BANGALORE, India -- A couple of years ago, Shashikanth Raitha, 38, a coconut grower from Tiptur in Karnataka state, was earning 7,000 Indian rupees ($104) for each 100kg of copra, or dried coconut kernel. He now sells the same amount for between 15,000 and 20,000 rupees.
"In the past 10 years, the price of copra rarely went beyond 8,000 rupees per quintal [100kg]. But now the picture is totally different," said Raitha, who sells 50 quintals of copra every year. The reason is a two-year-old online marketplace for farmers and traders called the Unified Market Platform, launched by Rashtriya e-Market Services.
Formed as a public-private partnership between the state of Karnataka and Mumbai-based NCDEX Spot Exchange, the UMP marketplace has revolutionized agricultural marketing in Karnataka by removing middlemen from the supply chain and reducing transaction costs, benefiting both farmers and consumers.
In the traditional mandi market system, which prevails in much of India, prices of farm produce are set through wholesale auctions organized by agricultural produce market committees (APMCs). These committees, controlled by commission agents and traders, often give farmers a raw deal by paying them a fraction of the retail price that urban consumers pay.
"There was a clear nexus between middlemen and traders that short-changed us. They wouldn't pay us on time. We would get 30% at the time of transaction, another 30% the following week and the balance a month later," said Raitha.
S. Prabhakar, 58, who for the past 15 years has been selling betel nuts in the market at Tumkur, Karnataka, said the new system means he gets the right price for his produce and receives the money within an hour at his bank. "Earlier, we would bring our produce in the morning, they would call for tenders and the auction would happen. The whole process used to take the entire day and the agents never paid the whole amount in one go," he said.
Osama Manzar, founder of the New Delhi-based Digital Empowerment Foundation, an Indian organization that works with villagers across India to increase digital literacy, said that no one producing goods in rural India gets a fair price. "Be it farmers, artisans or weavers, they all suffer because their product doesn't reach the market without crossing various levels of middlemen," he said.
With digitization, 124 of Karnataka's 157 APMCs allow farmers to earn 40% to 60% more than they did earlier, ReMS claims. Although other factors such as scanty rains have also helped improve prices, removing middlemen was the game changer, said Raitha.
As soon as a farmer brings his goods to the market, product details and the quantity offered are uploaded to the system. The goods are then assayed and graded based on quality by assayers accredited by the government. A unique ID is then created for the farmer with his bank details.
Once products and quantities on offer are listed, buyers who are connected to the platform can make bids. When a deal is contracted, the buyer deposits money in a common pool account. The money is transferred to the farmer's bank account shortly afterwards.
Manoj Rajan, chief executive of ReMS, said the UMP marketplace had attracted the interest of companies such as Reliance, ITC, Godrej Agro, Max Hypermarket and Pepsico India, which have joined the platform. Food Bazaar, a leading Indian food supermarket chain, also said it was interested in participating in the future.
Several states are trying to follow Karnataka's example. "We have helped Andhra Pradesh implement this model and they have experimented with it in 15 markets," said Rajan. "Talks with other states like Tamil Nadu and a few others are on."
Early this year, Indian Prime Minister Narendra Modi launched a similar model, the e-National Agriculture Market, with pilot programs in 23 APMCs across eight Indian states, which he said will be extended to 585 APMCs across India.
However, huge price disparities between states will make it difficult for the central government to implement the program at the national level. Devinder Sharma, an agriculture expert and a critic of industrialized agriculture, also said these systems will be of no help to farmers unless they allow trades at India's Minimum Support Price, fixed annually by the government for each crop, rather than the market rate.
In addition, critics of the UMP marketplace say traders have to be physically present at the market to assess quality for some products. "With tamarind, we have to personally see its color and fiber content before putting a price on it. Only an experienced person dealing in these goods can assess their quality," said Andrews John, who exports 500 to 700 tons of tamarind a year to the Middle East.
ReMS says this is not a problem because of the outsourcing of assaying to government-accredited third parties. "If there is any problem with the quality of the produce they will reimburse the difference of price between the two different qualities," said Rajan. There are currently 60 to 70 assayers across 124 APMCs where the UMP operates.
So far the UMP has been applied to 118 commodities, but this year Rajan plans to add perishable goods such as fruits and vegetables. "We will start with a few and depending on its functioning and challenges we will include another 27 such perishable goods," he added.
Bypassing traditional intermediaries in the supply chain has been politically sensitive, however. Commission agents have been reassigned to providing support services such as data entry, weighing and sorting goods. Some have taken up new roles such as warehousing, facilitating logistics for buyers, cleaning, bagging and other duties.
V. Rajanna, deputy director of the Tumkur APMC, said, "This is only the beginning. We can't just ask them to go, else the whole system will collapse. We will gradually eliminate the commission agents."