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E-Commerce Platforms for Agricultural Products Get a Boost from the Centre's Farm Laws

Editor, TRANSFIN.
Jan 21, 2021 8:14 AM 4 min read
Editorial

With the passing of the three farm bills, plans are afoot to launch an e-marketplace of sorts for agricultural produce.

Named Krishi Setu, this platform will be handled by the National Bulk Handling Corporation (NBHC), a Mumbai-based agri-warehousing services company and is being touted as an “Amazon for agricultural goods”.

If all goes according to plan, Krishi Setu could go live by June-end this year.

Recap

One of the three recently-passed farm reforms essentially enables buyers to purchase produce outside designated mandis. It does so by redefining the phrase “trade area”, dramatically expanding the places where farmer-buyer transactions can take place.

It also redefines “trader” aka the middleman. Earlier, only State APMC-designated middlemen could purchase crops from farmers. Now, anyone with a PAN card can become a trader.

Intrigued enough? Listen in to one of our earlier podcasts to know how the Indian agricultural value chain really works and how the Indian farmer is often caught between the devil and the deep blue sea.

By expanding the definition of who can buy agricultural produce and where such transactions can take place, the farm reforms have set the stage for online trading of such goods.

Furthermore, the law stipulates that “no market fee or cess or levy” shall be levied on farmers or traders in trade areas - online or offline.

(For a detailed analysis of the pros and cons of the three farm laws, click here. And for a deep-dive into why farmers are protesting against these laws, read this.)

 

Krishi Setu

NBHC says it will get in touch with farmer-producer organisations (FPOs) and other groups, following which the platform would be formally launched. It is also looking to expand its list of accredited laboratories to test all kinds of farm produce (it has over 40 quality testing labs across the country). It will also tap into its existing infrastructure for the purposes of collection, storage and fumigation.

The platform would work like a typical e-commerce platform. Buyers - who can include large companies - can place an order on Krishi Setu. The collection, storage and delivery of the agricultural goods would be handled by NBHC.

The platform would have to register and operate as per the rules set by the central and state governments.

 

NBHC

A commodity and collateral management major, NBHC is wholly-owned by homegrown PE firm True North. It has a pan-India warehousing presence with more than 1,250+ warehouses across 19 states - adding up to a total of 2.10 million metric tonnes of agri-commodities under management.

As for True North, the Mumbai-based PE fund specialises in consumer (36%), healthcare (23%), financial (18%), infra services (13%) and other sectors (10%). Its total assets under management add up to nearly $3bn, including its co-investments. With an ownership structure that resides in a private trust, the company has made many successful bets on high-profile companies such as Biocon, Trinethra, Atria Convergence Technologies and Aster.

 

Agricultural E-commerce

In April, at the peak of the COVID-19 lockdown, the Centre launched the Krishi Rath mobile app to facilitate the transportation of agricultural produce - but this was limited from farmers to mandis.

Farmer groups in Madhya Pradesh, Rajasthan, Telangana, Andhra Pradesh and Punjab have been selling produce on the internet for a long time - and have also reportedly been earning 15-20% more than the price they used to fetch earlier.

Moreover, several Farmers Produce Companies (FPCs) have taken membership of the National Commodity and Derivatives Exchange (NCDEX) to delve into futures and spot auctions.

FYI: The NCDEX is a commodities exchange dealing primarily in agricultural commodities. As of March 2019, it featured futures contracts on 19 agricultural commodities and options on five. And it’s big - based on value and number of contracts, it is second to only the Multi-Commodity Exchange (MCX), which is focused on energy and metals.

Then there’s the National Agriculture Market (eNAM), a Government initiative founded in 2016. It is a pan-India electronic trading portal for APMC mandis to create a unified national market for agricultural commodities.

But while eNAM is primarily a mandi service, online platforms such as the one developed by NBHC are broader in scope in that they encompass a wider market area.

Speaking of NBHC, it is not the only warehousing company trying to digitise Indian agricultural marketing. Others like Star Agriwarehousing & Collateral Management and National Collateral Management Services have also launched their own online commodity trading platforms (AgriBazaar and Marketyard respectively).

So as we can see, the idea of an e-marketplace for farmers’ produce is not a new one. But it has no doubt received a major fillip due to the pandemic and the farm laws.

Going forward, the fate of the farm laws is uncertain on account of the continuing protests and the Supreme Court’s interjection. However, the pandemic is still very much present and agricultural marketing will find it impossible to navigate the circumstances without embracing some degree of digitisation.

FIN.

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