Agriculture Marketing Reforms: Benefiting Farmers?

The low price realisation and inefficient market linkage have been the biggest pain points for the farmers which need to be addressed. Mohd Mustaquim analyses the recent reforms brought into agriculture marketing

Agriculture Marketing Reforms: Benefiting Farmers?

The low price realisation and inefficient market linkage have been the biggest pain points for the farmers which need to be addressed. Mohd Mustaquim analyses the recent reforms brought into agriculture marketing

It was horrific for the conscience of the nation when six farmers were killed during a protest in Mandsaur in the ‘progressive state in agriculture’, Madhya Pradesh. The only sin of these farmers was to demand remunerative prices for their produce. After hard work of six months crop cycle and investments of their savings when the time comes for getting the return or reap the benefits, either the prices fall or there is no taker of their commodities.

Despite long proclamations of the governments time and again, election jumlas (slogans) and recommendations, the farmers’ conditions remain unchanged with sign of improvements in future too. In 2006, the father of India’s Green Revolution, Prof. MS Swaminathan, in his capacity as Chairman of National Commission on Farmers, had recommended that the Minimum Support Price (MSP) should be 50 percent higher than the cost of production along with strengthening the market linkage. Speaking to Rural & Marketing, Prof. Swaminathan cites the current MSP system totally wrong and says, “After hard work farmers are only given 10-15 percent higher than the national average of cost of production while the cost itself varies in one agro-climatic zone to another. Distress sale is another fox which is swallowing the farming community.” Having a medical family background, he gives another example of medical products and devices that the sector charges 300 percent higher than the cost while farmers cannot even get fair prices.

In the 2014 Lok Sabha election, Bhartiya Janata Party had promised to implement Swaminathan Commission’s report and that it would give MSP 50 percent higher than the cost if comes to power. In contrast, in February 2015, the BJP led NDA government filed an affidavit in the Supreme Court that it cannot ensure 50 percent higher MSP than the cost. Going further, addressing a FICCI summit in July 2017, Union Agriculture Minister, Radha Mohan Singh said, “MSP is just a component of farmers’ income while other components are integrated farming and integrated marketing. The income can only be increased by applying other components also. MSP alone cannot increase farmers’ income.”


The biggest misery with agriculture marketing has been in India that commodity prices are decided by keeping food inflation in mind. The responsibility of keeping control on food inflation has been imposed on the heads of farmers. The influence of global commodity cycles on domestic prices of agricultural produce adds to the complexity of the issues. This necessitates a critical review of agricultural marketing in multiple dimensions.

Agricultural marketing in India is a complex system with a mix of organised and unorganised sector practices. There are thousands of rural periodic markets (haats) and more than 7,000 government regulated APMC markets, besides initiatives of numerous cooperative, development agencies, and private sector that engage with farmers directly or indirectly. The APMC system was established in the 1960s with the purpose of preventing exploitation of farmers. However, over a period of time, APMC yards turned into Zameendaars (landlords) whom the farmers of their respective notified areas are bound sell their produce.


However, in last two decades, it was felt to reform the agriculture marketing. With some reluctance on the part of different States, there now seems to be a consensus that agricultural marketing needs to be reformed and liberalised.

The Economic Survey of 2014-15 highlighted an interesting initiative, Rashtriya eMarket Services, undertaken by the Government of Karnataka in connecting all the APMCs in the state to create a virtual, single market across the state. The Economic Survey mooted the idea of replicating this model at the national-level. Thus, the Union Cabinet on July 2015, approved the concept of e-National Agriculture Market (e-NAM). It involves integrating the existing APMCs in the country to create a pan-Indian electronic market for farm produce. e-NAM aims to achieve this by a liberal licensing system for buyers with a single license being valid for trading in the entire State.

Agricultural Produce and Livestock Marketing (Promotion & Facilitation) Act, 2017

By the end of June 2017, 16 states have liberalised APMC acts, three states did not have such regulartions and 18 states have come together for e-vyapar through eNAM. Majority of states have agreed to have their APMC markets connected online. Therefore, Directorate of Marketing and Inspection, Ministry of Agriculture came up with a Model State/UT Agricultural Produce and Livestock Marketing (Promotion & Facilitation) Act, 2017 to create a more conducive framework for States to enable them to join e-NAM. Agriculture being a State subject, the proposed Act needs to passed by the State legislatures.


Highlighting the new law on agriculture marketing, the Agriculture Minister said, “The model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was released to the states on April 24, 2017, and had received a positive response regarding its adoption from all states.”

e-NAM has a potential to create a seamless, nation-wide marketplace that will not only benefit farmers by reducing their cost of finding buyers, but also by enhancing competition among traders, enabling transparency and creating conditions for overall improved food management in the country.

Highlighting the integration of technology with agri marketing, RV Kanoria, Chairman & MD, Kanoria Chemicals & Industries said, “Technology would play a key role in empowering farmers and augmenting productivity in India. There is a need for newer approach to strengthen agriculture marketing system, where the synergies of both the public sector and the private sector are harnessed for the benefit of farmers. There is need to step forward and look at developing private mandis and come aboard e-NAM.

Potentially, e-NAM can provide better prices to the farmers. However, it has its own limitations. Despite having over 7,000 APMC yards across the country, they have not been able to provide desired remuneration to the farmers. The National Commission on Farmers had observed that the density of APMCs is poor and it would actually be helpful if the market is within a radius of 5 km from the farmers’ place. e-NAM has so far integrated only 455 APMC markets which has target of integrating only 585 APMCs by the end of 2018. It would still be question mark how would e-NAM be able to deliver the desired the results? Hope, the Centre with the support from the States would increase the horizon of e-NAM to the rest of the APMCs and private market yards too.

As e-NAM provides an opportunity for online trading of agricultural commodities, the physical distance of buyer and sellers could be in thousand kilometres which needs efficient and effective logistic support. In e-NAM, this component needs tremendous focus.

Contract Farming

In order to strengthen agriculture marketing and to increase farmers’ income more measures need to be explored. One of the measures could be the Contract Farming. It had been given prominence in the Model APMC Act, 2003. However, a new model Contract Farming Act 2017 has also been formulated. Seed production by seed companies and sugarcane production near the sugar factory hinterlands are classic examples of contract farming that have been around in India for at least a few decades. Contract farming by Pepsico for tomato in Punjab, Jain Irrigation’s Contract farming for Mango, SAB Miller for barley, and McCain for potato in Gujarat are some success stories that created a win-win for both the contracting company and the farmers.

The main advantages of contract farming for farmers were found to be the lowering of market risk with the sponsor contracting in advance to buy the farm produce within a reasonable range of quality parameters.


Emphasising smart practices for better farm income, A Didar Singh, Secretary General, FICCI, said, “For last 2000 years we have been doing agriculture. Now we are talking about smart marketing. Smart doesn’t mean only to be digital. Smart is also research and development, smart is infrastructure, smart is productivity, smart is a new policy, smart is the change in the APMC Act. All these together make agriculture smart.”

Direct Marketing

Direct marketing is another concept that had been emphasised in Model APMC Act of 2003 and Model APLM Act, 2017. Direct marketing can occur in two ways – the producer sells directly to the consumer or consumer markets are established where producers can directly go and sell. The main objective in this case was to remove intermediaries in the chain and reduce price spread.

Government-backed initiatives such as “rythu bazars” in Andhra Pradesh, “apni mandi” in Punjab and “uzhavar santhai” in Tamil Nadu helped urban areas get fresh farm produce at low prices and better returns to farmers.

Agricultural growth in India is driven by three high-value sub-sectors – horticulture, livestock and fisheries. In addition, the quantum of agricultural production – foodgrains, cotton, oilseeds – have also grown abundantly. The infrastructure required to handle the quantity and quality of agricultural produce is neither sufficient nor suitable to address the changes.

Stressing on the need of reforms in agriculture marketing, Shilpa Divekar Nirula, Chair, FICCI National Committee on Agriculture and CEO, Monsanto India said, “With changes in production scenario it is necessary to have effective agricultural marketing reforms to ensure that the farming is remunerative.”

Primary Processing Centres

In the journey of making farm income remunerative, primary processing centres can play vital role. It refers to those post-harvest processing activities wherein the produce does not undergo any change in its composition. It is made suitable for subsequent second stage processing to be used for manufacturing various kinds of food stuffs. Cleaning, washing, slicing, dicing, canning are some of the methods of primary processing. It is often labour intensive and hence provides good opportunity to generate employment for unskilled labourers in the rural areas.

However, running a processing centre is not so easy. It has complicated hassles for the processing units. Describing the problems, Jagdeep Grewal, Director – CR Comtrade who runs spices and pulses processing centres in Rajasthan said, “The government is talking about doubling farmers’ income but rather than promoting processors, they are being harassed. These processors directly buy commodities from the farmers which gives good return to the growers. It is very tough to get or renew a license for operating a food processing centre. The only thing needed to be done is to easing the licensing process.”

The agriculture marketing in India has been in shambles. The MSP system and existing marketing mechanism have not been sufficient for providing right prices to the peasants. While working on the National Commission on Farmers, farmers had urged the Commission’s chairman, MS Swaminathan to provide better MSP and better market linkage. Thus, the need of the farmers can be understood easily. The recommended MSP by the Commission has seen a red flag from the government, now it is the market linkage which can boost the farmers’ confidence to continue with agriculture. Today, agriculture has become an activity for the people who do not have any other livelihood opportunities. According the census 2011, despite the rural population increased to 83.3 crore from 74.3 of 2001, the number of farmers fell around one crore. Farmers are losing interest in agriculture which could be a big challenge for ensuring food security.

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