Farm trade reform: Chilli growers find e-NAM not too hot

The Narendra Modi government’s flagship agriculture marketing initiative comes a cropper in Asia’s largest mirchi yard.

Written by Sreenivas Janyala | Updated: October 5, 2017 2:21 am
Farm trade reform, indian farmers, mandi commission fees, mandi reforms, Agricultural sector, agricultural produce market committee, Narendra Modi, Narendra Modi government, PM Modi, e-NAM, indian express Very few transactions have taken place since September 1, when the new system of trading was introduced. (Express Photo: Sreenivas Janyala)

On September 3, Peddireddi Narasimha Reddy brought 15 quintals of red chilli to the market yard here, said to be Asia’s largest for the ripened and dried pungent fruit. The six-acre farmer from Sattenapalle, about 35 km from Guntur, was hoping to realise at least Rs 7,000 per quintal for his produce stored from last season’s crop. At rate, after deducting transport cost, commission fees and other expenses, would have netted him with Rs 90,000 — a decent take-home just ahead of Dussehra.

But it wasn’t to be. Reddy couldn’t manage to sell a single kilo, even after camping for two days at the Guntur market yard. The reason: Opposition from traders and commission agents to the e-National Agriculture Market (e-NAM), a pan-India electronic platform that seeks to usher in a more transparent system of bidding and price discovery for farm produce.

The Guntur Mirchi Yard was identified as a model market for trading through the Narendra Modi government-promoted portal that enables farmers to offer their produce to buyers across India, as opposed to only those physically bidding within a particular mandi premise. However, very few transactions have taken place since September 1, when the new system of trading was introduced. The chilli yard’s sprawling auction sheds have, in fact, not seen a single trade for almost a month.

“The government people say e-NAM is very transparent and will eliminate middlemen. But if traders don’t want it and I’m unable to sell, what’s the use?” asks Reddy. The real problem with e-NAM, according to him, is that it is unable to create “vishwasam” (trust) between the farmer and the buyer, especially on the quality of produce offered.

In the old word-of-mouth and unwritten rules-based system, the commission agent was the one who stood guarantee for the farmers’ stock. And since the buyer believed the commission agent, the problem of “vishwasam” was resolved. When it came to trading through e-NAM, the bidders/buyers sought guarantees from the farmers themselves that the chilli inside all their bags was of uniform quality. Even if a few lots turned out to be not so, the latter would have had to return the equivalent money. “We couldn’t obviously give any such guarantees. The auctions, then, came to a grinding halt,” points out Reddy.

Farm trade reform, indian farmers, mandi commission fees, mandi reforms, Agricultural sector, agricultural produce market committee, Narendra Modi, Narendra Modi government, PM Modi, e-NAM, indian express Workers sitting idle at Guntur’s Mirchi Yard, in Andhra Pradesh. (Express Photo: Sreenivas Janyala)

“With no system now to guarantee uniform quality, farmers were being asked to open all their bags. The farmers naturally refused, as opening a truckload of bags and drawing samples from each is a tedious process that also damages the chilli,” admits Manna Subba Rao, the Guntur Mirchi Yard chairman. But these, he believes, are just teething problems and “traders and farmers will soon realise the benefits of transacting through e-NAM”.

Lack of quality assurance and the associated problem of “vishwasam” are also cited as key reasons by Samba Reddy, president of the Red Chilli Traders Association, for e-NAM being a non-starter. “Chilli quality varies from the first, second and third pickings, and also with changing weather conditions. Earlier, the commission agent ensured that the produce was at least fair average quality. But today, how can we offer a price based on just the farmer’s word, without even checking for colour, brittleness and other basic parameters?” he notes.

Harvesting of red chilli happens from January to May. Normally, 15-20 lakh kg of produce would have got auctioned off at the Guntur yard in September alone, with the entire stock from the previous year’s crop being sold by December before the new harvest’s arrivals from January. This time round, farmers brought tractor/truckloads of chilli in early-September, only to find no buyers either at the Mirchi Yard or e-trading platform. They could, hence, do nothing other than go back and keep their produce in cold storage rooms.

Myla Venkat Rao, a leading trader at the Guntur yard, estimates that around 55 lakh kg of chilli is currently lying in the cold storage godowns in and around the market. When trading through e-NAM opened on September 1, the bids started at Rs 7,000 per quintal. While below last year’s peak of Rs 13,000, they were higher than the Rs 5,000 levels of April this year that was a result of over-production. And today, with no trading at all, farmers aren’t able to even sell, leave alone realise a price.

The worse sufferers here are tenant farmers. The commission agents not only stand guarantee for the quality of their crop – giving traders the confidence to buy – but also extend loans to meet cultivation costs as well as expenses towards harvesting, loading and transporting of produce; they even pay for cold storage if necessary. The middlemen also undertake auctioning of the crop and pay the farmer after deducting the loans and other financial dues.

“The commission agent ensures that the farmer gets the payment for his crop, even if it has not been made by the buyer,” says Avula Tirumal Reddy, another trader. The downside to this established manual auction and purchase system is, of course, that the commission agents and traders ultimately dictate the price received by the farmer.

On the other hand, e-NAM does away with middlemen, by allowing farmers to find buyers online from anywhere in India and receive payment almost the same day. It also fits in with the Modi government’s stated vision of moving to a “one country-one market” regime for all agricultural produce.

P Prasad Rao, who farms five acres of his own land at Piduguralla, 65 km from Guntur, is among those happy to have transacted through e-NAM when it was launched. After having his identity details, including bank account number, fed into the portal, he got bids ranging from Rs 6,500 to Rs 6,800 per quintal. Within 15 minutes, he had sold his crop at Rs 6,800. The payment for it, too, was credited directly into his bank account the very next morning.

But Rao was neither a tenant farmer and nor had he borrowed money from any commission agent. That made him a free seller. Besides, he had only 40 bags (each of 45 kg) to sell, which were already opened earlier in the day to show to another bidder and not been re-stitched. And since the chilli inside was of the top quality ‘Teja’ variety, it did not require any assurances from middlemen.

Not all farmers have been as lucky.

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