From Courtyards to Digital Yards, Why India's Mandi Story Must Change

In rural India, dawn is not simply heralded by the crowing of the rooster; the real first light appears at the mandi. Dust clouds swirl around the concrete slab as slow-moving vehicles, loaded with Punjab's wheat, Chhattisgarh's paddy and Maharashtra's onions, enter the courtyard. Shoulders hunched together, the farmers wait in a mixture of anxiety and wariness. Stacks of grain literally spill over into the courtyard; quality points are marked on the dusty floor by an agent, while the informal auction moves to the edge of the agent's humble shop. Prices are half-whispered in the warm air, counts are imprecisely taken, and finally, the farmer leaves for home with a much post-dated cheque/NEFT with erratic internet and servers down, struggling to remember whether today's "deal" has made or lost him money.

Such scenes are the lived routine in over 7,085 of India’s regulated mandis, the lifelines, or more honestly, the headache-lines, of the 120mn farmers in the country. These markets were cut from the cloth of the Green Revolution, stitched in a scarcity mindset of the 60s and 70s. Now, they gawk in silence at an economy where surplus roams, couriers of instant chat ping with price alerts and an app on the akimbo-global agri-value chain has only just begun to wake up.

The Mandis We Inherit, the Mandis We Envision

Once, the mandis were adorned with a hero's cloak; they provided safety from predation, a legal standing as a 'grain-confed' and price checks every afternoon. Over the decades, they have deteriorated from that ideal image into dusty, creaking frames characterised by opacity and monopoly, commandeered by commission agents and connected solely by challans and whispered cut-off percentages.

Market fees and transaction commissions, which typically add up is a staggering 6–8% of a deal, are a growing burden for importers. This drag on margins is stark when viewed beside rising transport and port costs. Each percentage point counts, and thousands of other line-item fees are micromanaging profitability line by line, pulling margins tighter. Spreads on short-term swaps, hedging and short-term import financing are compounding the hit at every stage, transforming what was once standard predictive costing into a bloody game of half-guess half-calendaring supply risk.

Reforms Haven't Progressed Sufficiently

Reforms like the Model Agricultural Produce Market Committee (APMC) Act and e-NAM (electronics National Agriculture Market) endeavoured to bring agricultural trading up-to-date. Today, over 1,500 mandis in 23 states and 4 Union Territories are linked to e-NAM. The overall effect remains small, though, as only fewer than 5% of total agricultural commerce takes place in a virtual manner.

A much deeper problem persists: the same institution, the APMC, acts both as a market operator and a regulator and exhibits conflicts of interest. At the same time, 70% of farmers are not aware of existing market prices at the time of transaction. Only 15% use price data to establish where or when they sell. Most continue relying on commission agents for both entry to markets and cropping decisions.

A Mandi's New Mandate

If agriculture is to become competitive, sustainable and rewarding, not only must mandis be reformed, they must be redesigned.

a) Transition from Commission Agent Shops to Open Auction Yards

Shift trade from backroom shops to centralised auction yards, to be overseen by mandi committees. Employ digital displays, standard lots and open bidding for fair price discovery and price transparency.

b) Shifting from Arbitrary Fees to Transparent Charges

Eliminate the elaborate chain of mandi cess, levies and commissions. Instead, use regulated service fees for labour, logistics, weighing and assaying in a fee-for-service system with rewards for efficiency.

c) Transition from Monopoly to Managed Competition

End mandi monopolies. Permit Farmer Producer Organisations (FPOs), cooperatives and private enterprises to handle major services such as cleaning, storage and grading under a service-provider architecture infused with accountability and contract arrangements.

d) Moving from Quantity to Quality

Base trade on quality, not quantity. Strengthen the Directorate of Marketing and Inspection (DMI) for the purpose of certifying quality, training the assayers and drafting national standards. It is a shift needed to build consumer confidence, export preparedness and compliance in SPS norms and SDGs.

e) From State-Controlled to Professionally Managed

Separate regulatory and operational functions. Let APMCs focus on oversight; let mandi operations be managed by professional CEOs using digital MIS and performance-based metrics.

Infrastructure cannot be ignored as modernising mandis also demands serious investment in infrastructure:

•     Cold storage facilities, a mere 36mn metric tonnes or so today, are much short of needs, and hence, record huge post-harvest losses of 4–6% for cereals and 18% or higher for fruits and vegetables.

•     Warehousing capacity of 148 million metric tonnes exists, but is unevenly distributed, disadvantaging many states.

•     The National Commission on Farmers (2006) suggested one regulated market per 80 square km. But coverage is spotty, with many having to travel long distances or sell to rural agency operators.

Pilot, Prove and Replicate

India needs to lead a new mandi generation in reform-prepared states such as Karnataka, Maharashtra or Madhya Pradesh on themes such as transparency, accountability, digital infrastructure and service delivery. Track their effects on price discovery, incomes for farmers and market efficiencies. Based on those learnings, expand nationally.

Mandi repair is not only for farmer welfare but for:

•               Fighting food inflation

•               Minimising post-harvest losses

•               Enhancing private investment in agricultural logistics

•               Facilitating India's export opportunities

•               Aligning with SDGs and global agri-trade standards

India aims to realise a $1trn agri-economy in 2030. Such a dream is rooted in the bedrock of efficient, state-of-the-art agricultural markets. Mandis must change from monopolistic ancient to open, service-oriented institutions connecting farms to futures, producers to prosperity. In the largest democracy of the world, the market must be for the many not for the few.

The authors are principal scientists with ICAR-National Institute of Agricultural Economics & Policy Research (NIAP), Ministry of Agriculture & Farmers Welfare.