According to a report by credit rating agency Acuite Ratings and Research, the commencement of the rabi harvest season (winter crop) amidst the current lockdown presents a good opportunity for online sale and trading of agricultural goods across the country.
While the Central and the state governments have a mechanism of minimum support price (MSP), farmers often are forced to sell their produce in the open market at a lower rate than MSP, given the procurement constraints of government agencies, the report said.
It further noted that consumer prices of such commodities are uneven across the country with significant inter-regional disparities in availability.
As per the report, a divergent food inflation landscape is a reflection of regional demand-supply imbalances and highlights the need for a pan India agricultural trading market in India.
A comparison of the food inflation print among India's 23 states reveals that the February FY20 food CPI ranged between 3.46 per cent (Delhi) and 8.94 per cent (Telangana), this is despite the 7.3 per cent increase in food subsidy allocation to Rs 1.08 lakh crore for FY20, it noted.
Further, the report said the primary factor behind supply and price distortions for farm produce in India is due the inherent inefficiency in Agricultural Produce Market Committee (APMC) structure for marketing of agricultural goods in our country.
"Clearly, the APMC led market system has made India's agriculture trade highly region centric and discouraged the development of a national agricultural auction platform. In our opinion, this can be addressed by taking advantage of the electronic national agriculture market or eNAM, one of the digital initiatives of the government," Acuite Ratings and Research Chief Analytical Officer Suman Chowdhury said.
This can bring significant efficiencies in the farm marketing mechanism, act as an effective tool for fighting inflation or price distortions and also reduce the procurement burden on the exchequer, he added.
According to estimates, the share of eNAM in India's total food grain production (including oil seeds) is only 8.6 per cent on average since inception in April 2016.
However, it is encouraging to note that both the Central and the state governments are currently urging farmers and traders to utilise eNAM and avoid physical presence at the auction site, the report added. SM DRRDRR