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243 viewsAll GS PapersGS Paper 3
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Approach:

  1. Introduction – significance of Agri sector.
  2. Briefly mention the key challenges of Agri-trading.
  3. Mention why e-NAM became needed.
  4. Chart out the benefits of e-NAM.
  5. By briefly mentioning the key issues, give measures for their remedy.
  6. Conclusion.

India has traditionally been an agrarian economy. It continues to be the primary livelihood source for about 58% of India’s population, contributing around 18% to the overall GDP. Thus, any advancement in agriculture directly impacts the development of majority of the population.

Key challenges facing agriculture trading: Today, Indian agriculture is marred with key challenges like : small land holdings per farmer, primary & secondary processing, supply chain, reducing intermediaries, financing, etc. While addressing small-land holdings is a limiting factor to agricultural productivity, the other challenges can be met through structural reforms.

Need for e-NAM: One such key structural initiative is the e-NAM or Electronic National Agriculture Market. e-NAM is a pan-India electronic trading portal for Agri-produce to create a unified national market by networking existing Agriculture Produce Marketing Committees (APMCs). The APMC framework had its own set of challenges, the main being that since it is state specific, APMCs lacked uniformity or compatibility leading to fragmentation of each markets, with each state functioning as a separate market.

The core purpose of APMCs was prevent farmers’ exploitation, by bringing all trade into regulated markets. But its creation has led to restrictive practices and collusion among traders leading to overdependence of farmers on middlemen. Consequently, this entire architecture made inter-state trade all the more difficult.

Benefits of e-NAM:

  • To overcome these challenges, e-NAM was conceived with the goal of creating a seamless national market where buyers can bid for specific lot electronically. This dispersed set of online buyers bidding anonymously reduces chances of traders’ collusions.
  • Under e-NAM, one license issued for a trader is valid across all mandis in the state.
  • There is a single-point market fees on the first wholesale purchase from the farmers. For local traders, e-NAM offers opportunity to access a larger national market for secondary trading Traders can buy from more than one market with the same license & quote bids online.
  • For farmers, this increases access to markets through warehouse-based sales, reducing the need to transport produce to mandis. The farmers thus benefit from participating directly in local mandi trading, thereby negating their intermediation cost.
  • Farmers can now access 24×7 commodity price information, along with advance lot registration facility that reduces waiting time at mandis. Farmers can further view bids placed for their produce with quality assaying parameters.

Key Issues facing e-NAM:

  • Alignment of nationwide APMCs and states.
  • Awareness & adoption by key stakeholders.
  • Adaptation to rapid changes in technology.

Steps ahead:

  • Aligning nationwide APMCs & States : e-NAM needs a legal binding arrangement across states that is compatible to correct weaknesses of the divergent APMC Acts at the state level. State seeking integration with e-NAM should issue – (a) a single unified trading license for all state mandis, (b) implement a single point levy of market fees, and (c) provide e-auction as a mode of price discovery.
  • Adoption by key stakeholders : to ensure adoption by key stakeholders, upgradation of quality of existing infrastructure is needed, other than flourishing awareness, assuring regular electricity and availing working computers for large scale operations with high-speed internet connectivity across smaller towns. This is a sine-qua-non for NAM’s success.
  • Rapid changes in technology must be swiftly adapted and the farmers and traders be made acquainted with such new developments through training & simulation
  • Banking system is a key-driver of e-NAM. Banks needs to offer end-to-end integration for banking services like collection through multiple modes, payments to beneficiaries, host to host reporting, digital auctioning, etc.
  • Digitization of trade transactions is required for enhanced transparency.

e-NAM hosts a slew of long-term benefits, supply chain efficiencies, transparency and harmonization of quality standards. The aforementioned steps can help in early adoption and integration, which will be crucial for e-NAM’s success.

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