Agri Market Reforms – Karnataka Model

Importance of Agri-Marketing

India’s Agri-Marketing sector is garnering attention more than ever before and has remained a subject of intense discussion. Agriculture Census 2011 says that 61.5% of Indian population is dependent on agriculture and around 118 million of them are farmers. Along with population, food production has also increased tremendously from just 51 million tonnes in 1950-51 to about 252 million tonnes in 2014-15. But, the farm income did not grow.

Possible reasons for poor outcomes to farmers are marketing channels restricted to regional mandis with small number of buyers participating in each mandi, regional restrictions for buyers making them asymmetrically stronger in markets over farmers, non-transparent price discovery process, cartelisation, information asymmetry, dominant role of trader as well as commission agent leading to lower farmer income and profitability. This has significantly emphasized that higher output alone will not provide higher income to farmers unless the produce is well marketed. Farmers dumping their produce on roads or taking back few coins for their produce is clear evidence of it. Therefore, even a slight improvement in markets and its efficiency could drastically impact overall welfare and if its not done, the losers will be the farmers themselves. Reforms for restructuring markets is the need of the hour which benefits all market participants and promise to allow farmers a wider choice of markets beyond the local mandis.

The Karnataka Model

Karnataka state being foremost in bringing out reforms in essential sectors and to restructure the agri-marketing scenario, announced Karnataka Agricultural Marketing Policy (2013). Agriculture being a state subject, it was first time in the nation that any state had announced Agri-marketing policy. This policy facilitated single point levy of taxes, promoted direct interface between farmers and end-users via an electronic trading platform (Unified Market Platform) which integrates entire markets of the state, alternate ways of marketing produce etc. An important recommendation in the policy was to constitute a Special Purpose Vehicle (SPV) – Rashtriya e Market Services Private Limited (ReMS). This SPV is a joint venture of Karnataka Government and NCDEX Spot Exchange. ReMS was tasked with integrating all regulated state mandis through a single Unified Market Platform (UMP). About 157 agricultural markets across 29 districts in the state have been connected through UMP since its implementation in January 2014.

The UMP is first of its kind initiative who has seamlessly connected farmers, traders and buyers across Karnataka to trade on a single platform. Introduction of single trading license for purchase and sale of agri-commodities in any APMC throughout state has eased market operations and has encouraged institutional and bulk buyers to trade in the markets. This unique initiative has enhanced transparency in price discovery by providing various modes such as e-tender, e-auction, direct sale, direct purchase and bilateral trade. Now, the farmer doesn’t have to return back with a feeling of poor price realisation. True price discovery has increased the confidence level of farmers.

“Unified License” has eased business hurdles for traders, increased competition in markets and has brought smile on faces of 44 lakh farmers registered with UMP. Now that the assaying facilities are established in major markets, farmers will get better price for good quality produce.

Technology remains main aspect of the whole process which has enabled online payment system to transfer the money directly in farmer’s bank account. Online payment system has been taken up in phased manner. It’s been 3 years and initial indicators exhibit its success. Post-reforms period has witnessed increased arrivals, enhanced transparency in markets, more bids per lot and better price realization to farmers. While its early to reach to any conclusion, it is useful to draw attention on ongoing experience for a clear understanding of reforms.

Rashtriya e Market Services has been recognised as one of the ‘Gems of Digital India’ and has been conferred prestigious ‘D L Shah Platinum Award’ for reforming agricultural marketing in the state. This unique model of agriculture reforms has also prompted the central govt. to adapt the initiatives as Electronic National Agricultural Market (e-NAM).

Renewed Line of Thought

Karnataka has attempted root and branch change in agricultural markets of the state. Entire nation was looking at the initiative of Karnataka State and it inspired the Government of India to initiate a Pan-India operation of integrating all the markets of the country via virtual platform called e-NAM. Being a state subject, most states welcomed the proposal as this will guarantee remunerative prices for farmers.

A farmer is a farmer irrespective of its caste, region, village, city or state. Farmers’ participation in agri-markets should not be worrisome rather they should be empowered to decide when, where, to whom, at what price the produce has to be sold. This can’t be addressed unless all the states are in favour of market reforms and the country will achieve food security only when the farmer’s feel secured about their income.

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