Need for Unified Agriculture Market integrated with Agri Value Chains in India

2018

“The country needs to completely revamp its agriculture market management policies, create adequate marketing infrastructure especially at farm gate level, promote sustainable marketing linkages and ensure scientific pricing for agriculture products to foster true competition in the market to make them efficient”- Manoj Rawat, Founder & CEO of ValueFin India

The objective of Unified Agriculture Market (NAM) should be to bring a paradigm shift to develop free and competitive agriculture market in India, help in better price discovery and ensure “rightful price” to farmers for their produce.

Agriculture remains vital to India’s economy

Over 58 per cent of the rural households depend on agriculture as their principal means of livelihood in India. Agriculture along with fisheries and forestry, contributes to more than 17% of Gross Domestic Product (GDP) of country. Having said this India still remains and agrarian economy and a single bad monsoon takes toll on entire economy and can completely derail the projected growth plan. The demand for food is going to go up by 40% by next decade.

Creating Income Security for farmers

India has seen significant growth in its food production over the last few decades but a large part of population still remains deprived of the basic access to nutrition and the middle class highly vulnerable to food inflation. Above all farmer has been struggling to get the “minimum remunerative price” or even meet his “production expenses”. The credit flow to Agriculture has grown by more than 10 times in last decade however the income of farmers & share of farmer in “consumers” wallet has not seen any significant increase. The narrative has changed from “Doubling of Credit” to “Doubling of income of farmers” and rightly so. The intent of creating income security for farmers seems right, given the current state of India’s agriculture and the plight of its farmers.

Need for Agri Value Chains

Agri-value Chain means capturing the tru value created along the Agriculture chain from pre sowing to food harvest or in other words capturing value created from “Farm to Fork” will only ensure the farmer “rightful price for his produce”.

We need build Agri Value Chain in India for the following reasons

1. To prevent Colossal Wastage of Agriculture Produce which worth “billions of dollars” loss to economy.

2. To ensure that share of Farmer income in Consumers wallet may increase by at least 20%

3. Demand for MSP regime will fritter away when farmer will get rightful price for the produce

4. Ensure optimal management of natural resources and mother earth which is being abused 

Creating Efficient Agriculture Markets

While we have seen the real farm incomes have plummeted as compared to previous decade, it is not wishful thinking that incomes of farmers can be doubled by adopting a multi-pronged approach which efficient implementation framework.  While this would involve high focus productivity, expanding irrigation facilities, augmenting the flow of investment credit to Agriculture Sector under a value chain approach and making investment in allied activities like livestock, poultry, beekeeping and fisheries, but the biggest challenge would

  1. To bring inefficiencies in Agriculture markets,
  2. Curbing the number of existing intermediaries in the current Agriculture marketing system
  3. Building robust and sustainable Agri-value Chains

To enable this “Agriculture needs to be liberated from traditional policy framework and grossly inefficient marketing system”. We need to recognize and accept that existing Agri-marketing institutions and the regulations of agriculture markets have failed to keep up with times and provide an efficient agricultural marketing system to the country. These development oriented institutions (State Agriculture Marketing Boards, APMCs) have become revenue generating institutions rather than facilitating efficient marketing practices to benefit the farmers, buyers, consumers and other market participants. The non-transparencies in transactions, high markups, collusion and mushrooming of large intermediary players have added to further inefficiencies and woes. In India most of the agri-marketing ecosystem is controlled by public sector.

The country needs to completely revamp its agriculture market management policies, create adequate marketing infrastructure especially at farm gate level, promote sustainable marketing linkages and ensure scientific pricing for agriculture products to foster true competition in the market to make them efficient. The existing Public and Private sector investments, Government schemes and subsidies need to dovetailed effectively and channelized efficiently to make this a reality. 

Why we need for Unified National Agriculture Market?

There is no dearth of market places in India but there is lack of efficient market linkages, basic grading sorting centers, logistics to ensure better participation of stakeholders primarily farmers and above all removing the infestation of intermediaries who “add no value”. Lack of efficient markets fails to facilitate the “Producer find the best Buyer and Buyer identify the best supplier”.

We have more than 7000+ Regulated Markets, 22000 + Regular Periodic markets in primitive shape and thousands of un-organized Haats, fairs, assembly markets. In addition, we have 6 National Commodity Exchanges and 24 Regional Commodity Exchanges, who could play an important role in rightful price discovery for farmers.

Besides this we have State Marketing Boards, Warehouse Accreditation Agencies and Various Government Agencies to enable seamless integration of Agriculture markets and Agri-value Chain. Unfortunately, the Agri-marketing System, its stakeholders and players are working in silos and working without any synergy to bring lasting improvement for the farmers, consumers and economy as whole.

The markets continue to follow a very subjective practice which has promoted monopolistic practices, procedures and market inefficiencies. There is lack of grading infrastructure, no premium for quality, unscientific post-harvest handling of produce and markets are being controlled by middlemen as who add little value or no value. The Linkage between farms to markets are grossly inadequate with no basic grading and sorting centers, preprocessing units and above all the Logistics and Information technology interventions literally remain non-existent. Fundamentally the system is only production oriented and detrimental to preservation, processing & value addition. To develop efficient Agri-Value Chains, there is urgent need for Reforms, better market information and use of Information Technology that can attract large capital and skill based investment in Agri-Supply Chain sector which estimated to multibillion dollars.

Unified Agriculture Market is a step forward

The Unified Agriculture markets (NAM) is a step in the right direction but is not participative and has to make lot of efforts, policy changes, sensitization and incentivisation to make it far more participative. As on today less 5% retail players/stakeholders/farmers have registered on this platform which needs to be accelerated.  We need to understand in very near future we will have more than 90% farmers as small and marginal, where soil quality will get further deteriorated, water scarcity will be more severe & population shall grow by another 15-20% and therefore it is critical we address the issues of farm, soil health, water management, productivity, mechanization, farm gate level remuneration, income security of farmers and food security of nation through a Robust and Sustainable Value chain approach with efficient markets for “rightful” price discovery for both producers and consumers. However, the NAM has to be made truly participative for farmers to get the rightful market price.

Unification of Agriculture markets and Agri-value Chains should “continuously” evolve and should remain work in progress

The situation in India demands to “needle” the various factors into a single thread that would provide end-to-end solutions for efficient agriculture markets and better price discovery for producer, processor and consumer. Unification of Agriculture markets and integrating them with Agri Supply Chains should continue to remain as “work-in-progress” and continuously evolve as per need of producer, consumer, markets and economy. We need to unify this market in the interest of farmers, consumers and economy of the nation. It’s not just a matter of income security for farmer but a matter of survival for all of us, make our country hunger free and to ensure food security of the nation.

We have no other choice but to gear up!

About the Author

 Manoj Rawat is a well-known Agribusiness and Rural Banking professional with more than two decades’ experience working with NABARD, Fullerton and RBL Bank in leadership position. He is currently the Founder & CEO of ValueFin India, a Value Chain Financial Services Company, working to bridge the credit gaps and missing links in Agriculture, MSME and Green value chains.

Manoj Rawat, Founder & CEO of ValueFin India

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