable agricultural marketing information system,

c) Establishing linkages with the secondary market in select commodities;

d) Establishing linkages with financial institution to facilitate seamless clearing and

settlement mechanism.

7. Contract Farming—

To promote contract farming in the state and have a single point for registering

contract-farming sponsors with procedures for timely settlement of disputes by the

registering authority.

8. Infrastructure

a) Developing key agricultural marketing infrastructure;

b) Fostering conducive for private sector and other stakeholders' investment through

apt incentives

9. Regulatory and Legislative Environment

12

Reviewing the Karnataka Agricultural Produce Marketing (Regulation and

Development) Act, 1966 to facilitate the aforesaid objectives and initiatives and to

promote a regulatory environment facilitating transparent and efficient functioning of

agricultural markets.

2.7 Agri-marketing Reforms in Maharashtra

The Government of Maharashtra had from time to time made amendments to APMC

Act to incorporate the provisions of Model Act, 2003. These include, Provision of

Establishment of National Integrated Produce Market (Terminal Market) 2003,

Amendments in the APMC Act 2005 (27 Dec 2005), Provision of Contract Farming

2006, Notification of Rules 2007, Maharashtra Agricultural Produce Marketing

(Development and Regulation) Act, as amended by MAH. Act 21 of 2010,

promulgation of ordinance in 2016 for taking out fruits & vegetables out of the purview

of APMC, e-Marketing, single point levy of Market Fee and Commission charges from

buyers,. promulgation of ordinance for change in constitution of Committee giving

direct voting rights to agriculturists. The status of reforms in APMCs during this period

are given as under:

1. Allowing setting up of Competitive Markets by private person, farmers and consumers

A new chapter I-B, section 5D has been inserted (Mah.Act 48 of 2005, Section 7)

under which

(1) The Director may grant licence to any person to establish a private market in one

or more market areas for (a) processing of the agricultural produce; (b) trade of the

agricultural produce of particular specification; (c) Export of the agricultural produce;

(d) Grading, packing & transactions in any other way by value addition of the

agricultural produce.

(2) The Director may grant licence to any person, who agrees or undertakes to develop

the prescribed infrastructure, for establishing farmer, consumer market.

Persons owning 1 acre land with a license Fee of Rs.10,000/-, Bank Guarantee of Rs.1

lakh, Infrastructure Investment of Rs.10 lakh would be eligible to apply. Maximum 10

kg fruit and vegetable, 50 kg food grains / non-perishable goods permitted to be sold

to one consumer.

2. Direct sale / procurement from the farmers field

A new chapter I-B, section 5D has been inserted under which the Director may grant

licence to any person for Direct marketing. Any Person, Partnership firm, Cooperative

Society, NGO, Local/Govt body and Company is eligible for direct marketing licence.

Permission to purchase agricultural produce outside APMC yard will be given subject

13

to payment of licence fee of Rs 1000/- and Bank Guarantee of Rs 5 lakh for the entire

state. The progress in issue of direct marketing licences and their turnover during the

last four years is as under:

Table 3 – No. of direct marketing licences issued during the last three years (Rs. Crore)

YEAR No. of Direct Marketing

Licences

Turnover

2013-14 79 1774

2014-15 91 1182

2015-16 133 1553

2016-17 527 2218

Source: MSAMB

3. Markets in Private Sector

Section 5D and Rule 4C of the Act provides for establishment of Private Market. Any

Person, Partnership firm, Cooperative Society, NGO, Local/Govt. body and Company

can establish a Private Market. License can be issued to Commodity exchanges also.

Eligibility for licence shall be minimum of 10 acres land in district place with municipal

corporation, licence fee of Rs 50000/-, Bank Guarantee of Rs. 20 lakh, Infrastructure

Investment of Rs. 2 to 5 crore. While in other places it is minimum of 5 acres land in

district place with municipal corporation, licence fee of Rs 25000/-, Bank Guarantee

of Rs. 5 lakh, Infrastructure Investment of Rs. 1 crore. The progress in issue of

marketing licences in private sector and their turnover during the last four years is as

under:

Table 4 – No. of private marketing licences issued during the last four years (Rs. Crore)

YEAR No. of Private Marketing

Licences

Turnover

2013-14 22 1375

2014-15 28 3537

2015-16 34 3230

2016-17 42 2460

4. Contract Farming

A new chapter I-C, section 5E, Rule 4O has been inserted (Mah.Act 25 of 2006) - under

which

14

1. Contract farming Sponsor shall register himself with market committee 2. Contract

farming Sponsor shall get Contract Farming Agreement recorded as may prescribed

with market committee 3. No title, rights or ownership, possession of land of the

farmer shall be transferred, alienated or vested in the contract farming sponsor etc. 4.

Disputes arising out of contract farming agreement may be referred to settlement

authority for resolution, which should be resolved within 30 days.

5. Promote Public-Private Partnership in financing, construction, operation

and management of agricultural markets.

Amendment proposal already carried out in April 2004 (Mah Act 13 of 2003, Section

2) - Establishment of private terminal markets for fruits & vegetables and flowers can

be permitted under the amended law.

6. Market fee

1. Single Point levy in the entire process of marketing. Under section 31,2(1) – No

market fee shall be levied and collected in the same market area in relation to

agricultural produce in respect of which market fee have already levied & collected

therein.

2. Fee on : i. Direct Marketing under section 31 of the Act – Market committee is

competent to levy and collect fee in the prescribed manner at such rates as may be

decided by it.

5D(2) (b) specifies service charges shall be collected by seller for remitting to

proprietor of Farmer Consumer market.

5D(2)(c) specifies save as otherwise provided in this Act, no market fee shall be leviable

in the farmer consumer market

Under section 31 of the Act 5E(8) specifies no market fee shall be levyable on sales by

farmer to the contract farming sponsor

Processing - Market fee is exempted if processed within 30 days of arrival – Under

Section 31(1).

Exports- Under Section 31 (1)(a) - Market fee is exempted.

7. Licensing :

Under section 7(3) and Rule 6(3) of the Act – The market committee may grant one

single licence in respect of the principal market, subsidiary market and in respect of

any other place in the market area. Any trader, who desires to operate in more than

one market areas, may apply to such authority or officer notified by the State

Government for grant or renewal of licence with such details, as may be prescribed.

15

Such application shall contain the names of the Agricultural Produce Market

Committees in which the applicant trader wants to operate and the authority or officer

granting such licence shall incorporate in the licence the names of such Agricultural

Produce Market Committees in which concerned trader shall be entitled to operate.

The person applying for licence to operate in more than one market areas, shall be

required to pay the licence fee at such rate, as may be prescribed, to the concerned

authority or officer and such fee shall be shared in the manner prescribed, between

such authority or, as the case may be officer and the Marketing Committees, which are

covered under the said licence.

16

3 E-trading of agricultural commodities

For years, farmers in India have had inadequate access to market information

regarding their crop prices. They have been at the mercy of arthiya’s, commission

agents and middle men to sell their produce. These arthiya’s and commission agents

often gave farmers loan for cultivation, that too at very high interest rates. Often times

farmers just wanted to sell their produce and get money to eke out their living. Since

access to information regarding crop prices was minimal they sold their produce to the

commission agents and traders, at whatever prices they quoted. When sold in open

markets farmers lose out on prices besides being subject to commission charges, loss

in weighment etc.

Regulated Markets and Agricultural Producers Cooperative Marketing Societies were

established to address the above issues. Farmers bring their produce to the RMs or

cooperative markets that are close to their farms/villages or sold it in the open

markets. The regulated markets and the cooperative markets are expected to regulate

the trading practices and ensure a fair price for the farmers. Agricultural commodities

are sold either through open/closed tender auctions in the APMC’s and cooperatives.

The auctioning process is entirely manual. As stated earlier, the farmer has to spend a

lot of time at the markets since the time he brings his produce to the time he realizes

his payment. During huge arrivals, the farmers are forced to stay till night to get their

payment. The manual process of determining the highest bidder (H1) is not only

cumbersome but also prone to human errors. Since the trading is limited to a single

market, cartelization of traders occurs which impairs the transparency of transaction.

In the end, farmers lost out on the prices for their produce.

It is therefore imperative that an alternative to the manual system of sale needs to be

introduced which while not only ensures a fair and transparent price to the farmers, it

will also preclude cartelization of buyers, reduce the time period of stay of the farmers

at the mandis and ease the work load of the mandis / cooperative societies. It is in this

context that the Electronic spot trading in agricultural commodities was initiated in

the country in selected pockets initially culminating in the concept of National

Agricultural Market.

3.2 Concept of E-trading

Buying and selling of agricultural commodities through electronic trading portals

situated at APMC’s (or) other market yards is known as e-trading. The quality details

of the agricultural produce are displayed on the electronic platform, traders from

different parts of the state participate in the buying process and quote prices

electronically and the sale proceeds are also transmitted online.

In many mandis, prices are quoted online by the traders after visual

inspection/scientific assaying of the commodity and based on the available market

17

information. The price quotes are tabulated automatically and the highest bidder gets

to buy the commodity.

Information regarding the highest quote is then communicated to the farmer as text

messages, displayed on big screens or through loud speakers. Farmers get the

opportunity to accept or reject the offer. If the offer gets accepted by the farmer then

money gets transferred to him either through RTGS/Cheque/cash. The trader gets to

take the commodity after obtaining the exit permit from the mandi. The genera process

flow of e-trading is depicted in Figure 6.

The objectives of e -trading in agricultural commodities are to

Ensure competitive price for agricultural produce through a transparent

trading process

Increase the demand for the produce by increasing the number of buyers

/sellers

Online transfer of sale proceeds to the bank accounts of the farmers on the day

of sale itself

Disseminate information to the farmers at all stages of sale process

Online platforms currently available

The online platforms currently available in India for e trading in Agricultural

commodities are shown as under:

3.3 Unified Market Platform (UMP)

This online platform is an initiative of Rashtriya e-Market Services Ltd (ReMS), which

is a joint venture between NCDEX e-Markets Limited and Karnataka government.

ReMS provides online access to all participants in the APMC markets in the state

holding the unified market license from the state government. Currently, 157 mandis

in Karnataka use e-trading, e- permits, e-payments and scientific grading/assaying

services through this initiative. This is a Web enabled platform and is accessible from

web enabled devices like desktops, mobiles, tablets etc.

The objective of the UMP was to implement Karnataka State's new agricultural

marketing policy and to bring in efficiency and transparency in the agricultural

marketing system for efficient price discovery for the benefit of farmers and other

market participants. UMP was recognized by the Indian government as a model for

building the National Agricultural Market. The process flow in a market that uses

Unified market platform (eg. Tumkur) is presented in Figure 7.

18

Figure 3- Process flow of e-auction under UMP

Diversified uses of UMP

Unified Market Platform enables automated price discovery mechanisms and also the

post-auction process (weighing, invoicing, market fee collection, accounting, payment

of proceeds directly to farmers and e permit generation) in agriculture markets. “UMP

has clearing and settlement module, which enables direct payment from the accounts

of traders to those of farmers. Traders purchasing multiple lots have to transfer to one

single clearing and settlement account of APMC. UMP automatically trifurcates the

whole amount into three components and transfers to the accounts of the farmer

concerned, commission agent and market committee. They have piloted online

payments in three markets.

Challenges in ReMS

The following are the challenges in the adoption of UMP

Farmer has the option of selling the stuff directly to a person of his choice or putting it for auction through a commission agent even after lot numbers are given.

Most of the farmers selling produce at the yard have registered for online payments, but small farmers want to be paid in cash.

Farmer Lot Wise

Entry and Lot ID

Creation

Unloading at

Commission Agent

/ CA Inventory

Update

Sample / Heap

Bidding Through Screens / Mobile Based on Unique

Lot ID

Best Price —Winner SMS sent to winner / CA /

Farmer

Farmer Option Accept or Reject Best Price

Weighing Of Lot -Authorized Personnel

Generation of Sale Receipt

Cess Payble Booking CA / Buyer Account

Generation of Farmer Receipt

Update of Buyer Inventory

To Secondary Sales / Exit Process

19

Though trading at the mandi’s is online, only a miniscule number of trades end up in online payments.

Grading/assaying is not mandatory, so only few farmers opt for it.

3.4 National agricultural market (eNAM)

National Agriculture Market (NAM) is a pan-India electronic trading portal that

networks the existing APMC mandis across the country to create a unified national

market for agricultural commodities. Ministry of Agriculture & Farmers’ Welfare,

Govt. of India has appointed Small Farmers’ Agribusiness Consortium (SFAC) as the

Lead Implementing Agency of NAM. SFAC will operate and maintain the NAM

platform with the help of a Strategic partner selected for the purpose. Software

contract has been awarded to a consortium led by Hyderabad-based Nagarjuna

Fertilizers and Chemicals (NFC). Being the strategic partner for NAM, Nagarjuna

Fertilizers and Chemicals Ltd. are responsible for development, operation and

maintenance of the platform. Their broad role includes writing of the software,

customizing it to meet the specific requirements of the mandis in the States willing to

integrate with NAM and running the platform.

NAM is a “virtual” market but it has a physical market (mandi) at the back end. Thus, physical infrastructure of mandis will be leveraged through an online trading portal. 585 major wholesale markets (mandis) in the country are expected to be linked electronically through eNAM. Thus, buyers situated even outside the state will also be able to participate in trading at the local level. This NAM Portal provides a single window service for all APMC related information and services. Some of the offerings include commodity arrivals & prices, buy & sell trade offers, provision to respond to trade offers etc. Though the movement of the agriculture produce continues to happen through mandis, an online market reduces transaction costs and information asymmetry.

In India, Agriculture marketing is administered by the States as per their agricultural

marketing regulations. Each state is divided into several market areas. These market

areas are independently administered by separate Agricultural Produce Marketing

Committee (APMC) which imposes its own marketing regulations including the fees.

This fragmentation of markets even within the State, hinders free flow of agricultural

commodities from one market area to another. Agricultural produce gets handled at

multiple levels and multiple mandi charges are also paid. This escalates the prices for

the consumers without commensurate benefit being given to the farmer.

A list of state-wise number of wholesale markets, primary rural retail markets and

those identified under eNAM is given in Table no. 5.

20

Table No. 5 - Details of wholesale, Rural Primary, Regulated Markets and those selected under

eNAM in different States (as on 31.03.2015)

States/ UTs Rural

Primary

Retail

markets

Regulated Markets APMCs

selected

under

eNAM*

Principal

markets

Sub

Market

yards

Total

Andhra Pradesh 157 190 157 347 22

Bihar** 1469 - - - 0

Chhattisgarh 1132 69 118 187 14

Goa 24 1 7 8 0

Gujarat 129 213 187 400 40

Haryana 195 107 174 281 54

Himachal Pradesh 35 10 44 54 19

Jammu & Kashmir 8 11 0 11 0

Jharkhand 602 28 173 201 19

Karnataka 730 157 356 513 0@@

Kerala@ 1014 0 0 0 0

Madhya Pradesh 0 254 284 538 58

Maharashtra 3500 305 603 908 45

Odisha 1150 54 382 436 10

Punjab 1390 150 274 424 0

Rajasthan 312 134 312 446 25

Tamil Nadu 0 277 6 283 15

Telangana 110 150 110 260 44

Uttar Pradesh 3464 250 365 615 100

Uttarakhand 30 26 32 58 5

West Bengal 3250 20 464 484 0

Assam 735 20 206 226 0

Arunachal Pradesh 66 0 0 0 0

Manipur 95 0 0 0 0

Meghalaya 85 2 0 2 0

21

Mizoram 218 0 0 0 0

Nagaland 174 18 0 18 0

Sikkim 12 0 0 0 0

Tripura 470 21 0 21 0

A & N Islands 28 0 0 0 0

Chandigarh 0 1 0 1 0

Delhi 0 7 8 15 0

Puducherry 0 4 5 9 0

TOTAL 20389 2479 4267 6746 470

Source: Doubling of Farmers’ Income – Volume IV; * Progress under eNAM as on 31 October 2017; ** APMC Act repealed in Bihar; @ No APMC Act in Kerala; @@ 160 APMCs under UMP in Karnataka;

3.5 Field level observations on the use and perceptions of e- trading

platforms

Computerization /automation was done at various points in these APMC’s. Electronic entry at the APMC gates: Commodity arrivals were recorded at the

gate electronically in some mandis. Unique lot ids were also created. In some

cases, they were not being done.

Electronic bidding process: The electronic bidding systems were in place.

However, e-bidding was adopted only for commodities with high arrivals in the

mandis. Other commodities were traded manually.

Price /information dissemination: The level of information dissemination

varied. Information regarding the prices /quotes were sent as text messages

(SMS’s), displayed on screens, given as printed slips and in some cases loud

speakers were used.

Commission/ other charges: Traders at Tumkur APMC market pay 2% of the

gross purchase value to Commission Agents, 2% tax and 1.5% to ReMSL by way

of commission. In the small percentage of cases where online settlements are

being made, the total Buyer Obligation amount comprising Gross sale value

plus transaction charges, Commission agents’ commission, APMC cess and

Sales tax, handling and packaging charges is being settled online by the trader

into APMC’s bank account. The goods are delivered by the CA to the trader after

confirming credit. The net amount payable to the farmer after adjusting

handling and packaging charges is credited online by APMC into the farmers’

bank account and the CA’s commission is also being settled online.

However, as per options exercised by farmers, net settlements are

presently being made in cash to majority of the farmers by the

22

Commission Agents. The payment to farmer is being settled immediately by

Commission Agent on acceptance of bid price by the former while traders are

settling the commission agents’ payments in instalments over a period of one

month. APMC market fee and sales tax are also being paid by the Commission

Agents upfront to APMC and collected by them as a part of the gross invoice

amount from the traders subsequently.

Although a Banker’s court has been set up in the APMC to facilitate opening of

bank accounts for the registered farmers, the progress has been slow in this

respect. Discussion with some of the commission agents and traders revealed

that most of the market players prefer to continue with the system of cash

settlements as farmers are getting their payments immediately while traders

can pay the commission agents over a period of time under the offline

settlement system.

Assaying facilities: Though assaying for commodities was available on

voluntary basis, neither the farmers nor traders actually trusted the quality

based on assaying and they were hardly used. These facilities were mostly used

by those traders who wanted to export their produce. Traders preferred visual

inspection over scientific assaying methods as they felt that these scientific

methods were actually not as accurate as visual inspection. Farmers felt that

assaying could reduce the price of their commodity, hence were reluctant to use

assaying facilities.

3.6 Benefits to farmers

There is a more transparent and better discovery of price as, due to e-auction,

more no. of bids are received from traders now as compared to past. Further,

possible manipulations in physical auction (such as gesticulations / eye signals

to indicate upward/ downward quotation of price) are largely eliminated.

Farmers get computerised bills and SMS indicating the total value of the

produce immediately after the auction results are declared. This eliminates

possibility of manipulation and under-payment to farmers.

About 22 lakh farmers are registered with UMP in the State. All registered

farmers get SMS regarding previous days’ trading price of agricultural produce.

This enables farmers to decide when to go to APMC market for selling their

produce.

Before introduction of e-market, traders / commission agents used to delay

payments, sometimes up for weeks or months. Through UMP, farmers now

receive SMS alerts from APMC when the auction results are announced. The

commission agent makes payment to farmers on the same day.

It was observed during the study that the Gate entry slip is issued to farmers in

about 30 second on an average (since all the details regarding the farmer are

already available in the database of ReMSL). This itself is a vast improvement

23

as compared to APMC markets in other States where it takes a considerably

longer time for the farmer to get entry in the market.

Farmers have higher degree of control on sale of their produce as they have the

right to reject the price offered by the highest bidder in e-auction. In that case,

his lot gets traded on the next trading day. In the meanwhile, the produce is

kept in the godown of commission agent.

Strongest benefit appears to be in the form of electronic weighment (machines

provided to Commission agents by the APMC) which ensures accurate

weighment and eliminates the possibility of cheating at the time of weighing

farmer’s produce.

A registered farmer also gets insurance benefits if he meets with accident/ dies

during agricultural operations.

That farmers are benefitted from e-auction, is evident from the fact that the

arrivals in the market after introduction of ReMSL has been increasing steadily.

The value of commodities traded through the UMP has almost doubled to

₹ 12,597 crore in 2015-16 from ₹ 6,509 crore in 2014-15. In Tumkur, the mandi

fee collection improved from ₹ 4.77 crore in 2014-15 to ₹ 6.83 crore in 2015-16

and further to ₹ 8.68 crore in 2016-17.

To sum-up the benefits, farmers and traders have become familiar with

computers and online auctions. • Farmers have greater bargaining power

versus traders. • Farmers are more aware of crop quality specifications. Quality

consciousness among farmers has increased. • Farmers have better

understanding about banking. Literacy among farmers about bank transactions

/ operations has increased. • Direct electronic fund transfer from buyers to

sellers. • Maintenance of mandi trading records has become computerised. •

Greater transparency at every stage of transaction within a mandi. • Electronic

trading system allows buyers to bid in real time even when they are not

physically present at the mandi. E-auctioning system has enabled sellers to

participate irrespective of proximity to the mandi location. • APMC revenues

have increased due to online transactions. Transparency in registration process

has helped reduce evasion of market fee. • Tender results are announced daily

at 1 pm so farmers do not face uncertainty

3.7 Areas for further improvement

Farmers bring commodities to APMC markets without washing and grading.

These value addition activities are undertaken by traders (buyers) mostly and

sometimes by Commission agents (sellers). Farmers, therefore, do not get

advantage of these simple value addition activities. There is a need to support

farmer groups in creating awareness and implementing these simple value

addition activities.

The small & marginal farmers, with uneconomical sized marketable lots, find it

difficult to aggregate their produce and move to these markets to participate in

the auction system for suitable price discovery. They, therefore, use local agents

and traders, who relieve the small farmer of their produce at locally determined

24

prices, to function as aggregators and transport to transact at the APMCs. This

intermediation results in depriving the farmer-producers from aiming for

optimal or market-linked price realization.

Farmers also do not have proper transport and storage facilities near to their

dwelling forcing them to part with their produce to the local agents.

Although under UMP, participants such as businessmen, traders, millers, etc.

from other States are also allowed to participate in online auctions. However,

visit to Tumkur APMC market revealed that bids are submitted only by local

traders. Therefore, there is always a possibility of cartelisation by local traders

and artificially depressing the price while bidding in e-auction. Therefore,

necessary safeguards need to be created to protect the interest of farmers.

There is a need for a massive Stakeholder Education Program to create

awareness of the benefits of the online markets to all stakeholders, and to create

awareness on the importance of cleaning and grading produce before offering

it to the market, availability of assaying facilities at markets, transparency of

transactions on the UMP such as providing a computerised sale receipt and

transfer of sale proceeds directly to the farmer’s bank account.

25

4 Status of Marketing Infrastructure in selected States

One of the objectives of eNAM is to promote better marketing opportunities for

farmers / sellers through online access to more buyers / markets, removal of

information asymmetry between farmer and trader, better and real-time price

discovery based on actual demand and supply of agri-commodities, transparency in

auction process, prices commensurate with quality of produce, online payment etc.

that contribute to marketing efficiency. However, it is observed that majority of the

APMCs do not have the basic Market infrastructure including automatic sorting,

grading, weighing and packing machine, building to house the machinery, trading hall,

warehouses, electronic weigh bridges and weighing machines, surveillance cameras,

power back up etc. resulting in non-integration and price discovery to the farmers/

sellers in these Mandis.

Due to the different types of climatic conditions prevalent in the country, different

varieties of the same crop are grown. These varieties have different physical

characteristics and chemical properties. Since the differences are many, it becomes

important to have some quality parameters that form the basis for trading. Assaying

is a process that is adopted to analyse the physical sample of a produce, in order to

determine its composition and chemical properties. This process provides an

indication of the value of a product, for the seller and the buyer. In the physical

markets, assaying can help determine properties of a product.

Assaying of commodities is largely undertaken on various parameters including

moisture content, foreign material, grain colour, oil content, fibre content, aroma etc.

which is important for segregation of various grades. It helps the buyer know the

contents of his commodities and will also help him gauge the approximate price of his

commodity. For example, a produce with higher moisture commands a lower price.

Assaying is done to determine the quality of the produce both in the spot markets and

in the futures market.

The state-wise number of APMCs is given in Table No. 5 under Chapter 3. It may be

seen that APMC Act was repealed in Bihar and there is no APMC Act operating in

Kerala as the State has not enacted the same.

4.2 Status of Marketing Infrastructure in Karnataka

The Department of Agricultural Marketing is supervising the activities of the

Agricultural Produce Market Committees (APMC) in the State. There are 162 APMCs

in the State which are implementing the provisions of the KAPMR (R&D) Act 1966 and

Rules 1968. The main objective of the APMC is to ensure better marketing practices

like correct weighment of produce of the farmers, competitive method of sale,

rationalization of market charges and timely payment of sale proceeds to the farmers.

26

Another objective is to provide basic infrastructure facilities for trade like construction

of market yards/sub yards, auction platforms, roads, drainages, drinking water

facilities, electricity, farmers rest houses, weigh bridges, administrative building,

shops, godowns, canteen etc., in the market yards for the use of market functionaries

and farmers.

4.2.1 Income of the Market Committees

The trade of notified commodities is supposed to take place in market yards and sub

yards. For every notified commodity purchased, the purchaser has to pay a market fee

of 1.5% and for Vegetables it is 1% and for Cattle Rs.5/- per head and Sheep, Goat

etc. Rs.1/- per head. Other sources of income for Market Committee include rent on

the properties rented out, license fees, interests on deposits, penalties etc.

Out of 1.5% market fees collected 1/3% is contributed to Revolving Fund. Out of total

market fee and license fee 5% is contributed to the Karnataka State Agricultural

Marketing Board and 1% is to the Agricultural Universities Fund. About 25% is

contributed to the State Consolidated Fund of the State. Remaining amount is utilized

for development of the market yards and administration purpose.

The value of the commodities transacted in all the APMCs of the state for the last three

years is given below;

Table No. 6 - Value of Notified Commodities Transacted in the APMCs. (Rs. crore)

Details of Market and Licence fee collected by APMCs in the last three years is given

below.

Table No.7- Collection of Market Fees and Licence Fees by APMCs. (Rs. crore)

It may be seen from the above that there is substantial increase in the value of

commodities transacted, collection of market fee, licence fee during the last three years

with the introduction of Unified Market Platform in the State.

Year Value of commodities transacted

2013-14 31308.98

2014-15 32046.78

2015-16 37073.68

Year Market Fee Licence Fee Total

2013-14 381.94 1.76 383.70

2014-15 385.40 2.28 387.68

2015-16 404.45 55.24 459.69

27

4.2.2 eNAM mandates that APMCs shall i) provide infrastructure facilities and

services relating to registration, cleaning, sorting, grading, assaying, IT, internet

connection of minimum 5-10 MBPS; ii) carry out training and awareness

programs and one time registration of all stakeholders; iii) provide facilities for

installation of computer hardware / printers along with UPS / generator; iv)make

available room/desk/space for support staff deployed for successful rollout and also

operation and maintenance of e-NAM; v)set up e-auction hall equipped with

computers; vi) set up Quality Assaying Laboratory; vii) promote third party

assaying labs; viii) put in place a system of quality assaying; ix) provide at

least one electronic weighbridge; x) take necessary steps to integrate the entire

market operations right from gate entry till exit of transacted commodity. APMC /

RMC should also provide all logistic support of storage and incidental thereto

for unsold agricultural produce, sold produce to be dispatched or produce brought for

selling through e-NAM platform requiring such support inside the market premises

on minimal charge basis.

4.2.3 Marketing Infrastructure Available/ required in Karnataka: Of the

162 APMCs implementing UMP in Karnataka, only 134 APMCs have their Own Land,

121 have their Administrative building, 94 have farmer’s bhavan, 128 have G0downs,

76 have auction platforms, 48 have bank/ post offices, only 14 have cold storages, 101

have internal roads, 77 have check posts, 100 have sundry shops and only 50 have

weigh bridges as may be seen from the following table.

Table No.8 - Status of marketing infrastructure available in APMCs

Infrastructure available

Number of APMCs under Division

Belgaum Gulbarga Mysore Bangalore Total

Own Land 43 29 28 34 134

Admn Building 37 25 28 31 121

Farmer's Bhavan 32 26 18 18 94

Godowns 38 28 28 34 128

Auction platform 32 23 12 9 76

Bank/ Post office 19 10 9 10 48

Cold Storage 3 2 6 3 14

Internal Roads 42 29 14 16 101

Check Post 32 24 12 9 77

Sundry shop 42 29 17 12 100

Weigh Bridge 16 8 16 10 50

Based on the data received by KSAMB, the infrastructure requirements was assessed

only in respect of 134 Mandis in the State. It is observed that 63 APMCs require

Godowns of varying capacities, 104 APMCs require Covered Auction Platforms, 10

require Assaying labs, 73 require Internal Roads/ drainage, 55 require compound wall,

36 require drinking water facility and 27 require other facilities including electronic

weighing, automatic grading and sorting machines, electrification etc. as per division-

wise details given in the following tables.

28

Table No.9 -Requirement of Marketing Infrastructure in Karnataka (Rs. lakh)

S

No.

Division Requirement of Infrastructure

Godowns Internal Roads Auction

Platforms

No. Capacity

(MT)

Amt No. Area

(Sq M)

Amt No. Amt

1 Belgaum 31 49500 4930 30 642200 14645 34 2275

2 Gulbarga 11 7000 800 19 81400 4975 13 475

3 Mysore 8 6500 725 24 268007 4003 35 925

4 Bangalore 13 6900 690 108000 2925 22 500

Total 63 69900 7145 73 1099607 26548 104 4175

Table No.10 - Requirement of Marketing Infrastructure in Karnataka (Rs. lakh)

S

No.

Division Requirement of Infrastructure

Compound Wall Drinking

water

Assaying

Labs

Others

No. Length (M) Amt No. Amt No. Amt No. Amt

1 Belgaum 27 23130 1385 15 195 10 600 14 955

2 Gulbarga 11 8790 830 8 80 0 0 6 300

3 Mysore 9 8390 609 7 40 0 0 7 275

4 Bangalore 8 2800 321 6 60 0 0 0 0

Total 55 43110 3145 36 375 10 600 27 1530

4.3 Status of Marketing Infrastructure in Maharashtra

The Government of Maharashtra had also introduced marketing reforms in phases to

facilitate participation of farmers/ sellers in the APMCs. The state has 306 APMCs,

598 sub-markets as on 31 March 2017.

4.3.1 Income of the Market Committees

The trade of notified commodities is supposed to take place in market yards and sub

yards. For every notified commodity purchased, the purchaser has to pay a market fee

of 1% for notified crops and for Cattle Rs.5/- per head and Sheep, Goat etc. Rs.1/- per

29

head. Other sources of income for Market Committee include rent on the properties

rented out, license fees, interests on deposits, penalties etc. During 2016-17, 292

APMCs reported an income of Rs. 900.12 crore and an expenditure of Rs 673.55 lakh

as per division-wise details given below:

Table No.11 -Income/ Expenditure of APMCs in Maharashtra

(Rs. Crore)

S No Division No. of APMCs Income

Expenditure

1 Amravati 54 153.89 82.08 2 Aurangabad 34 47.46 40.32 3 Kolhapur 21 57.48 35.78 4 Nagpur 50 112.10 79.55 5 Nashik 50 125.03 116.18 6 Pune 21 163.35 102.23 7 Ratnagiri 20 192.16 171.68 8 Latur 42 48.65 45.73

Total 292 900.12 673.55

The year-wise surplus generated by the APMCs is as under:

Table No.12- Annual surplus generated by the APMCs (Rs. Crore)

YEAR Income Expenditure Surplus

2014-15 679.30 502.39 176.91

2015-16 706.90 493 213.81

2016-17 616.93 423.75 193.19

Of the 292 APMCs, 153 are classified under A category, 65 under B category, 35 under

C category and 39 under D category. 114 APMCs under A category, 45 under B

category, 19 under C category and 14 under D category reported increase in income

during the year 2016-17 compared to previous year.

Table No.13 -Classification of APMCs in Maharashtra

Division No. Of

APMCs

Classification of APMCs

A B C D

Amravati 54 33 10 4 7

Aurangabad 34 13 12 4 5

Kolhapur 21 8 5 5 3

Nagpur 50 23 19 7 1

Nashik 50 40 5 2 3

Pune 21 16 1 3 1

30

Ratnagiri 20 8 3 4 5

Latur 42 12 10 6 14

Total 292 153 65 35 39

The value of the commodities transacted in all the APMCs of the state for the last two

years is given below;

Table No. 14 -Value of Notified Commodities Transacted in the APMCs.

(Rs. crore)

4.3.2 Marketing Infrastructure available/ required in Maharashtra:

Of the 292 APMCs in Maharashtra for which data is available, only 286 APMCs have

their Own Land, 273 have their administrative building, 112 have farmer’s bhavan, 206

have g0downs, 208 have auction platforms, 222 have internal roads, 211 have check

posts, 248 have market premises, 196 have compound wall, 84 have cattle shed, 127

have canteen and only 160 have weighing scale. The infrastructure requirements was

assessed only in respect of 292 mandis in the State. It is observed that 86 APMCs

require godowns of varying capacities, 84 APMCs require covered auction platforms,

70 require internal roads/ drainage, 250 require assaying lab, 96 require compound

wall, 208 require cattle shed, 108 require farmers’ accommodation, 27 require

drinking water facility and 201 require other facilities including electronic weighing,

automatic grading and sorting machines, office building, canteen etc. as per division-

wise details given in the following tables.

Table No. 15- Requirement of Marketing Infrastructure in Maharashtra

(Rs. lakh)

Division Requirement of Infrastructure

Godowns Internal Roads Auction Platforms Assaying Labs

No. Amt. No. Amt. No. Amt. No. Amt.

Pune 17 3825 8 280 10 300 34 1496

Kolhapur 7 1575 4 140 4 120 20 880

Nashik 7 1575 9 315 3 90 25 1100

Aurangabad 8 1800 4 140 13 390 24 1056

Latur 27 6075 15 525 35 1050 55 2420

Amravati 3 675 10 350 3 90 37 1628

Year Arrivals (Qtls) Value

2015-16 168982462 42875

2016-17 203747914 48000

31

Nagpur 4 900 9 315 4 120 36 1584

Ratnagiri 13 2925 11 385 12 360 19 836

Total 86 19350 70 2450 84 2520 250 11000

Table No. 16 - Requirement of Marketing Infrastructure in Maharashtra (Rs. lakh)

Division Requirement of Infrastructure

Compound wall Weighing Scale Cattle Shed Others

No. Amt. No. Amt. No. Amt. No. Amt.

Pune 6 90 16 400 25 550 18 3330

Kolhapur 3 45 13 325 11 242 16 2960

Nashik 6 90 7 175 15 330 20 3700

Aurangabad 17 255 6 150 25 550 24 4440

Latur 31 465 24 600 49 1078 51 9435

Amravati 9 135 13 325 36 792 36 6660

Nagpur 12 180 34 850 31 682 35 6475

Ratnagiri 12 180 17 425 16 352 28 5180

Total 96 1440 130 3250 208 4576 228 42180

4.4 Unit Costs of Investments in APMCs

As per the discussions held with officials of State Marketing Boards, the unit cost for various components of basic market infrastructure required for APMCs is presented as under:

Table No. 17 - Unit Cost of investments in APMCs

Type of civil construction Size Cost Rs lakh

New Construction for Bidding Hall Building 121.8 sq.m

ssqsq.m

33.00

Covered Auction Platform 400 sq.m 30.00

Conversion of Existing Building for Bidding Hall 200 sq.m 22.00

Estimate for construction for Grading, sorting &

cleaning facility with assaying unit 240 sq.m 44.00

Estimate for the Conversion of Existing Building for

Grading, sorting & cleaning facility with assaying unit

240 sq.m

13.20

32

Crop specific Assaying Lab (need based)

50 sq.m

100.00

Construction of 500 MT godown 500 MT 85.00

Construction of 1000 MT godown 1000 MT 130.00

Construction of 2000 MT godown 2000 MT 225.00

Internal Roads (PCC) 100 metres 35.00

Boundary Wall (1.5 metre height) 100 metres 15.00

Covered drainage 100 metres 10.00

Drinking Water 20.00

Fire Fighting 20.00

Sub-total (new infrastructure) 337.00

Machinery and equipments Size Cost Rs lakh

Automatic Weighing and Bagging machine (up to

100 kg)and Grading and Sorting machine (5 ton per hour)with civil

structure, including Installation and Commissioning, 3-phase &

Earth connections etc.,

5 MT per hour

(8 hours a

day)

185.00

Paddy drier 25 MT per day 25.00

Electronic weighing machine (300 kg) capacity 1.00

CCTV camera 5.00

Generator (25 KV) 25 KVA 10.00

Weigh Bridge 60 MT 25.00

Sub-total 251.00

TOTAL 588.00

Besides, to feed wholesale markets, the Rural Periodical Markets need to be

strengthened/ upgraded into Primary Rural Agri-Market (PRAM) centres that

will enable aggregation and transport from village level to wholesale markets of

farmers’ choice. Each PRAM would suitably take up the services of a village level

logistics hub, where agricultural produce would be assayed and graded for onwards

connectivity to next level markets. Hence, the PRAMs would necessarily have facilities

that will allow first stage post- production activities at the first mile, located close to

the villages and farms. As the primary objective of PRAM is to access the eNAM portal,

all the marketing infrastructure including cleaning, sorting, grading & packaging

facility (` 44 lakh) , weighing devices (` 1 lakh) , dry/cold storage (` 85 lakh), drying

platform (` 44 lakh), internet connectivity, internal roads(` 44 lakh), office space (`

44 lakh), parking space, sanitary facilities (` 44 lakh) need to be provided to comply

with eNAM requirements. However, as some of these PRAMs will be having need

based infrastructure, the requirement of new investments depending on the actual

transactions in the market will have to be assessed. The requirement of funds for

marketing infrastructure is therefore assessed as ` 200 lakh per PRAM.

33

The location of PRAMs will be in rural/semi-urban centres identified based on their

potential to serve as a hub for a certain hinterland. The choice of such a hub would be

guided by its potential to serve as a ‘Farmer-Consumer Direct Market’ or/and

‘Aggregation Platform’ that can link the produce with a wholesale agriculture market

(APMCs, etc.).

The unit cost required for provision of hardware in selected APMCs for implementation

of eNAM is given in Table given below. The requirement of funds for eNAM is therefore

assessed as ` 10 lakh per APMC.

Table No. 18 - Unit costs for hardware for E trading and office automation

Sl.No. Hardware Rs per unit

1 Desktop 65,000

2 Tablet PC 15,000

3 Android (POS) 20,000

4 Network Printer 35,000

5 Laser Printer 20,000

6 Dot Matrix 12,000

7 Blue tooth printer 10,000

8 Router (AC 1900 Mbps speed D-link) 20,000

9 Internet with WiFi (8 mbps) 2,75,000

10 UPS (10KVA) 2,80,000

11 LED Monitor (48 inches) 60,000

12 Multifunctional Xerox machines 1,50,000

TOTAL 9,64,000

4.5 Potential for financing Marketing Infrastructure in APMCs/ PRAMs

In view of the foregoing, the potential for financing marketing infrastructure in

APMCs/ PRAMs and eNAM platform is assessed for three years commencing from

2018-19 as per phase-wise details given as under:

Table No. 19 – Potential for financing marketing infrastructure in APMCs/ PRAMs

S.

No.

Agency Total

Number

Potential

for

financing

Coverage

under

Phase I

Coverage

under

Phase II

Coverage

under

phase III

1 APMCs 2479 1735 500 500 735

2 PRAMs 22932 10000 3000 3000 4000

34

3 eNAM

platform

2479 1737* 500 500 737

*excluding 585 APMCs under eNAM till 31.3.2018 and 157 APMCs in Karnataka under UMP.

4.6 Creation of Agriculture Marketing Infrastructure Fund (AMIF)

Table No. 20 - Requirement of funds for financing marketing infrastructure

(` lakh)

S.

No.

Agency Total

Number

Potential

for

financing

Unit

Cost

Funds Required

Phase I Phase II Phase III

1 APMCs 2479 1735 500 250000

(500)

250000

(500)

367500

(735)

2 PRAMs 22932 10000 200 600000

(3000)

600000

(3000)

800000

(4000)

3 eNAM

platform

2479 1737 10 5000

(500)

5000

(500)

7370

(737)

TOTAL 855000 855000 1174870

*Figures in parentheses are number of units.

Assumptions:

i. Unit Cost:

. The unit cost of investment per APMC is assumed at ` 500 lakh based on

specific infrastructure identified as given in Table No. 16 and for eNAM

platform as given in Table No. 17.

a. The unit cost of investment per PRAM is assumed at ` 200 lakh based

on specific infrastructure identified and may vary as per actual

requirement at the field level.

b. The costs are indicative based on tentative assessment being followed for

proposals under Warehouse Infrastructure Fund by DSM.

ii. No. of Units:

. The number of APMCs at 1000 in Phase I and 737 APMCs in Phase II

considered after excluding 585 APMCs assisted under eNAM by GoI till

31.3.2018 and 157 APMCs in Karnataka under UMP.

iii. The total requirement of funds under agriculture Marketing Infrastructure

Fund is assessed at Rs. 28,800 crore which will be implemented in 3 phases as

given in para 5.

35

Assuming the funds are borrowed/mobilised from market at the present market

rate of 7.60%, the funds required for interest subvention @ 2.0% will be Rs.576

crore and the effective lending rate will be 6.20% p.a. The actual requirement

of funds under interest subvention may vary based on year-wise utilisation of

allocations. The Ministry of Agriculture, Department of Agriculture, Co-

operation & Farmers’ Welfare (DAC&FW) may be the nodal agency for

implementation of the scheme through NABARD.

iv. Although the production of Food grain, Horticulture, fisheries and milk

production has been going up steadily over the last decade, there has been no

commensurate increase in the existing marketing infrastructure.

v. The fund assessment is only for upgradation and modernisation of the existing

APMCs. However, in order to enhance the currently low market density (485

square kms per market), establishment of new APMCs can also be included as

an eligible activity in the proposed fund.

vi. It may be mentioned that both modernization of existing APMCs as also

establishment of new APMCs are eligible for finance under Warehouse

Infrastructure Fund (WIF) since January 2017. However, not many proposals

are forthcoming from the State Governments or State-owned entities. Thus, this

demand is latent and suitable capacity building of State Governments

and other stakeholders will be crucial to spurring the demand. Earmarking a

dedicated fund, say about 1 % of the total corpus, may be helpful.

vii. For fully tapping the latent demand, the State Government/s would also need

to evolve an investment roadmap for the sector in a time-bound manner.

36

5. Summary and Conclusions

A quick study was conducted in two States viz., Karnataka and Maharashtra to assess

the status of Agriculture Marketing Infrastructure consequent upon the

implementation of UMP/ NAM in Agriculture Produce Marketing Committees

(APMC) markets in these States.

The agricultural marketing system of the country is characterized by various short

comings like heavy sale of agricultural commodities at village level immediately after

the harvest, absence of on-farm grading of produce, poor packaging, insufficient

marketing infrastructure, long marketing channels, existence of various malpractices

in the marketing of agri-produce, non-transparent price discovery mechanism, lack of

market information system, low marketable surplus especially of small and marginal

farmers, etc. Regulated Markets in the form of Agricultural Produce Marketing

Committees (APMCs) were established in various States to address these issues.

Despite several advantages bestowed on the farmers through APMC regulation, these

acts prohibited direct sale by farmers outside the market yard, cartelization by market

functionaries like traders, commission agents and labour and complete control of

government on establishment, development and supply of market services leading to

inefficiencies. The auctioning process is entirely manual and cumbersome resulting in

lack of transparency and delayed payment to farmers.

The study conducted by the ICAR-CIPHET on harvest and post-harvest losses in major

crops across the country reveal losses in farm operations/ storage channels for cereals

in the range of 4.65 – 5.99%, pulses (6.36 – 8.41%), oilseeds (3.08 – 9.95%), fruits

(7.76 – 15.88%), vegetables (4.58 – 12.44%), plantation crops (1.19 – 7.89%) and

livestock produce (0.92 – 10.52%). According to Gopal Naik (2017), these losses sum

up to Rs.91,787 crore during 2012-13, as compared to Rs. 62,875 crore during 2005-

06 (calculated using average wholesale prices of various commodities for 2014).

5.2 Reforms in Agriculture Marketing

Based on a Model Act circulated by the central government, almost all major states

enacted APMC legislation. The regulation was introduced to overcome the problems

faced in traditional marketing system by ensuring mechanism for proper sale of

produce, weighment, grading and standardization, market information, market

charges in proportion to the services provided, prompt payment without any un-

authorized deduction etc. The market regulation brought its impact in terms of

providing higher prices and better returns to framers

reduction of market charges and

providing amenities at the time of sale of the product to the farmer in the

vicinity

The 2014 budget recognized the need for setting up a National Agricultural Market

(NAM). Conceptually NAM would interlink various markets within the state and the

37

country by creating a unified market through online trading platform, both, at State

and National level and promotes uniformity, streamlining of procedures across the

integrated markets, removes information asymmetry between buyers and sellers and

promotes real time price discovery based on actual demand and supply, promotes

transparency in auction process, and access to a nationwide market for the farmer,

with prices commensurate with quality of his produce and online payment and

availability of better quality produce and at more reasonable prices to the consumer.

National Agricultural Market (eNAM) is a single pan India electronic platform for (i)

Efficient and transparent price discovery; (ii) Gateway for all licensing; (iii)

Facilitating intra state and inter state movement of commodities; (iv) Payment

gateway and (v) All market operations. As on 31 July 2017, around 455 APMCs in 13

States are connected through eNAM.

5.3 Findings of Quick Study

As more than 50% of marketable surplus is traded through APMCs, the reformed

APMCs is part of the solution. The UMP/ NAM platform brought many benefits to the

stakeholders. Farmers and traders have become familiar with computers and online

auctions. • Farmers have greater bargaining power versus traders. • Farmers are more

aware of crop quality specifications. Quality consciousness among farmers has

increased. • Farmers have better understanding about banking. Literacy among

farmers about bank transactions / operations has increased. • Direct electronic fund

transfer from buyers to sellers. • Maintenance of mandi trading records has become

computerised. • Greater transparency at every stage of transaction within a mandi. •

Electronic trading system allows buyers to bid in real time even when they are not

physically present at the mandi. E-auctioning system has enabled sellers to participate

irrespective of proximity to the mandi location. • APMC revenues have increased due

to online transactions. Transparency in registration process has helped reduce evasion

of market fee. • Tender results are announced daily at 1 pm so farmers do not face

uncertainty.

However, to improve the participation of farmers and for better integration of markets,

it is essential to provide basic market infrastructure in these APMCs. The small &

marginal farmers, with uneconomical sized marketable lots, find it difficult to

aggregate their produce and move to these markets to participate in the auction system

for suitable price discovery. They, therefore, use local agents and traders, who relieve

the small farmer of their produce at locally determined prices, to function as

aggregators and transport to transact at the APMCs. This intermediation results in

depriving the farmer-producers from aiming for optimal or market-linked price

realization.

At present, there are 2,479 principal (APMC) markets plus 4267 sub-market yards

totalling 6,746 locations served by the Regulated Markets. As the market density in

majority of APMCs is more than the prescribed level of 5 Km, it is essential to upgrade

the existing sub-market yards to improve access of farmers to markets. At the same

time, there exists a large number of rural periodical markets (RPMs) that are located

38

at village level. These are small haats / shandies that operate at intervals of a week or

two and attract both sellers and consumers from the hinterland. An assortment of daily

needs including farm produce (grains, fruits & vegetables) are traded at these places.

These RPMs, numbering about 22,932 (as on 31.03.2017) are owned and managed by

different agencies, namely, individuals, panchayats, municipalities, including State

Agricultural Marketing Boards (SAMBs) / Agricultural Produce Market Committee

(APMCs). Besides, warehouses owned by Primary Agricultural Cooperative Societies

(PACS) also operate in rural areas which can provide Negotiable Warehouse Receipt

(NWR) financing to small/ marginal farmers and can act as aggregators to link them

to the primary markets.

5.4 Agri-marketing Infrastructure requirement

Lack of Market Infrastructure in Agricultural Markets: Studies indicate that

covered and open auction platforms exist only in two-thirds of the regulated markets,

while only one-fourth of the 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. Electronic weigh-bridges are available only in a few markets.

eNAM mandates that APMCs shall i) provide infrastructure facilities and

services relating to registration, cleaning, sorting, grading, assaying, IT, internet

connection of minimum 5-10 MBPS; ii) carry out training and awareness

programs and one time registration of all stakeholders; iii) provide facilities for

installation of computer hardware / printers along with UPS / generator; iv)make

available room/desk/space for support staff deployed for successful rollout and also

operation and maintenance of e-NAM; v)set up e-auction hall equipped with

computers; vi) set up Quality Assaying Laboratory; vii) promote third party

assaying labs; viii) put in place a system of quality assaying; ix) provide at

least one electronic weighbridge; x) take necessary steps to integrate the entire

market operations right from gate entry till exit of transacted commodity. APMC /

RMC should also provide all logistic support of storage and incidental thereto

for unsold agricultural produce, sold produce to be dispatched or produce brought for

selling through e-NAM platform requiring such support inside the market premises

on minimal charge basis.

Besides, to feed wholesale markets, the Rural Periodical Markets need to be

strengthened/ upgraded into Primary Rural Agri-Market (PRAM) centres that

will enable aggregation and transport from village level to wholesale markets of

farmers’ choice. Each PRAM would suitably take up the services of a village level

logistics hub, where agricultural produce would be assayed and graded for onwards

connectivity to next level markets. Hence, the PRAMs would necessarily have facilities

that will allow first stage post- production activities at the first mile, located close to

the villages and farms. As the primary objective of PRAM is to access the eNAM portal,

all the marketing infrastructure including Cleaning, sorting, grading & packaging

facility (` 44 lakh) , weighing devices (` 1 lakh) , dry/cold storage (` 85 lakh), drying

39

platform (` 44 lakh), internet connectivity, internal roads(` 44 lakh), office space (`

44 lakh), parking space, sanitary facilities (` 44 lakh) need to be provided to comply

with eNAM requirements. However, as some of these PRAMs will be having need

based infrastructure, the requirement of new investments depending on the actual

transactions in the market will have to be assessed. The requirement of funds for

marketing infrastructure is therefore assessed as ` 200 lakh per PRAM.

The location of PRAMs will be in rural/semi-urban centres identified based on their

potential to serve as a hub for a certain hinterland. The choice of such a hub would be

guided by its potential to serve as a ‘Farmer-Consumer Direct Market’ or/and

‘Aggregation Platform’ that can link the produce with a wholesale agriculture market

(APMCs, etc.).

5.5 Creation of Agriculture Marketing Infrastructure Fund (AMIF)

The total requirement of funds for covering 1735 APMCs and 10000 PRAMs under

Agriculture Marketing Infrastructure Fund is assessed at Rs. 28,800 crore which will

be implemented over a period of 3 years commencing from the year 2018-19.

Assuming the funds are borrowed/mobilised from market at the present market rate

of 7.60%, the funds required for interest subvention @ 2.0% will be Rs.576 crore and

the effective lending rate will be 6.20% p.a. The actual requirement of funds under

interest subvention may vary based on year-wise utilisation of allocations. The

Ministry of Agriculture, Department of Agriculture, Co-operation & Farmers’ Welfare

(DAC&FW) may be the nodal agency for implementation of the scheme through

NABARD.