Every industry is currently facing a tough competitive landscape where new innovations are constantly changing the market. The agritech sector is also part of this landscape and is seeing the introduction of many new technologies. One of the most notable transformations in this area is the rise of spot trading platforms, which are changing how agricultural products are bought and sold.
These platforms allow for real-time transactions. This means that farmers, traders, and investors can buy and sell agricultural goods instantly, which is improving market efficiency and transparency. As the need for easier trading solutions increases, spot trading platforms are set to play an important role in updating agricultural trade practices and meeting the demands of a fast-changing industry.
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In India, agriculture is regulated by state governments. Until recently, trading agricultural products could only happen through government-controlled markets known as APMCs. However, some state governments have started issuing licenses for online spot trading as part of a central government initiative to reform the sector to help the sector grow.
Reforms in the Agriculture Sector to Foster Industry Growth
Historically, agricultural marketing in India was governed by public wholesale markets, which were established during colonial times under the APMC Act. This regulatory system is over 100 years old, and has created some good marketing practices. But with time it also faced challenges due to various regulations and restrictions on agricultural trading. To address these issues, the Government of India introduced reforms through the Model Act of 2003 and the APLM Act of 2017. These reforms aimed to remove restrictions on the movement of commodities, implement a single market fee, and promote alternative marketing systems and technology.
In response to the complicated regulatory environment, the Union Budget for 2014-15 proposed a unified common market platform. This led to the launch of the National Agricultural Market, or e-NAM, on April 14, 2016.
e-NAM is an electronic trading portal that connects existing physical mandis across India, promoting the idea of “one nation, one market.” The platform aims to create uniformity in agricultural marketing and streamline processes across integrated markets. It reduces the information gap between buyers and sellers and facilitates real-time price discovery based on actual supply and demand. e-NAM ensures transparency in the auction process and gives both buyers and sellers access to a nationwide market.
The vision behind this initiative is to promote free trade among states while addressing information asymmetry between buyers and sellers. The mission is to connect APMCs throughout the country with a common online platform, enabling better price discovery through transparent auctions and ensuring timely online payments.
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What Changes Are Happening in the Agriculture Industry After Recent Reforms?
Even though reforms have been made to develop the agriculture sector by the central government, differing policies among states have made it challenging to implement a standard agricultural regulation across the country. In 2019, the government of Rajasthan became the first state to release a notification to permit private online trading of agricultural commodities in India. The first private online mandi notification issued by the government was for an agritech startup called Apna Godam, making it the first non-government platform to facilitate the online buying and selling of agricultural commodities in 2020.
Apna Godam is an agritech startup that initially focused on providing warehouse services for farmers to store their agricultural products. When the e-NAM platform was introduced, Apna Godam chose to be the part of it. As Apna Godam’s team was recognizing that the farmers using their warehouses often faced challenges. Farmers had to transport their stored goods to the nearest APMC to sell them, which often resulted in prices that were lower than the farmers’ expectations. Additionally, if a farmer had a small quantity of produce to sell, it was even more difficult for them to do so. The reason for this is that traders typically preferred sellers with larger quantities to save time and resources. Furthermore, to sell produce, farmers often approached middlemen, which led to even lower prices.
Apna Godam is a unique portal for sellers and village-level collectors where they can access warehousing, commodity finance, and market linkage all in one place. Based in Jaipur, this agritech startup provides warehousing facilities and online commodity financing to farmers across India. In addition, Apna Godam offers an online platform that connects farmers, traders, and buyers for commodity trading, helping to improve price discovery and streamline the marketing of agricultural products. Farmers can sell their products to buyers through the Apna Godam portal on an “as is where is” basis.
Conclusion
There are very few spot trading platforms in India that focus on agricultural non- perishable commodities. The main reason for this is that agriculture regulations vary from state to state, which makes it hard for platforms like Apna Godam to expand. If these platforms consider offering their services in different states, they must comply with all the local regulations and policies for obtaining an online trading license. The process to register for the license is tedious and time-consuming because of the differences in state regulations, resulting in a less competitive market in this emerging sector.
In some states, laws are being changed to improve trading practices in non-perishable agriculture. Several states have established rules for trading agricultural commodities, and around 16 states have released notifications for private online trading. This initiative aims to transform the agriculture industry by making it more efficient and accessible for farmers and traders. Currently, only a limited number of online trading platforms in India are registered with e-NAM. As of now, 16 state governments have allowed online spot trading platforms, but further provisions and reforms are necessary to help this sector grow and thrive. In some states, laws are being updated to enhance trading practices in non-perishable agriculture. Several states have set rules for trading agricultural commodities, and about 16 states have released notifications for private online trading. This effort aims to change the agriculture industry by making it more efficient and accessible for farmers and traders, but more measures and reforms are needed to support the growth and success of this sector.
