How effective is e-NAM in integrating food commodity prices in

India? Evidence from Onion Market

SUMMARY
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.
Stabilising food inflation is a major policy challenge in India. Apart from demand and supply
side factors and the factors related to government policies behind high and sticky food
inflation in India. Recent studies highlight market distortions as another reason behind
persistent food inflation in the country.
A series of market distortionary rules and regulations hinder development of an integrated
agricultural market in India. In the agriculture sector, Agriculture Produce Marketing
Committee (APMC) and Essential Commodity Act (ECA) are the two major Acts, under
which, centre and states impose regulations on trading of commodities thereby impeding the
free trade. The main aim behind these Acts is food security and to ensure fair prices to
farmers and to control price volatility for consumers by setting the floor price for retailers.
However, in the absence of a competitive market and adequate infrastructure, the rent seeking
activities of the market agents causes large deviation between wholesale and farmers’ prices
of food commodities.
The levies and taxes charged by the states, with the aim of protecting their own socio-
economic interest and fiscal revenues, are a major source of market distortion which has been
prohibitive towards internal trade in India. These high taxes have significant cascading effects
on the prices when the commodities passes through the supply chains, therefore leading to
price variations among identical commodities across states.
Some of the other common reasons for the incomplete price transmission of several
commodities across states are regional bias in price and procurement policies, non-uniformity
in taxes and levies across states, information gap, weak infrastructure, transportation costs for
moving commodities across states, and monopsony power of mandis on price formation.
Therefore 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 post-harvest
issues; and most importantly creating a competitive national market for food commodities.
 The emergence of e-NAM is expected to be the game changer in agricultural trading and the
potential source of various direct and indirect benefits to the agricultural sector and the
economy. Directly, the e-NAM is expected to increase competition in agricultural market,
eliminate cartels and price manipulations by local traders, and stabilise price mark ups at both
wholesale and retail levels (Chand, 2016). Indirectly, this system would help farmers to find
out the market with remunerative prices for the produce, motivating them to investment in
productivity enhancement and increase production. The
The National Agriculture Market (e-NAM) was introduced in India with the aim of
transforming the agricultural sector by creating a unified national market for farmers to sell
their produce. One of the key objectives of e-NAM is to integrate food commodity prices,
providing transparency and efficiency in agricultural trade. This article focuses on evaluating
the effectiveness of e-NAM in achieving this goal, with a specific focus on the onion market.
The success of e-NAM depends on how well different markets across India are integrated
with each other. In the present study, we examine how effective the e-Nam has been in case
of wholesale onion market in India. The average price inflation of onion in India has been
more than 5% on monthly year-on-year (YOY) basis during the last decade of 2010-2019.
How ever there are occasions when we see huge spikes in onion inflation. Onion inflation
reached its peak in year 2013, in 2015 and again in 2019. In August 2013, the wholesale
inflation was more than 55 %, in August 2015 it went over 56%, and in December 2019 it
crossed 53% mark. In this context, we examine to what extent, the wholesale market prices of
onion of the four onion producing states in the four regions of the country, namely,
Maharashtra, Karnataka, Rajasthan, and West-Bengal are integrated with the average
wholesale price of onion in India. We examine the integration of wholesale market of onion
in the pre and post e-NAM periods separately. The pre e-NAM period ranges from January
2010 to March 2016. The post e-NAM period spans from April 2016 to December 2019. By
using cointegration analysis we assess whether e-NAM facilitates integration of onion market
in India.

CONTEXT OF THE ARTICLE

India is one of the largest producers and consumers of onions globally. The onion market is
characterized by volatility in prices, influenced by factors such as weather conditions,
production cycles, and market dynamics. Traditionally, the onion trade has been conducted
through traditional mandis (marketplaces), where farmers often faced challenges such as
information asymmetry, lack of market access, and price manipulation. e-NAM was
envisioned as a solution to address these issues and create a more transparent and efficient
trading environment.
Onion Market Dynamics:
The onion market in India is particularly interesting due to its susceptibility to price
fluctuations. Onions are a staple in Indian households, and any disruption in supply can have
a significant impact on prices. Factors such as weather conditions, storage facilities, and
transportation play a crucial role in determining onion prices. The traditional mandi system
often led to inefficiencies and delays in the supply chain, contributing to price volatility.
Evidence from the Onion Market:
The implementation of e-NAM in the onion market has witnessed mixed results. On one
hand, the platform has brought transparency by providing real-time information on prices,
arrivals, and demand. This has empowered farmers with access to market data, enabling them
to make informed decisions. On the other hand, challenges such as the slow adoption of
technology, inadequate infrastructure, and resistance from traditional market players have
hindered the full potential of e-NAM.
One positive aspect is the reduction in post-harvest losses. With improved logistics and
transportation facilitated by e-NAM, farmers can efficiently transport their produce to distant
markets, reducing wastage. However, issues related to the grading and standardization of
onions persist, impacting the overall quality of produce traded on the platform.
KEY POINTS
Integration and Transparency: e-NAM facilitates seamless integration of APMCs, enabling
farmers to reach a wider audience of buyers. The platform enhances transparency by
providing real-time information on prices and transactions.
Empowering Farmers: By eliminating intermediaries and enabling direct sales, e-NAM
empowers farmers to negotiate better prices for their produce. This has the potential to
improve farmers' income and reduce exploitation in the traditional supply chain.
Challenges and Adoption: Despite its potential benefits, e-NAM faces challenges such as
slow adoption by states, resistance from traditional market players, and issues related to
infrastructure and connectivity in rural areas.
Technology Infrastructure: The success of e-NAM relies heavily on robust technology
infrastructure. Ensuring internet connectivity, digital literacy among farmers, and continuous
platform improvements are crucial aspects.
Policy Reforms: Successful implementation of e-NAM requires supportive policy reforms at
both the state and central levels. States need to align their APMC acts with the e-NAM
framework, and policymakers must address any regulatory hurdles.
Market Access and Expansion: The platform needs to continually expand its reach to cover
more commodities and markets. Expanding market access can lead to a more competitive
environment, benefitting both farmers and consumer.
CRITICAL ANALYSIS
While e-NAM has made significant strides in transforming India's agricultural landscape,
challenges persist. The pace of adoption varies across states, and some regions still rely
heavily on traditional trading practices. Connectivity issues in rural areas hinder the seamless
functioning of the platform.
Policy support and regulatory alignment are critical for the platform's success. The
government must work closely with states to ensure that legal frameworks are conducive to e-
NAM's objectives. Additionally, investing in infrastructure development, particularly in rural
areas, is essential for the widespread success of the platform.
Information Asymmetry and Farmer Empowerment:
e-NAM has addressed the issue of information asymmetry to some extent. Farmers now have
access to real-time market information, allowing them to make data-driven decisions.
However, the digital divide in rural areas and the slow adoption of technology among farmers
have limited the overall impact.
Reduced Intermediaries and Transaction Costs:
The platform has succeeded in reducing the dependency on intermediaries in the onion trade.
This has potential benefits for farmers as they can receive a higher share of the final price.
However, resistance from traditional intermediaries and the need for better market linkages
pose challenges.
Infrastructure and Technological Challenges:
The success of e-NAM is contingent on robust technological infrastructure. In many regions,
inadequate internet connectivity, lack of awareness, and resistance to change have impeded
the seamless adoption of the platform. Investment in infrastructure is crucial for the
platform's sustained success.
Quality Control and Standardization:
The onion market faces challenges related to the quality and standardization of produce. e-
NAM needs to incorporate mechanisms for ensuring that the traded onions meet specified
standards. This is essential for building trust among buyers and establishing the platform as a
reliable trading avenue.A series of market distortionary rules and regulations hinder
development of an integrated agricultural market in India. Apart from various other reform
measures including infrastructural development and institutional changes, 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.
CONCLUSION
While e-NAM is a major shift in policies related to agricultural marketing, there have been
decade old efforts to enhance efficiency in agricultural trading under APMC. The
introduction of model APMC Act 2003 has been an effort to overcome some of the shortfalls
in the APMC Act, 1950. For instance, the model APMC act has provisions for (i) direct
selling by farmers to contract farming sponsors, (ii) setting up of new market area by private
persons, farmers and consumers, (iii) direct interaction between farmers and consumers, (iv)
single levy of market fee on sale in any market area, and (v) replacement of multiple
licensing system with single registration of market functionaries to operate in multiple market
areas.
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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