What I'm going to try to do today's focus a lot on what we call know as the enam And just bring some insights from the field studies. We've done in Karnataka so agriculture as we all know is a state subject and if you look at the Constitution market is also a state subject at the same time the government of India has a larger Responsibility of ensuring that the country has an integrated there are no barriers within the nation on trading so here you have some dual responsibility of the state and the center and That that sort of frames the agricultural market environment So at the center we know the Essential Commodities Act trade policy the procurement and price policy is largely set By by the center although with the last one states do have some role in the procurement And we heard about the enemy MSP bonuses yesterday in the context of FCI I'm going to focus on the state level Which is the agriculture produce marketing regulations and we call it APMC acts We'll stick to that which were which came up in the 60s and 70s at different points of time different states adopted it I think the crux of the APMC is that Post independence there was a need to actually regulate these markets to protect farmers interests So it was very much a farmer centric legislation aimed to Ensure that farmers were not left at the mercy of traders So anything that is visible is Regulatable and in that sense there was designated commodities, which are called notified commodities and market areas were defined And each market area came under an APMC and you can have Mondays sub Mondays I won't go into that in too much detail essentially trade took place there and There was a market fee paid to the Which would go into the APMC and it was meant to be plowed back to provide infrastructure And traders and agents need to have a license to operate in a Monday So this is the essential sort of elements of the APMC But the way in which it took shape in different states are quite diverse. I won't go into that but one example is Even the notified commodities are very different across different states So it can differ from something as basic as that So the types of markets I'll just skip over this But just to say that the APMC regulated Mondays are not the only Mondays that are there There are a lot of small markets that are regulated by the Panchayats So only 15% of periodic markets are regulated So this is to suggest that the APMC is not the only kind of market space available Not even the only kind that's regulated, but it's definitely an important Space and I pulled this out from the National Sample Survey Situation assessment of farmers and you see for different crops the blue is actually the one that's sold in the Monday And the red is actually to private traders So depending on which crop you're looking at the where you sell can be very very different So you're talking about a lot of heterogeneity and diversity Which is something that we have to keep in mind whenever we talk about markets, which is a sort of a general concept So a trade in the Monday the key actors are commission agents and then the traders again It varies by state Madhya Pradesh for example doesn't have these agents at all by law and there are the workers who are the Hamalis The farmers and the purchasers are of course at the tail end So there are a lot of actors in a Monday and so in terms of welfare consequences It's important to know what happens to different players when things change in Markets and there are two broad modes of sale one is an auction which is like open cry auction so far where There's a base price and from there people bid for a particular lot and the highest bidder wins And there's a close tender where people examine the produce and then write in their bid and then They compare all the bits and the winners declare So these are the two ways in which price is determined in a market It's easy to see what the traders can or cannot do in this context the one of the things that has Historically being documented is that traders often end up colluding so that the bid price and what they bid is actually Predecided and leaving the farmer quite clueless and it's especially egregious in Horticulture crops where the farmers often a bystander and the trader and the commission agent are actually negotiating on behalf of the farmer But the essential marketing problem So when you talk about reform we had the system which was designed to be in the interest of the farmers But over time it turned out that it wasn't working all that well Where farmers were actually at the receiving end and they didn't really have a say in the prices and one of it comes from the essential Problem of designing markets. So there are two dimensions. I would Specify one is how do you have the farmers access markets at the least cost? So you want proximity? On the other hand, you also want to ensure competitive markets That is the market should not be so thin that there are so few buyers that they can actually collude So you want transparent price discovery you want price signals to be formed Reliably so you have this thing about proximity versus thinness now imagine you take a market very close to the farmer So supposing I have a village level APMC regulated Monday. There are going to be too few people So collusion is easier. Whereas if I put one Regulated market per state you're going to have a lot more players making collusion hard So there's a inbuilt trade-off between having small markets very accessible to farmers versus having Markets that are competitive and this is the essential problem that became a sort of a problem with many of the APMC It's because the original idea was to make make things accessible But then you traded off competitiveness and then of course you want farmers to have choice of buyers and not to be pushed into Monday's Because the law says so And they also cared about the larger ecosystem what if for example the farmers got prices They did not want can they store it can they hold out do they have the financial capacity to do so do they have the Infrastructure to do so so all of these also become the ecosystem of marketing Unfortunately under the old APMC we accomplished neither. So if you how did we do? In terms of density of regulated markets, which is proximity we weren't doing so well So the National Commission on Farmers had recommended a radius of five kilometers So essentially saying that every 80 square kilometers must have a market But if you look at the range even Punjab which had the densest market network had only one per hundred and nineteen square Kilometers and Meghalaya you can imagine the kind of difficulties in In terms of terrain it was very poorly served. So even on the on the Dimension of proximity we haven't really done a good job Of making it easy for farmers to Access markets, but we haven't done well with the other side also the spot markets were not thick enough They were not enough buyers and players partly because to trade in each Monday you need a license So imagine a trader if he if he or she wants to procure from different Mondays They have to get a number of licenses to trade in each they need the manpower or Agents on the ground to actually be able to execute these so the cost of barrier the barriers to entry are quite large For the traders so invariably you had these small markets where there was a lot of Collusion and I've just put this that consequently you have a lot of non-transparent price discovery the price dispersion is quite large They and then of course you had the interstate barriers because each state had a different kind of APMC So there's a list of the committees and I just wanted to focus on the last one So in the the national agriculture policy in the early 2000s said let's have a rainbow revolution And they started making space for private players and a lot of states actually adapted their laws to enable that But I'm going to focus on the last one which is on enam and this idea that let's have an electronic national agriculture market So what does the enam do and I'm going to just focus on the principles of enam And to enable enam you need all the states to align their laws to enable a nationwide market And they sort of produce an APLM model at which they said if all states adopt that then you can have a market But if even one state doesn't adopt it your market cannot yet be national So in some sense there's the lowest common denominator problem that the most restrictive state will actually determine how effectively the market is integrated now the National agriculture market actually was based off what Kanatka began doing in 2000 early 2007 actually and then in 2013 they had an act that actually enabled this to happen Now there are two elements to unified markets one is a national market one is unification and one is online trading and both go hand in hand So what happens is now instead of getting a Monday specific license you're saying I'm going to get one license to be trade that I can use in any Monday I don't need a Monday specific license so for the trader you're decreasing the cost of buying in a market that can be very distant from him or her Then you want to sort of if I'm sitting in place A and I'm trying to bid in place B And how do I do it without having people on the ground so the e-e trading enables that so I I sort of bid on produce That's in place B while sitting in at a computer in place a so that's the online bidding and auction now How do I do it? I I have to have an assaying system because I have to know what I'm bidding for so the ideas that the good comes in It's I say it's graded so that the better grade has a higher bid price and so price is related to quality And once I know that that is it's a seed and it's this grade I trust that are saying because it's done by the Monday and I put my bid and now what happens All the bits come in from different locations. It's no longer local to that extent It's it increases the contestability of markets and I may get a better price because now more participants are there And now the winning bid is not manually done. It's Processed by the computer so the chances of favoritism nepotism isn't there and Then the pay the winning bid is declared and the payments are cleared Centrally and electronically so that the farmer gets the money Into the bank account and the receipt is generated and because the receipt is now the market is unified You don't you're not taxed at multiple points So that this is supposed to be the thing and the two key things are unification one license works everywhere and E-trading so here you see the Lot set and people has of now physically inspect the quality then go to the Computers and they are bidding on the computer and then the computer sort of declares the winner and the winners are being announced So this is a semi automated system because I think is still not being done here now we went to Because enam is modeled on the Karnataka model. We went to Karnataka to 10 Mondays to see how it's working It's published in the EPW as a paper, but I'm just going to sort of come to the findings So in theory the enam is a very good design It's intended both to get proximity of markets because I can go to the nearest Monday and still have buyers who are from elsewhere And I have this idea that it's unified And that there is E-trading so you have proximity and contestability both of them being achieved in terms of design But what we have found was that not all elements were in place everywhere And for different reasons and some of these I'll talk about so only selected Commodities were traded on the E-platform and the decision was based on the total arrivals in the Monday So for example when there are very small quantities that come Everyone knows there are so few buyers everyone knows each other so they end up saying let's do a manual auction We won't go to the computer to have online auctions And E-trading so because the trader lobby was quite resistant to many of the changes E-trading they ended up conducting only selected days of the week So and the reason that the Monday officials told us was that the arrivals don't come steadily each day So when the days when they actually come there are days when nothing comes So in the season when something comes then we do E-trading if there are too few then we do manual So there's no consistent system and it's a day-to-day decision that they seem to take and several commission agents We found were also registered as traders Suggesting that you know this idea that traders are bidding from elsewhere So essentially what traders ended up doing was getting commission agents to register as traders and trade on their behalf So what was an old system was just modified to a new framework We also found that of course all of us know that there's a very strong relationship between farmers and commission agents And the commission agents and traders and I'll elaborate on that point a little in the next slides And the assaying instruments were seem to be a big problem because I saying takes time and very small farmers Don't want to part with samples because it's a loss for them and to get it as it it takes time and They and and when the arrivals are peak and pigeon pea to her and All of that you you just can't I say every lot. So the assaying is somewhat It's inadequate and they are mostly unutilized So what we found was between e-trading and unification e-trading had some benefits Okay It saves a lot of time because bids were now declared manually matching 10,000 bids took used to take a long time So now the computer does the process it and gets gets it out So it's only a few seconds whereas before it used to be several hours So the farmers say it's safer for us to take the money travel out and it's all done So in some ways they don't have to wait till night time to get the money and go home They also said there is a reduction of possibility of mistakes or manipulation many times the bids used to retrospectively be adjusted So that your favorite person won the bit now It's not possible because the computer sort of does it automatically so the system is more transparent But there's always a claim that once the enam comes and farmers get a better price the arrivals in the Monday Will increase most people said that's not happened at all and some specific Issues that came up was in perishables like jaggery They said that when you have an online auction or a bit only the best quality gets traded That is when you do it manually there's negotiation on the price and all qualities find By a so this was one of the issues and then the infrastructure problems are huge So they said the power cuts internet connectivity server issues. They just doesn't make online trading feasible at all and I want to just focus on the tip-toe issue This is a very big market where you would think that this system would work very well but there was a Trader called Rudraya who essentially they used to have a meeting about a hundred traders would meet at his house and They would all decide to put the same bid just plus or minus two rupees so even though this was supposed to not have collusion because the Collusion breaks when there are traders from outside the Monday But here all of the there were no outsiders because they were not bidding because they didn't know the quality and a saying was not done And so collusion was happening anyway And so in some sense it didn't solve the problem that it was supposed to solve On unification the central problem is really quality A trader outside who'd who does he or she trust they do not trust the assaying by the APMC they also feel that there are parameters that cannot be a seed so for example in jaggery It's a loo luminosity and translucent So they put it against the light to check if it's good quality So they say these are not the parameters that are ever tested so in some sense as a seeing as a as a way of Expanding markets doesn't seem to happen and the traders seem to prefer having their own person on the ground the logistics issue Okay, supposing I'm a trader building from outside who takes care of the shipping and the delivery, right? There are no there's no clarity on that and so far actually the Commission agents were doing all of that they were taking on the role of Managing the entire transaction and being compensated for in different ways by both the farmer and trader that doesn't happen So I've already talked about the same and one of the things that came very clear is in the government There was a lot of discussion on making a saying mandatory, but there is complete Lack of I mean there's lack of disagreement So everyone agrees that if you actually make it mandatory the you're just going to drive trade out of the Mondays The final bit is actually with e-payments So one of the interesting features in enam was that I get paid electronically But many of us who are aware of the extent of financial inclusion and access to banking know that this is a bit Difficult so for farmers they say access to banking services is a challenge and the other problem They have is you pay into our loan accounts and they remove that money for repayment of loans And we don't have control over the money we earn So they said that we do not want payments into a bank account that is linked to our loan account. Yeah, very You can imagine why they would want that Traders say that we are not going to clear the bills immediately because I need to come receive the product and Be assured that the quality they said it was is actually true And so I'm not going to pay until I get that so in some sense The traders are unwilling to put in the money via a payment the commission agents Actually are the ones who suffer one of the commission agents said all commission agents are like now in the ICU Because they are squeezed they and I think we sometimes under-appreciate the role of the commission agents Because then the farmer comes they're providing storage services then they actually Mediate the transaction and the other ones who are actually involved in the logistics and sometimes also in credit to the farmers So in such a scenario, I think unless we think of the commission agents role It's they are not indispensable they are actually performing such a critical role and There's no way in which an enam can function by removing them from the picture So these are the issues and so I just to summarize the major challenges with the national unified market is Seeing issue unless you know what you're buying for I'm never going to bid on anything that I can't see It needs to be quick and cheap Access to credit has to be there for farmers and traders and I would add commission agents as well The Monday infrastructure needs to be in place and the payment channel We have to innovate at that end as well where it doesn't always have to go through the banks The closest we came to where commission agents are irrelevant are through cooperatives for collective marketing because the cooperative now Supplies all of the services that commission agents Actually were providing and this is for Shimoga and Arrakhan at you go and see that system You say, okay, this is how it's supposed to be Where farmers get a they have the right to refuse a low price and the cooperative has storage facilities So you have a very nice system where farmers can hold out and they get a loan for pledge loan against the produce So it's a nice system and anyone who wants to see how you can organize it I think the Shimoga Arrakhan it is a very good Example so I'm just wrapping up so the status of enam As of yesterday I checked there are 429 markets in 18 states when we checked Online trading was very notional one crop per Monday on a few days and we saw in Haryana Actually, they did everything as before and at the end of the day they used to enter it in the portal So it's enam data entry