The National Policy Framework on Agricultural Marketing drafted by the Agriculture Ministry, has been circulated for public comments and suggestions.

Background

• Repeal of the Farm Laws: The Government tried to usher in agriculture reforms by bringing in three farm laws during the Covid pandemic but had to repeal them eventually, in the face of farmers’ protests.
• Jurisdiction: Agriculture is a State subject whereas, Agricultural trade comes under the concurrent list.

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Key Proposals in the Draft National Policy Framework on Agricultural Marketing

• Constitution of an Empowered Agricultural Marketing Reform Committee
  • Suggested creation of a panel similar to the GST Empowered Committee of State Finance Ministers.
  • Composition: State agriculture ministers, chaired on a rotational basis.
  • Registration: Under the Societies Registration Act, 1860.
  • Constitution of the Committee: The constitution of the committee should be made through non-statutory gazette notification.
  • Operation: Quarterly meetings or as needed; a permanent secretariat proposed.
• Goals of the Committee
  • To push the states to adopt the reform provisions in the state APMC Acts, 
  • Notify the rules and also build up the consensus among the states to move towards a unified national market for agricultural produce through a single licensing/registration system and single fee.
• Proposed Reforms for States: 
  • Adoption of the Model Agricultural Produce Marketing Act, 2003.
  • Implementation of 12 identified reform areas, including:
    • Private wholesale markets.
    • Direct farm-gate purchases by processors, exporters, and retailers.
    • Deemed market yard status for warehouses and cold storages.
    • Single-time market fee and unified trading license across states.
• Price Insurance Scheme for Farmers: Proposed a price assurance mechanism similar to PM Fasal Bima Yojana (PMFBY) with an aim to:
  • Stabilise farmer incomes during price crashes.
  • Encourage adoption of modern agricultural practices.
  • Enhance credit flow to the agriculture sector.

Significance of the Proposed Draft Policy

• Addressing Market Fragmentation: The Proposals tries to address fragmentation of markets within the state in the name of notified market area managed and regulated by statutorily constituted market committee due to state-legislated APMC Acts.
• Bridging Divergence of Views: Seeks to resolve divergence of views between the Centre, states, and farmers on agricultural marketing.

About Agricultural Marketing

• Agricultural marketing involves all activities related to the movement of agricultural produce from farms to consumers. 
  • This includes collection, grading, storage, transportation, processing, and sale.
• Agricultural Marketing In India is governed by the Agricultural Produce Marketing Committee (APMC) Acts, which are administered by respective State Governments.

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Reasons For Increasing Importance of Agricultural Marketing

• Increase in Marketable Surplus: Improved technology and better-quality seeds have led to increased agricultural productivity, resulting in a higher surplus of commodities. 
  • Efficient and responsive markets are necessary to handle this surplus.
• Market Requirements for Horticultural Crops: Diversification toward high-value horticultural crops, which are bulky and perishable, requires proper handling and storage to maintain quality throughout the supply chain.
• Price Discovery and Price Signals: Agricultural marketing involves discovering prices at different stages and transmitting price signals, especially from consumers to farmers.
  • Price signals help the farmers understand market trends and make informed decisions on what to grow, when to sell, and at what price, ensuring fair pricing and aligning production with demand.
• Feeding Urban Populations: Increased urbanisation requires efficient agricultural marketing systems to transport food from rural areas to urban centers, meeting the growing demand for food in cities.

Problem Areas in Agricultural Marketing in India

• Fragmented Market Structure: Agricultural markets in India are governed by state-specific Agricultural Produce Market Committee (APMC) Acts, which fragment the marketing system.
  • There are around 2,500 APMC-regulated wholesale markets across the country.
  • Farmers are often required to sell their produce at designated APMC mandis, limiting their access to a wider market.
• Regulatory Bottlenecks: High market fees, cess charges, and licensing requirements increase transaction costs.
  • Different states have varying regulations, hindering the development of a unified national market.
• APMC Problems: The APMC system in India faces issues such as limited number of traders in APMC markets thereby reducing competition, cartelisation of traders, and undue deductions in the form of commission charges and market fee. 
  • Example: In Haryana and Punjab, mandi fees and rural development charges for wheat and non-basmati rice purchased by FCI are four to six times the charges for basmati rice purchased by private players. 
• Small and Scattered Holdings: Fragmented landholdings increase production and transportation costs, reducing marketing margins.
  • As of 2022, there were 121 million agricultural holdings in India; out of these 99 million holdings are small and marginal (87%). 
• Inadequate Storage Facilities: Lack of proper storage, including cold storage, forces farmers to sell produce immediately, often at low prices. 
  • Most of the existing storage facilities are in very poor condition which affects the quality of the agricultural produce and leads to post harvest losses.
    • Example: The All-India post-harvest loss survey by NABCONS, 2022, reveals that the country suffers staggering food losses worth Rs 1.53 trillion ($18.5 billion) with a loss of 12.5 million metric tons (MMT) of cereals, 2.11 MMT of oilseeds and 1.37 MMT of pulses.
• Poor Transportation Infrastructure: Absence of all-weather roads, suitable vehicles for perishables, and linkage roads to mandis escalates transportation costs.
• Limited Access to Credit: Farmers rely on high-interest loans from moneylenders due to limited access to affordable institutional credit, pushing them to sell produce prematurely to repay debts.
  • Example: Only 30% of all farmers borrow from formal sources, while nearly 50% of small and marginal farmers are unable to borrow from any source
• Lack of Market Information: Inadequate infrastructure and limited ICT access in rural areas leave farmers unaware of market prices, making them dependent on middlemen.
• Insufficient Marketing Research: Emphasis on production over research in marketing, storage, and packaging results in outdated techniques and insufficient understanding of consumer preferences.
• Absence of Farmers’ Organisations: Farmers operate individually, increasing costs and reducing bargaining power, leading to exploitation by organised traders.
  • Farmers often do not get remunerative prices for their produce
    • Example: Individual dairy farmers selling milk might receive lower prices compared to members of cooperative societies like Amul, which negotiate better rates and provide storage support.

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Government Measures to Improve Agricultural Marketing In India

• Launch of National Agriculture Market (e-NAM): In 2016, the government launched e-NAM, enabling farmers to sell their produce transparently to a larger number of buyers across multiple markets electronically.
• Formation and Promotion of Farmer Producer Organizations (FPOs): The Government of India has approved and launched a Central Sector Scheme of “Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)” to form and promote 10,000 new FPOs till 2027-28.

• Agriculture Infrastructure Fund (AIF): The government has set up the Agriculture Infrastructure Fund (AIF) with an allocation of Rs. 1,00,000 crore to support post-harvest infrastructure projects such as warehousing and community farming assets through interest subvention and financial aid.
• Agricultural Marketing Infrastructure (AMI) Scheme: Under the Integrated Scheme for Agricultural Marketing (ISAM), the government supports the construction of godowns and warehouses in rural areas, enhancing storage capacity. 
  • Subsidies of 25% to 33.33% on project capital costs are provided based on the beneficiary’s category.
• Establishment of Private Markets: Over 120 private markets have been established, providing farmers with alternative marketing channels and ensuring better prices for their produce.
• Model Contract Farming Act, 2018: Excludes contract farming from the jurisdiction of Agricultural Produce Marketing Committees (APMCs).
  • Includes provisions for dispute resolution, such as negotiation, reconciliation, and referral to a dispute settlement officer.
• Model Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act, 2017 (APLM)
  • Replaces the APMC Act, 2003, to create a unified agricultural market with a single license for both agriculture produce and livestock.
  • Mandates the establishment of regulated wholesale agri-markets every 80 km.
  • Allows private market yards, warehouses, and cold storages to function as regulated agri-markets.
• Operation Greens: Aims to stabilize the supply of Tomato, Onion, and Potato (TOP) crops to reduce price volatility of these crops.

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Way Forward

• Effective Implementation of Economic Survey Suggestions: The Economic Survey of 2024 indicated that implementing the e-National Agriculture Market (e-NAM), supporting Farmers Producer Organisations (FPOs), and enabling cooperatives to participate in agri-marketing could enhance market infrastructure and facilitate better price discovery.
• Financial incentives to states: NITI Aayog has revived the 15th Finance Commission’s idea of providing financial incentives to states to encourage them to implement agriculture reforms.
  • The Finance Commission had recommended performance-based incentives for the implementation of agrarian reforms by the states.
• e-NAM Reforms
  • Implement a unified e-NAM trading license across all APMCs to simplify the process for traders and eliminate the need for separate licenses. 
  • Expand e-NAM coverage by integrating more APMCs into the platform, enhancing regional connectivity, and providing farmers access to a larger pool of buyers for better price discovery.
  • Encourage more farmers to sell their produce directly through e-NAM rather than relying on intermediaries
• Enable Sample-Based Sales: Allow farmers to bring a sample of their produce to the mandi, along with relevant quality certification, instead of hauling the entire lot. 
  • This would save on transportation costs and reduce crowding at APMCs, while benefiting traders by receiving graded produce ready for transportation.
• Storage and Banking Facilities Near APMCs: Provide bagging and storage facilities near APMCs along with loans against warehouse receipts to avoid distress sales during the post-harvest months. 

Conclusion

• As Agriculture is a state subject, its implementation of reforms faces challenges. 
• There is a need to build consensus between the Centre, states, and farmers and incorporate the principles of Cooperative Federalism for improving the agricultural Ecosystem of our Country.

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