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Home > Business > Special


Private mandis? Most welcome

Business Standard in New Delhi | October 04, 2007

While prospective investors in new retail chains are up against the odds in several states, those wanting to invest in primary level agricultural marketing may find the going easier. A clear indication to this effect is available from the way different states are amending their laws on agricultural produce marketing so as to allow privately-built, -owned and -operated terminal markets for trading in fruit, vegetables and other perishable farm products. More than 10 states have already identified the sites for such private markets and have short-listed the financial institutions which will support these ventures.

If successful, this initiative will provide farmers a more competitive and therefore efficient marketing infrastructure. It will enable them dispose of their produce at transparently determined prices through an electronic auction system -- in sharp contrast to the present system, where most transactions are done by commission agents, who usually keep farmers in the dark about how their produce is evaluated and priced.

Previous attempts to improve farm marketing have relied on curbs and controls under the existing laws, including that umbrella legislation, the Essentially Commodities Act. This time, fortunately, the outmoded state laws on agricultural produce marketing are being replaced with relatively liberal legislation, thus ending the state monopoly in this field.

The new markets will be mandated to have facilities like cold stores and efficient logistics support. They will function through collection centres located at convenient spots to allow farmers easy and quicker market access. In return, farmers will be expected to pay user charges that may be higher than the levies and fees prevailing  in the existing mandis. Those running the new markets will therefore have to make sure that the reward for higher charges is sufficiently attractive for farmers to come to them.

This development needs to be viewed in the context of the other changes taking place with regard to the marketing of agricultural products. Companies like ITC have set up a digital price-discovery network that helps farmers get better returns on their crop. Firms that are into food processing have emerged as major buyers, as also some of the retail chains that are seeking to set themselves up.

The growing popularity of the commodities exchanges is another factor to be taken into account. Even as these changes are under way, the existing agricultural marketing infrastructure has been exposed as being inadequate for today's needs. There is just one agricultural market in an area as vast as 435 square kilometres.

This puts mandis virtually out of reach for a sizable section of farmers, forcing them to rely on improvised markets or local haats, which are not a substitute for modern markets. On the other hand, there is congestion in the main mandis, especially during the peak harvesting seasons, forcing farmers to wait for days before they can dispose of their stocks. Not even 10 per cent of these regulated mandis have cold stores in their vicinity, leaving farmers with little option but to sell their perishable produce at whatever price is on offer.

The expansion and strengthening of the marketing network has been estimated by an official task force to cost as much as Rs 12,230 crore (Rs 122.3 billion) -- a sum that will not become available without private participation. The question now is whether there will be a good response to the opening up of this sector.



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