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Lessons for unifying agricultural markets

Karnataka’s experience shows success depends on taking along all stakeholders.

Written by Vyasan R |
Updated: April 16, 2016 12:05:45 am
National Agricultural Market Scheme, karnataka agricultural market, modi govt, Narendra Modi, union budget, farmers, agricultural sector, agricultural markets, indian agricultural markets, Rashtriya electronic Market Scheme, ReMS, express opinion It is important to note that growth rate of agriculture and allied sectors in India has historically tracked the movement of the overall income growth in the country quite closely.

The government of India launched the National Agricultural Market Scheme in July 2015 in 585 markets and has, since April 14, started e-trading on the platform. This is in line with the Union Budget’s target to double farmers’ incomes in six years. To be sure, a doubling of incomes by 2022 would require them to grow at an annual average rate of just over 12 per cent. Achieving such a high rate of growth would require multi-faceted reforms in the agriculture sector.

Agricultural and allied sector in India grew at an annual average rate of 1.7 per cent per annum between 2012-13 and 2015-16 (at 2011-12 prices). The gross value added at factor cost in the agricultural and allied sector, which is a first approximation to the income generated in the sector, has shown a growth rate in excess of 10 per cent only in four years between 1950-51 and 2011-12 (measured in constant 2004-05 prices). All these supra-10 per cent growth rates came on the back of negative growth rates ranging from minus 1.1 per cent (1987-88) to minus 11.1 per cent (1979-80).

It is important to note that growth rate of agriculture and allied sectors in India has historically tracked the movement of the overall income growth in the country quite closely. The task of improving growth rates in the agricultural sector in a growing economy is easier than in a stagnant one. As such, this imperative for an unprecedented growth rate will require reforms covering all facets of the agricultural sector, such as irrigation, soil health, traditional farming, fertilisers, and extension services among others.

In this context, the e-trading initiative attempts to improve the marketing aspect of the agriculture sector. Reforming agricultural markets in the country is a project that requires serious effort and concerted action. As the Economic Survey 2014-15 pointed out, India has 2,477 principal regulated primary agricultural markets in the country. These markets governed by APMC Acts create segmentation and lead to inefficiencies in price discovery. There are often complaints of vested interests of commission agents (arhatiyas) and other middle-men driving a wedge between the farmers and the traders (who are the buyers of the crops).

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A similar experiment, called the Rashtriya electronic Market Scheme (ReMS), was launched in Karnataka in February 2014. By December 2015, 100 principal markets were unified by this e-platform. The reforms in the state have succeeded to the extent that an autonomous body — the ReMS Private Limited — is in charge of the entire process of unification and is proceeding according to a definite plan.

But the gains to farmers have remained muted. The software that is used for trading has a provision for including quality parameters of the traded commodities. To actualise this, plans are afoot to start assaying facilities in mandis. Since marketing of agricultural produce affects farmers, commission agents, traders, the APMCs and the government, introduction of these facilities without allaying the concerns of all these stakeholders may not have its impact.

For example, the commission agents in these markets fear that unification will affect them adversely. The farmers can directly enter the details of their commodities in the e-platform and sell to the highest bid-der without any mediation from the commission agents. This creates a very potent impediment against the forward movement of reforms and a standalone e-product may not have the full desired impact. In some mandis though the assaying facilities were present, they remained in disuse because of apprehensions of loss of income felt by farmers.


Commission agents are the pet whipping boys for agricultural economists searching for efficiency and unified prices. However, these “middle-men” provide real and substantive services such as credit facilities and crop loans to farmers in a timely manner. The farmers’ dependence on arhatiyas is mutually beneficial to a degree but may not be without elements of rent extraction. Like all things in life, we hit a grey area even in agricultural marketing.

The experience of Karnataka has a few pointers. It succeeded to the extent that an independent body outside the government (ReMSL) tasked with unification generated sufficient revenues and created a positive momentum. However, in the absence of an involvement of all stakeholders the gains are slow and minimal.

Reforms that rely only on technical solutions may not give the desired effect. If implementing unification within a state is a slow affair with frequent stoppages, one can only imagine the difficulties that unification can cause for an inter-state reform measure.


The writer is an IAS officer and a graduate student (MPA/ID) at the Harvard Kennedy School, US. Views are personal

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First published on: 16-04-2016 at 12:05:42 am
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