Agricultural marketing, storage and transport

The first principle

A farmer is paid not for what he grows but for what he can sell, where and when he can sell it. Produce is perishable, bulky and harvested all at once, while buyers are few and the farmer often needs cash immediately, so without storage, transport and many competing buyers the farmer sells at harvest to whoever is nearest, at whatever price is offered. Marketing reform is therefore about two things: more buyers competing for the farmer's produce, and the ability to wait for a better price.

The core

The regulated market system

• Why mandis were regulated. Before independence farmers sold to moneylenders and traders who fixed weights, prices and deductions, so the States passed Agricultural Produce Market Committee (APMC) Acts, mostly from the 1960s, which set up regulated market yards (mandis) where produce is sold by open auction to licensed traders, weighed on checked scales and paid for promptly. Agricultural markets are a State subject (Entry 28 of the State List).
• How a mandi works. A commission agent (arhtiya in the north) brings the farmer's lot to auction, traders bid, and the market committee collects a market fee from the buyer, while the agent earns a commission and often lends to the farmer before the harvest, which ties the farmer to him.
• Price spread is the difference between what the consumer pays and what the farmer receives, and the farmer's share in the consumer's rupee is the farmer's net price divided by the retail price. Every intermediary, every kilometre of transport and every kilogram lost on the way widens the spread. Figure 1 traces the chain, and Figure 2 works out how much of a Rs 40 retail price reaches the farmer through two routes.

What went wrong with the mandi system

• Too few markets. India has only some 7,000 regulated markets, far fewer than the National Commission on Farmers (2006) recommended when it asked for a market within about 5 kilometres of every farmer, so most small farmers sell to village traders instead.
• Restricted entry. Licences were limited and held by a few families of traders and agents, so bidding was often collusive, and levies and commissions in some States added several per cent to the cost of every sale.
• One market area. A farmer could sell notified produce only in the mandi of his own area, which fragmented the national market.

Dimensions

• Economic. Bargaining power lies with whoever can wait, so a farmer without storage or credit sells at the harvest low, while traders who store profit from the rise later in the season.
• Perishability. Fruits, vegetables, milk and fish must be sold within days, so the cold chain matters more for them than the mandi does. A study by NABARD Consultancy Services (NABCONS), the consultancy arm of the National Bank for Agriculture and Rural Development, for the Ministry of Food Processing Industries in 2022 put post harvest losses at about Rs 1.53 lakh crore a year, with the highest percentage losses in fruits and vegetables.
• Federal. Markets are a State subject, while inter State trade and commerce in foodstuffs falls in the Concurrent List (Entry 33), so reform depends on the States, which is why the Centre writes model Acts and why the three farm laws of 2020 drew a federal objection.
• Political. Market fees fund State boards and rural roads, and commission agents are powerful in procurement States such as Punjab and Haryana, so reform has winners and well organised losers.
• Consumer. Wide price spreads and wastage raise food prices, so marketing efficiency serves the household as much as the farmer.

In practice

Reform laws and their fate

• Model Acts. The Centre's Model APMC Act of 2003 allowed private markets, direct purchase from farmers and contract farming. The Model Agricultural Produce and Livestock Marketing (APLM) Act of 2017 went further, making a whole State one market area with private yards and warehouses as markets, and the Model Contract Farming Act of 2018 let a buyer and farmer agree a price before sowing, with disputes settled locally and the farmer's land protected from transfer.
• The farm laws. Three laws of 2020 allowed trade outside mandis free of State fees, created a national framework for contract farming and loosened stock limits under the Essential Commodities Act. Farmers in Punjab, Haryana and western Uttar Pradesh protested for a year, fearing the end of the mandi and of procurement at the minimum support price (MSP), and Parliament repealed the laws through the Farm Laws Repeal Act 2021.
• After repeal. Reform has returned to the States: Bihar had already repealed its APMC Act in 2006 and Kerala has none, which shows that abolishing mandis without building private markets does not by itself raise prices. In November 2024 the Ministry of Agriculture and Farmers Welfare circulated a Draft National Policy Framework on Agricultural Marketing that again urges States towards a unified market.

Electronic markets and collectives

• The National Agriculture Market (eNAM), launched on 14 April 2016, links mandis online so that traders anywhere can bid on a lot. By January 2026 it covered 1,522 mandis in 23 States and 4 Union Territories, and the Centre gives each mandi up to Rs 75 lakh to join (PRS Legislative Research, 2026). Its "Platform of Platforms" connects it to logistics, assaying and finance services.
• Farmer producer organisations (FPOs) are companies or cooperatives owned by farmers that buy inputs, grade, store and sell in bulk. The central scheme for forming and promoting 10,000 FPOs, launched in 2020 with an outlay of Rs 6,865 crore, funds their management, equity and credit guarantees.
• Gramin Agricultural Markets (GrAMs). The Budget of 2018-19 proposed upgrading about 22,000 rural haats, the weekly village markets nearest to farmers, into markets linked to eNAM.

Storage and transport

• Warehousing. The Warehousing (Development and Regulation) Act 2007 set up the Warehousing Development and Regulatory Authority, whose electronic negotiable warehouse receipts let a farmer store grain in a registered warehouse and borrow against it instead of selling at harvest; the logistics note covers the receipts. In May 2023 the Cabinet approved a plan to build grain storage in primary agricultural credit societies, described as the world's largest grain storage plan in the cooperative sector.
• Cold chain. India had over 8,500 cold storages with a capacity of nearly 400 lakh tonnes (Lok Sabha, 2025), most of them single commodity stores for potato in Uttar Pradesh and West Bengal, while pack houses, ripening chambers and refrigerated transport, the links that keep fruit and vegetables cold from farm to shop, remain thin.
• Finance for infrastructure. The Agriculture Infrastructure Fund, approved in July 2020 with a financing facility of Rs 1 lakh crore, gives interest subvention of 3 per cent and a credit guarantee on loans up to Rs 2 crore for warehouses, cold stores, pack houses and processing units.
• Transport. Most produce moves by truck, so rural roads under the Pradhan Mantri Gram Sadak Yojana are the first link to a market; Kisan Rail, started in August 2020, and Krishi Udan carried perishables over long distances, and Operation Greens supports the tomato, onion and potato chain.

Issues and way forward

• Market density. Most farmers are far from a mandi, so upgrading rural haats into GrAMs, allowing private markets with fair rules, and mobile procurement are needed to bring buyers to the farmer.
• Electronic markets without logistics. Inter State trade on eNAM remains small because a distant buyer cannot see the produce, so assaying, grading standards, warehouse based trading and a dispute settlement system must come with the software.
• Weak collectives. Many FPOs lack working capital, professional managers and assured buyers, so equity support beyond the start up years, priority lending and links with processors and exporters decide whether they survive.
• Storage in the wrong place and for the wrong crops. Capacity is concentrated in a few States and crops, so the cold chain needs pack houses and refrigerated transport near farms, and grain storage in villages through cooperatives would let farmers wait for better prices.
• Reform by consent. The farm laws failed because farmers saw them as a threat to MSP procurement, so reforms that keep the mandi and procurement while adding competing channels, negotiated State by State, are more likely to last.

Common confusions

• APMC and eNAM. The APMC is the State committee that runs a physical market, while eNAM is a national online portal that links existing APMC mandis; it does not replace them.
• Contract farming and corporate farming. In contract farming the farmer keeps his land and agrees to sell his crop to a buyer at a set price, while corporate farming means a company owns or leases the land and farms it.
• FPO and cooperative. Both are farmer owned, but an FPO registered as a producer company is governed by company law, with members' equity and professional managers, while a cooperative is registered under State or multi State cooperative laws.
• Warehouse receipt and procurement. A warehouse receipt lets the farmer keep ownership and borrow against stored grain, while procurement is an outright sale to the government at the MSP.

For the exam

• Keyword bank: regulated market, commission agent, price spread, farmer's share in the consumer's rupee, market density, model APLM Act 2017, contract farming, eNAM, Platform of Platforms, farmer producer organisation, Gramin Agricultural Markets, electronic negotiable warehouse receipt, cold chain, post harvest loss, Agriculture Infrastructure Fund.
• Previous year questions: Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: By January 2026 eNAM linked 1,522 mandis in 27 States and Union Territories, yet trade across State lines remains small, which shows that a market needs logistics and grading as much as software (PRS, 2026).
  • Introduction with a report: The National Commission on Farmers recommended a regulated market within about 5 kilometres of every farmer, a standard India is still far from meeting.
  • Conclusion: Farmers gain most when more buyers compete for their produce and they can afford to wait, so storage, collectives and competing channels matter more than any single law.
  • Conclusion: Marketing reform that adds channels without removing the mandi and procurement, built State by State, can raise the farmer's share without repeating the conflict of 2020.