Understanding The Indian Mandi Trading System

Understanding The Indian Mandi Trading System

The Indian mandi trading system is integral to agricultural trade in India. The Indian mandi trading system reflects the dynamism of its huge agricultural supply chain. According to a report by the World Bank, with around 66% of the country’s population living in rural areas, India is still a rural economy. Agriculture is the primary source of income to 58% of the Indian population, a good chunk of this being marginal farmers having land holdings of less than 1 hectare. In fact, only 6% of farmers receive the benefit of MSP. Therefore mandis play an important role in ensuring a profitable livelihood to farmers and other stakeholders in this sector. Most people outside the agricultural sector are not aware of the components and the major stakeholders of the Indian mandi trading system. We’ve broken down the elements below so that you can gain an appreciation for this indispensable cornerstone of Indian agricultural trading.

An introduction to mandis

Azadpur Fruit market in New Delhi

At its most basic level, a mandi is a marketplace where farmers sell their produce. Most farmers choose to sell their perishable commodities in nearby mandis. This saves them on transportation costs and they also get to sell their produce while it’s still fresh. As per reports, there are 2477 principal regulated markets based on geography (the APMCs) and 4843 sub-market yards regulated by the respective Agricultural Produce Market Committees (APMCs) in India.

The APMCs play an important role in the process. They facilitate auctions in designated market yards so that the farmers, suppliers and loaders can easily sell the produce to prospective buyers. As per the APMC Act, the first sale of agricultural commodities produced in a region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., can be conducted only under the aegis of the APMC through the commission agents licensed by the APMCs set up under the Act.

Only licensed traders and commission agents are allowed to be part of the trade process. It is important to mention that each trade happens according to the mandi framework based on certain rules. States are responsible for establishing the APMCs which frame rules for trades in mandis.

Role of mandis in India’s agricultural marketing

Understanding The Indian Mandi Trading System
Labourers empty out sacks from a truck carrying produce in Bangalore vegetable market

Caption: Labourers empty out sacks from a truck carrying produce in Bangalore vegetable market

Mandis are integral to the Indian agricultural marketing chain. Since mandis are the designated spaces where farmers and buyers meet, it gives them access to the markets. Also, auction facilities in mandis ensure that the farmers get a fair price for their produce. In simple words, a mandi is a platform where agriculture trade activities take place.

We all know that auctioning commodities increases the possibility of getting better prices. If mandis didn’t exist, farmers would fail to auction their produce. This will further add to their pains. Also, dealing with village traders and intermediaries doesn’t provide the room for farmers to bargain for their produce. This is why mandis are an important part of the agricultural ecosystem. The five points mentioned below will give you an idea about the relevance of mandis at a glance:

  • Provide a regulated market space
  • Reflects the dynamism of India’s food supply chain
  • Provides agricultural marketing infrastructure
  • Gives access to farmers to reach out to new markets
  • Offers a robust platform to meet prospective buyers

Mandi stakeholders

Understanding The Indian Mandi Trading System
Traders gather for an auction of pulses at Karanpur mandi, Ganganagar, Rajasthan
  1. Farmers: They are the key stakeholders in the agricultural marketing chain. Although they have the option to sell the produce to anyone, their objective to get fair prices leads them to mandis.
  2. Commission Agents: They are a crucial link between the farmers and the traders. They help farmers crack a better deal and in turn, they charge them a certain percentage. Read more about commission agents here.
  3. Traders: They are buyers who are registered in the mandi. They bid in the auctions to buy the agricultural produce brought in mandis by the farmer. They can be wholesalers, retailers or exporters.
  4. APMC staff: They supervise the trade and try to ensure a fair and transparent auctioning process. Their goal is to enable the smooth buying and selling of commodities.

A day in a mandi

In most places, mandi activities start early in the morning. One can normally see people as early as 4 am. Trucks start arriving in the morning and there’s the hustle and bustle of unloading produce. Some mandis also have sorting, grading and packing facilities. Generally, commission agents perform the task of auctioning. Since they act as mediators in the trade, they charge a certain commission percentage for each deal.

Coming to the prices for the produce, it depends more or less on demand and supply. When the supply of a certain commodity is high, prices remain low. On the other hand, when there is a supply crunch, prices go up. This is the routine process under which the farmers bring their produce to the mandis and sell to the traders through auctions. Produce like onions, potatoes, grains etc. have a longer shelf life, and are stored inside mandis or designated storage areas to be sold at a later date at a better rate.

Role of APMCs in Indian mandi trading system

APMC is a marketing board that was established under state governments. Its main responsibility is to protect farmers from exploitation and to ensure the smooth sale of agricultural produce. It constitutes a system to streamline agriculture marketing in India. It exists in almost every state.

Coming to the APMC operations, it is simple and smooth. Farmers bring the produce to the market and sales are made through auction. Mandis are established in different regions across the states. Along with this, licences are issued to the traders within the markets so that wrongdoings do not occur during the trade. Also, wholesale traders and retail traders outside the mandis are not allowed to participate in the process. This ensures better rates for the produce and keeps a check on irregularities.

Though our mandi system is complex, we hope you have got an idea of the major players and processes involved in it. Stay tuned for our next blog on the challenges faced by the Indian mandi system. Please drop your comments below. Do like, share and follow the Bijak blog for weekly articles from subject matter experts.