Indian government to modernize mandis August 27, 2007Posted by Ramnath Rangaswamy in Business, Emerging Markets, India, Indian Economy, Logistics, Supply Chain.
The Indian government, specifically the Ministry of Agriculture and Cooperation, is planning to modernize the mandis by providing ‘electronic auctioning’, gradation and standardization. These objective of the Indian governmenti, in modernizing the mandis is to (i) benefit the seller and the buyer and (ii) reduce the price the consumer pays for the produce.
However, the government is wasting it’s effort, money and time..
These initiatives will not ;
- reduce the cost of the supply chain
- benefit the seller and the buyer
The seller wants a good price and a quick sales-to cash turnaround time. The electronic mandis would have electronic displays showing the price of commodities thereby reducing the farmer’s dependence on middlemen, agents to get the latest price. This could lead to the farmer getting a marginally better price. But this does not reduce the supply chain costs and hence would not lead to a great benefit. to the seller.
The buyer wants a good price and reliable supplies of consistent quality. The electronic mandi would be of marginal help to the buyer.
The government has no stake or motivation to make a success of the mandis. They have no KPIs or scorecard measures to determine if the electronic mandi is a success or failure.Government agencies cannot help in the buying and selling process,.
What should the government do to benefit the seller and buyer?
- Help, form cooperatives.If the government is serious about helping the farmers and buyers it should encourage the farmers to form cooperatives. The cooperatives will have a bargaining power for transportation, cold-storage rates. The cooperatives will also make it financially viable for buyers to pick up the product from the cooperative’s location/’mandi’ rather than the farmers spending time and money to come to the mandi. It will be financially viable because the quantity aggregated in the mandi will be larger than that of a single farmer.
One example of a successful cooperative is Amul. The Amul model is successful because the milk is aggregated at myriad collection centres from where the milk is collected and brought to the factory for processing.
- Setup cold chains: The government should setup cold chains. This will enable the farmer to store the product and give him the choice of selling when he gets the best price.
On the fresh supply chain there are two very good initiatives that have recently been implemented. One is by Reliance which has started it’s own mandis and the other is by CONCOR [ Container Corporation of India] subsidiary Fresh and Healthy Enterprise Ltd. which buys apples from growers and uses it’s cold chain to supply to customers throughout the country.
Net, net do not expect any supply chain benefit from the government’s initiative to create ‘modern mandis’!
For the full story click here; Modern Mandis