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DESH-DESHANTAR: APMC TO e-NAM
Speaking at a global conference on rural finance hosted by the National Bank for Agriculture and Rural Development (NABARD), Finance minister Ms. Sitharaman said the Centre was talking to States to “dismantle” the APMC system and move towards the electronic National Agriculture Market (e-NAM).
What is APMC?
Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.
The APMC system was introduced to prevent distress sale by farmers to their creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through the auctions in the APMC area.
Drawbacks of APMC
- APMC Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk processor as the produce is required to be routed through these regulated markets. Over a period of time, these markets have acquired the status of restrictive and Monopolistic markets, harming the farmers rather than helping them to realize remunerative prices.
- Under this regulation, no exporter or processor could buy directly from farmers. It discouraged processing and exporting of agricultural products.
- Under the act, the state Government could only set up markets, thus preventing private players from setting up markets and investing in marketing infrastructure.
- Formation of cartels with links to caste and political networks resulting in price variations.
- An increased number of middlemen formed a virtual barrier between the farmer and the consumer.
- The licensing of commission agents in the state regulated markets has led to the monopoly of the licensed traders acting as a major entry barrier for new entrepreneurs.
What is e-nam?
The motivation for a unified market platform can be traced to the Rashtriya e-Market Services (ReMS), an initiative of Karnataka State Agricultural Marketing Board with National e-Markets Limited (NeML), erstwhile National Commodity and Derivatives Exchange (NCDEX) Spot Exchange.
NAM, announced in Union Budget 2014-15, is a pan-India electronic trading portal which seeks to connect existing APMCs and other market yards to create a unified national market for agricultural commodities.
Features of NAM:
- NAM is a “virtual” market but it has a physical market (mandi) at the back end
- NAM creates a unified market through online trading platform both, at State and National level and promotes uniformity.
- The NAM Portal provides a single window service for all APMC related information and services.
- While the material flow of agriculture produce continues to happen through mandis, an online market reduces transaction costs and information asymmetry.
Benefit of e-Nam over APMC
- In a move to liberalize trade in farm produce and aid better price realization for farmers, the center has proposed e-nam which would introduce features such as a single market within state, private wholesale markets, direct sale by farmers to bulk buyers, and promotion of electronic trading.
- It will cap market fees and commission charges payable by a farmer after bringing produce to a wholesale market, and help create a national market with provisions for an inter-state trading license.
- Under the new model law, traders will be able to transact in all markets within a state by paying a single fee and sell perishables such as fruits and vegetables outside existing mandis (wholesale market).
- Currently a regulated market is available per 462 sq km while ideally there should be one every 5 sq km so electronic trading of agriculture produce will fill this gap.
- It will promote competitiveness by breaking existing monopolies (of traders and middlemen).
- Apart from these, real time arrival recording, analyze price trends, arrival and trading activities- automated record of financial information, reduction in man-power requirement are some special benefit of e-nam.
While the Centre has been promoting e-NAM since its introduction in 2016, it is not clear if the online portal is ready to bear the entire burden of agricultural trade. Only 1.6 crore farmers have registered on the portal so far, from among the almost 12 crore cultivators in the country.
The model APMC act that promoted the participation of private sector has not been implemented by all the states and the monopoly of APMC continues.
In current days of mass production and marketing which is being replaced by customer-based or market-driven strategies, an effective marketing extension service is the need of the hour. This has added significance in the light of post-WTO scenario. If the Indian farmers have to withstand the possible onslaught of international competitors, both in domestic as well as overseas markets, agricultural marketing services have to be strengthened.