Farmers need markets, not charity !

Dr Sanjeev Chopra *

The last three Bharat Ratnas were actually a tribute to the entrepreneurial spirit of the Indian farmer. All the three–two former Prime Ministers Charan Singh and PV Narasimha Rao as well as Dr MS Swaminathan, the scientist administrator entrusted with the roll out of the Green Revolution–were deeply invested in and personally committed to agriculture as well as farmers welfare.

Swaminathan’s contribution is quite well known and acknowledged, but it is equally important to understand the context of the political economy in which the Green Revolution was successful.

It was Charan Singh who explained to Nehru the pitfalls of the Soviet and Chinese type of ‘collective farming’. He was clear that farmers were fiercely independent cultivators who did look up to the State for support in provisions for public goods–water for the fields as well as access to credit, roads and market infrastructure-but were vehemently opposed to any centralized plan of ‘land pooling and co-operative farming’ which the then Planning Commission was enamoured of.

It was during the tenure of PV Narasimha Rao that India joined the WTO, and signed the Agreement on Agriculture (AoA) which made India’s agriculture globally competitive. Till then, India policy regime was to restrict imports : under Rao, India looked to Agri exports as an important foreign exchange earner.

With budgetary and institutional support to APEDA, he helped the Indian agriculture to become globally competitive, though domestic trade continued to be operate through restrictive trade practices which were good for the procurement agencies and the registered traders of APMC, but not for the farmers.

Moreover, while the traders were looking to the world as their market, the farmers were confined to the area marked for their respective market yard. But perhaps the most meaningful policy intervention made by him was the establishment of the SFAC in 1994, the organization which has now been tasked with the establishment of the National electronic market for agriculture, thereby giving the farmer the ‘glocal advantage’ : a global market for local produce.

All this provides the background and the context to a transformative initiative launched by Prime Minister Narendra Modi eight years ago on the first of Baisakh (14 April). The reference here is to the SFAC backed Electronic National Agriculture market (E- NAM) initiative : ‘a phygital (physical plus digital) market’. This is a single window portal with a physical back end which provides actionable information, physical infrastructure, trade options and financial settlements.

The information component provides notifications on commodity arrivals, quality and prices. The physical infrastructure includes market yards, storage godowns, weigh bridges, sortex machines, moisture testing equipment and offers services like weighing, assaying and warehousing. For ease of doing business, it also organises the mandi arrivals into ‘offers for the sale and purchase of produce’ in terms of ‘specific lots’ and ‘trade offers.

The fourth component includes the actual trade and electronic settlement of payments directly into farmers’ account. It is different from the speculative futures trading, because the settlement is taking place on a ‘here and now basis’ with physical deliveries taking place in the market yard accompanied by online settlement.

Today, thanks to this initiative of the SFAC, 10.7 million farmers have the freedom, flexibility and the facility to transact across 1389 regulated wholesale markets in 23 States and 4 UTs in their own language on their own mobile phone.

Another 1.7 lakh integrated licenses have been issued by the participating States and UTs, but of even greater significance is the active participation of 3500 FPOs–for their transactions reflect granular support for this platform. As of January 2024, business of over Rs 3 lakh crore has been transacted on this platform.

Before closing, it’s imperative to share the backstory of this successful intervention. It must be mentioned that when the APMCs were introduced in the fifties, the farmer needed protection against distress sale.

This was before KCC became the ubiquitous instrument of rural credit, for in those days, money lenders advanced loans to the farmers and compelled them to sell the produce at the farm gate itself. The APMCs were designed to ensure ‘price discovery’ and provide a platform for procurement by state agencies under the MSP regime.

However, in this process, it also created a special class of intermediaries –the trader who had a license to operate in the particular mandi with its notified command area. However, as India became an IT superpower and agriculture moved from a peasant to a market mode of production, there was a need to change the restrictive rules of trade.

Institutions like the SFAC were established to leverage technologies and financial instruments for improving the terms of trade of the marginal and small famers. From providing venture capital funds to agribusiness entrepreneurs to creation of infrastructure, the SFAC broke new ground in the establishment of FPOs, market intelligence, warehousing and procurement support.

No wonder then, that the mandate for establishment of the ENAM was also given to the SFAC. To set the ball rolling, the Agriculture Ministry gave a grant of Rs 30 lakh per mandi for equipment/infrastructure such as computer hardware, internet facility, assaying equipment etc. in those regulated mandis, for installation of the e-market platform.

This was enhanced to Rs 75 lakh from 2017 for creation of additional infrastructures like cleaning, grading and packaging facilities and bio composting unit. While in the first three years, about 200 Mandis were brought under its purview, the pace picked up with 415 mandis by May 2020, another 260 mandis by July 2022, yet another 101 mandis by March 2023 and 28 mandis the end of the last calendar year. The number grows every quarter !

Policy making is the easy part. More difficult is the creation of the physical and IT infrastructure. The hardest is the task of making it work on the ground. For initial handholding, SFAC identifies and supports an IT expert (mandi analyst) for initial hand holding for a period of one year to each mandi integrated with e-NAM.

They report to the State coordinator (s), each of whom handle the day-to-day coordination for 50 mandis each. They are also responsible for providing pro bono training to all stakeholders in the E NAM system-farmers, traders, commission agents and mandi officials.

What next ? Rather than rest on its laurels, the E NAM is setting newer and higher standards. Its revised mandate incudes the expansion an and consolidation of the e-NAM by opening platform beyond APMC/RMC mandis to create further and ensure competitive price realization to the farmers. There is increased emphasis on Warehouses Based Sale (WBS) and e-NWR trade through e-NAM.

It is expected that this, along with quality assaying and trade reliable grade standards will promote inter-mandi and inter-State.For in the final analysis, it is price discovery and the freedom to sell which will usher greater prosperity for the farmer.