States encourage online sales of farmers' produce

Move aimed at eliminating intermediaries.

In a bid to bring down the number of intermediaries and help farmers get better realisation for their produce, many state governments have decided to encourage alternative platforms for farmers to reach the end consumer directly.

Recently, the state governments of Gujarat and Maharashtra issued licences to the National Spot Exchange (NSEL), promoted by Mumbai-based Financial Technologies, and the National Agricultural Cooperative Marketing Federation of India (Nafed) for facilitating the transactions online.

The new platforms proposed by the state governments include sale of products online. Tamil Nadu, Karanataka and Rajasthan are likely to follow the same model.

Under the new system, farmers can sell their products online. Similar to stock market quotations, prices of the farmers' produce will be flashed on computers.

The main advantage of the new system is that farmers are assured of better prices for their products as they will be directly selling to the customer without any intermediary. On Tuesday, there are about seven-eight intermediaries that operate between the farmer and the end customer.

Because of this, realisation for a product is only around 25 per cent of what the consumer ultimately pays. The proposed online trading system would increase the realisation up to 80 per cent, Anjani Sinha, managing director and chief executive officer of NSEL, said.

The second advantage is that a bank loan can be availed of against the receipt issued by NSEL's warehouse on delivering the produce. The NSEL has tied up with 18 public, private and regional banks to make available finance to farmers who are its members.

NSEL will commence its operations by May 2008. The initial investment for setting up the exchange will be around Rs 50 crore, which will be primarily used for setting up of warehouses and IT systems. "This will transform the Indian farmers' life and also the face of rural India," Sinha said.

Besides online trading, NSEL will also enable efficient clearing of products, settlement and payment guarantee at the national level.

Individual farmers, partnership firms, corporates, HUFs, co-operative societies and other legal entities can join NSEL as members to carry out transactions online.

Welcoming the proposal, Vettavalam K Manikandan, president, Tamillaga Vivasaigal Sangam (Tamil Nadu Farmers Association) told Business Standard that farmers in Tiruvannamalai, Virudhachalam, Erode, Tirunelveli and Periyakulam would use NSEL platform to sell products online shortly on a pilot basis.