How effective is e-NAM in integrating food commodity prices in India? Evidence from Onion Market

Rudrani Bhattacharya and Sabarni Chowdhury in this NIPFP paper:

A series of market distortionary rules and regulations hinder development of an integrated agricultural market in India. In order to ensure greater transparency and uniformity of food commodity prices across states, various reform measures have to be undertaken to develop
agriculture marketing. These measures concentrate on the numerous areas, specifically infrastructure development, information provision, improving the role of private sector and decreasing government sector intervention, training of farmers and traders in marketing and postharvest issues, and most importantly creating a competitive national market for food commodities.

The Indian government established e-NAM as a first step toward inducing competition in the agricultural market in 2016. The e-NAM or the National Agriculture Market, is a pan-India electronic trading portal which integrates the existing APMC mandis to create a unified national market for agricultural commodities. In this backdrop, this paper examines whether the introduction of e-NAM by the government has improved the spatial integration of onion markets in India.

Using the maximum likelihood method of cointegration, it investigates onion market price integration of Maharashtra , Karnataka , Rajasthan , West-Bengal with the average wholesale onion price of India for the period 2010-2016 ( before e-NAM ) and 2016-2019 ( after e-NAM ). It provides evidence in favour of market integration for the period 2016-2019, while multiple relations are found to govern onion prices across states during 2010-2016. The evidence in effect suggests that introduction of eNAM in 2016 has improved market integration for onion market prices in India.

The recent farm laws:

In this backdrop, the Indian parliament has recently passed the Farmer’s Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, and the Farmers (Empowerment and Protection) Agreement of Price Assurance and Farm Services Bill, 2020 as a major step towards promoting competitive market for food commodities. The recently passed farm bills allows selling produces outside the physical territory of the mandis and hence serves an additional marketing channel for the farmers, simultaneously retaining the mandis system under the APMC Act. The new farm bill has created wide-spread reactions, agitation and protests against it across the country.

….

The success of developing a virtual and physically integrated agricultural commodity market across the states in India ultimately depends on a large number of factors. Under e-NAM, and the in the ideal physically integrated market, mandis constitutes  the first layer of integration. However, in reality, the first layer of agricultural trade takes place at the farm-gate level. Farmers, mostly the small and medium farm-owners sell off the produce to big traders or produce aggregators at the farm-gate. Unless farmers in a neighbourhood of a particular mandi can collectively aggregate their produce and bring to the mandi themselves, the benefit of on-line realisation of remunerative prices at the mandi level may not be realised.

Further, If farmers individually cannot access local mandis, it would be difficult for them to make their produce available to buyers in other states. Again the cost of transports to markets in other states may be prohibitive for small and medium farmers, and hence, taking advantage of better price realisation in other states may not be feasible for them.

In a nutshell, to make the process of agricultural market integration sustainable, it is essential to build a public-private partnership (PPP) model to maintain information and payment flow through an electronic system, to provide processing and storage facilities at the mandi level, and to provide of transport facility for smooth movements of agricultural produce from one state to another.

 

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