[This case was developed by the author under the guidance of Prof. Subhash Bhatnagar as a part of work assigned to him when he was working with the Centre for E-Governance (CEG) at IIM, Ahmedabad. The article has benefited substantially from inputs provided by the CEG team and a project report submitted by participants of the PGP-ABM programme at IIM, Ahmedabad.]

APPLICATION CONTEXT

The central Indian state of Madhya Pradesh is the seventh most populated state of the Indian Union with an estimated population of 60 million people. About 73 percent of this population is rural. Agriculture is the main source of livelihood of the rural population with about 7.6 million rural households engaged in agriculture. Therefore, the economic development of the rural population is only possible through improved agricultural production and marketing.

Since farmers do not have any other livelihood, they are often forced to sell their produce to commission agents/brokers at lower prices in order to fulfill their immediate needs. To prevent the exploitation of farmers and to facilitate better marketing of their produce, the Madhya Pradesh State Agricultural Marketing Board (also referred to as the Mandi Board) was formed in 1973. The board is responsible for the administration and overall development of the market yard, and for ensuring a better agriculture marketing system in the state. The Mandi Board regulates and monitors the working of the agricultural markets or Mandi through its seven regional offices. The Mandi is the market place where farmers and traders collect to sell or purchase agricultural produce. Presently there are about 233 Mandis in the state. They provide farmers and traders the required infrastructure for display, weighing and selling/buying of the produce. It is estimated that the Mandis and Sub-Mandis cater to about 6 million farmers and 70,000 licensed traders. Annual arrivals at the Mandis are in the order of 12.5 million tons valued at US$ 3.5 billion.

The website of the Mandi Board provides reports on arrival of various commodities across mandis, and information on the grade wise list of all the mandis, rates of commodities (minimum, maximum, modal rate, the latest Minimum Support Price), etc. Apart from this, the website provides information related to the Mandi Act, prevailing commodity rates at other markets of the country, tender notices and other departmental information. Prevailing rates of various commodities are displayed on TV screens at the mandis using information available through the website. According to data available from the Mandi Board, the website received more than 160 thousand visits between March 2006 and January 2008. Most of these have been from regions other than Madhya Pradesh. Computer illiteracy and the lack of access to ICT infrastructure may be reasons for limited use of the website information by farmers. Pages displaying daily rates of commodities pages are among the most frequently visited. The information from the website is primarily used by the department for its own analysis and report generation.

The operations of the Mandi are complex as they involve physical display of the farmer’s commodity, auctioning and weighing of the produce, payment to the farmer and reporting the payment to the Mandi for the calculation of the Mandi Tax. Apart from this, if a trader intends to sell his commodity in other states, an entire set of additional documentation is required. Data compiled at the Mandi is aggregated at the regional offices and finally sent to the head office of the Mandi Board. In the manual system, the entire documentation was done manually. The quantum of transactions coupled with manual processing resulted in inefficiency and inaccuracy. The process for sale and purchase of commodities is described below:

SALE BY THE FARMER AT THE MANDI

1.   Entry in the Mandi Premises

Farmers usually enter the Mandi premises in bullock carts or tractors. A record of the entrant is made at the entry gate. Basic data such as the name of the farmer, the commodity brought for sale and the tentative quantity of the commodity are noted, and the farmer is issued an entry slip. The mandi collects an entry fee from farmers entering on lorries/trucks while those arriving on bullock carts are charged a nominal entry fee (varying between Rs. 2 to 5) or nothing.

2.   Auction of the Commodity

Farmers bring their commodity to a designated area in the Mandi. There are specified areas for different commodities. Licensed traders or their representatives accumulate around the vehicles. They assess the quality of the commodity and start the bidding at a base price, which is usually twenty percent more than the Minimum Support Price (MSP) offered by the government. A government representative (usually a Mandi Inspector) conducts and monitors the bidding. After the auction is finalized the Inspector issues an Auction Slip containing the names of the purchaser and the farmer, and the rate at which the sold commodity was auctioned. A copy of the Auction slip is retained by the Mandi for its records, while one copy each is issued to the purchaser and the seller.

3.   Weighing of Commodity

After the commodity is auctioned, the farmer takes it to a weighing balance. Weighing balances are usually located near the trader’s shop located within the Mandi premises. Weighing of the commodity is supervised by a licensed weigh person called Tulawati[i]. After weighing the commodity, the Tulawati issues the Weight Slip containing the name of the purchaser, the seller and the weight of the commodity. A copy of the slip is retained by the Tulawati for his own records while one copy each is given to the purchaser, the seller and the Mandi office. After the commodity is weighed it is kept in the trader’s store room/shop. This is done by the Tulawati and laborers hired by him.

4.   Payment to Farmer

After the commodity is weighed, the farmer approaches the trader for the payment with the Auction Slip and the Weight Slip. Copies of these are also available with the purchaser. The amount to be paid to the farmer is accordingly determined and the farmer is paid the amount. The purchaser then gets the Payment Slip (containing the name of the purchaser, seller, quantity sold and auction rate of the commodity) counter signed by the farmer acknowledging receipt of payment. This is the only documentary evidence of the payment done to the farmer. A copy of this retained by the trader and one copy each is provided to the farmer and the Mandi office.

5.   Tax Payment by Trader

The trader is required to deposit a tax of 2.02 percent of the total purchase value to the Mandi Office within 15 days of the purchase. The trader collects all Payment Slips issued by him within a fifteen day period and computes the tax payable. He then deposits the tax along with details of purchases made by him in a specific format. The Mandi maintains the account of each licensed trader and the tax deposited by him is credited to his account.

 SALE BY THE FARMER OUTSIDE THE MANDI

In order to sell the produce, it is not obligatory for the farmer or the producer to follow the process of auction. Neither is it obligatory for them to enter the physical mandi premises (Auction Yard). A farmer may sell the commodity to the trader by approaching him directly. Farmers often have long term associations with certain traders[ii], whom they approach directly for the sale of their produce. The rates are negotiated mutually between the trader and the farmer. However, even in these private transactions, the weighing of the commodity needs to be certified. There are some variations in the process of weighing depending upon the Mandi and the commodity. For instance, in the case of the Sendhawa Mandi, there are about 14 private electronic weigh bridges within 10 kilometers of the Mandi premises. At every weigh bridge, a Mandi employee (guard/ inspector) is present who certifies the weight of the commodity. Once again, the trader is required to submit details of all transactions at the Mandi Office in an appropriate format and pay tax on the transaction value.

If a farmer (especially in the bordering areas of another state) wants to sell the commodity to a purchaser in another state, he needs a ‘Certificate of Origin’ from the Village Sarpanch. This certificate states that the farmer is selling commodities grown on his own land.

 

SALE BY THE TRADER

The trader buys cheap and sells dear. He stocks the commodity till better prices can be obtained. In order to sell the commodity outside the Mandi premises[iii], the trader needs a ‘Tax Paid’ certificate from the Mandi. The certificate can be obtained by the trader by submitting a declaration stating details of commodities purchased and taxes paid on them. This certificate is valid for 72 hours during which the commodity has to be transported outside the mandi premises or the state. The certificate is checked at the interstate mandi check post, cancelled and retained by the authorities. It serves as a record of commodities that have been transported outside the state jurisdiction. In the event of a vehicle being caught without the certificate, a fine to an extent of five times the commodity value is levied along with an additional fine of Rs 5,000.

KEY ISSUES FACING THE STAKEHOLDERS

Farmers, traders and the Mandi board are the primary stakeholders in the activities of the Mandi. The objective of the Mandi is to ensure that the transactions between farmers and traders are facilitated, and that taxes applicable to these transactions are collected. Despite the Mandi Board’s efforts at providing a better marketing platform to farmers so that they can attain better prices, famers face several challenges and incur unnecessary costs in selling their produce. Besides, the manual process of recording and maintaining transactions taking place at the Mandi provides ample opportunities for financial manipulations by traders. Some of the key issues faced by farmers and the Mandi authorities are:

Lack of Awareness of Commodity Rate

Farmers do not have access to up-to-date and precise information on commodity prices, but have only an approximate idea based on prices that may have been prevailing in the previous few days. They end up selling at rates lower than those actually prevailing since their priority is to liquidate their commodities in order to meet their immediate requirements. This is particularly true for the smaller farmers.

Besides selling his produce in the Mandi, the farmer has two other options. He may choose to sell the produce to the government at the Minimum Support Price (MSP), which he rarely does as the MSP is lower than the minimum auction price that he would get at the Mandi. The second option is to sell the produce to organizations such ITC’s Choupal.[iv] Agents of the Choupal, who are present at the village itself, keep the villagers informed about the price being offered at the Choupal. Usually this price is equivalent to the Mandi’s best price the previous day. Thus even if a farmer has missed an auction at the Mandi, he can obtain the same price by selling the produce at the Choupal. In case a farmer finds out that better rates are being offered at the Choupal after the auction rate at the Mandi has been finalized, he may cancel the auction by submitting an application to the Mandi office stating reasons for cancellation and paying cancellation charges of Rs. 2 per auction. At the ITC Choupal, a commodity is procured only if its meets a specified quality standard. Small farmers, unsure of the quality of their product, therefore prefer to approach the Mandi where they are sure of being able to sell their commodity even if it is of inferior quality[v].

Wastage due to Weighing

Farmers bring their produce to the Mandi in bags of various weights and capacities. The trader on the other hand requires produce to be packed in bags bearing standardized weights. For example, soya bean is generally packed in bags weighing 90 kilograms each. Therefore, the produce sold by the farmer is emptied into the standard-sized bags provided by the trader while being weighed. During this process, there is spillage of one-two kilograms per quintal of grain, a loss which is borne by the farmer. In the ITC Choupal, the farmer does not incur such losses on account of weighing. The lorry bearing the produce is weighed at the weighbridge and then re-weighed without the produce. The difference between the two weights is calculated as the weight of the commodity.

Transportation within the Mandi

Farmers with smaller quantities of produce to sell at the Mandi bring them in bags loaded on to tractors or carts. They disaggregate their bags in the auction yard and once the auction has been finalized, transport the auctioned produce to the purchaser’s shop for weighing and the subsequent payment. For this transportation within the Mandi, they have to pay laborers 5-10 rupees per bag. Also, the name of the purchaser is written by hand on the Auction Slip making it difficult for the illiterate farmer to figure out the identity or location of the purchaser. This makes transportation even more tedious and expensive for the farmer.

Under-Payment and Evasion of Taxes by Traders

The amount of tax to be paid by the trader depends on the monetary value of the purchase made, which in turn is determined by the auction rate and the commodity weight. Since the auction is done publicly, chances of manipulation in the auction rates are minimal. However the weight of the commodity can be wrongly recorded with the involvement of the Tulawati who is the final authority for certifying the weight. The lower the recorded weight, the less is the tax liability of the trader.

Once a purchase transaction is recorded, the trader is required to pay the tax applicable to it. However, a ‘Tax Paid’ certificate is required by the trader only for selling commodities outside the state. Traders tend to settle their tax liabilities promptly in the case of such commodities only. Though the Mandi maintains accounts of each registered trader and keeps records of their tax liabilities, the accounts do not get reconciled right until the end of the financial year when the big traders deposit tax in bulk. Traders thus manage to evade their tax dues for several months.

Manipulations at Interstate Checkposts

Often, vehicles carrying commodities purchased at the Mandi within the state and being transported outside the state for resale, pass the interstate check posts without submitting the ‘Tax Paid’ certificate. At times, they submit fake certificates that may have already expired or were issued for different commodities. Further, the absence of weigh bridges at the check post makes it impossible to verify the weight of the commodity being transported.

NEW APPROACH

EKVI is an e-Agriculture Marketing project undertaken by the Government of Madhya Pradesh, India, as part of its e-Governance initiatives. The project has been conceived and executed by the Mandi Board and Madhya Pradesh Agency for Promotion of Information Technology (MAP-IT) on a Build-Own-Operate (BOO) basis with a consortium consisting of private parties - SQL Star International Ltd and Zoom Developers. The entire investment on hardware, software, manpower and maintenance has been done by the vendor. The Mandi Board pays the vendor a proportion of the total Mandi fee collected. This percentage is determined by the class of Mandi, in terms of its activity level. The Intellectual Property Right of the software is owned by the Mandi Board of Madhya Pradesh. MAP-IT has the exclusive right to use the software outside Madhya Pradesh through its associates/vendors on payment of certain percentage of royalty of sale value to Mandi Board.

The project intends to formalize and reorganize the agriculture trading business of the Mandi Board through use of ICT. Specifically, it aims to: 

§      Collect and make real time information on rates and arrivals of commodities in the Mandi available online

§      Make operations more effective and completely transparent, thus benefiting all stake holders (farmers, traders and the government), and

§      Empower the stakeholders through accurate and timely information for effective decision making.

The aforesaid objectives could not have been achieved without capturing data related to auctioning, weighing and payment (to farmers as well as Mandi through tax). Thus the project primarily involved capturing the transactions in the Mandi through the usage of technologies such as digital hand held terminals, electronic weigh balances, and VSAT based connectivity across Mandis, check posts and the Mandi Board’s head office. 64 mandis and one interstate check post have been computerized. These 64 Mandis fall under the ‘A’ and ‘B’ categories that have higher activity levels and cumulatively contribute to seventy percent of the total annual transaction volume of Mandis in the state.

The private operators are responsible for capturing data related to the entry, auction and weighing of commodity within the Mandi premises. A computer terminal installed at the entry gate records details of the vehicle along with approximate weight of the commodity taken by the Mandi employees manually. This data is entered simultaneously into the VSAT connected system and uploaded to the central server. This provides real time information on the arrival of the commodities.

Field staff of the private operators has been provided with stand alone digital hand held terminals. During the process of auctioning and weighing, data related to the purchaser, seller, commodity rate and commodity weight is entered through these terminals. Manual issue of auction slips and weight slips is done simultaneously by the Mandi staff. After every hundred entries, the data from the hand held terminal is loaded onto the back office computer through use of electronic cards. This data is once again transmitted to the central server using VSAT connectivity. Thus the data on the latest auction rate and the quantity of commodity traded is made available online and is available to other computerized Mandis.

A television installed at the Mandi and connected to a computer, provides the daily rates, arrivals, important news and other announcements. By capturing the purchaser/seller name, auction rate and commodity weight, the exact tax payable by the trader is calculated and is available on real time basis. The software application has been developed using Visual Basic with SQL Server as the backend database. The software for smart card has been developed in CARDOS. Besides covering the Mandi transactions, the software covers a host of other Mandi activities such as financial accounting, payroll and establishment, engineering, MIS at all levels and check post operations. VSAT, with leased line backup, is used for connectivity for receiving and transferring of data from the market yard and check posts of the Mandi. Video conferencing facility (through VSAT) is available between Mandis and the regional offices/head office.

COSTS AND BENEFITS

Benefits arising out of Mandi computerization largely relate to those resulting from access to relevant information. For the farmers – the most important beneficiaries – there has been minimal perceptible benefit, except that which can accrue due to greater awareness of rates in other markets. For example, the farmer can obtain data on the rates prevailing in other nearby Mandis. He may accordingly choose to sell the produce in the Mandi that provides better rates. For large farmers who bring their produce in tractors, weighing is hassle free as they can weigh the produce directly at the electronic weigh bridge, wherever available. The trader can reconcile his accounts with those of the Mandi easily and promptly as data on receivables is available on a daily basis.

KEY LESSONS

Study of the Mandi computerization indicates that end-to-end computerization of processes, process reengineering and appropriate legislative reforms are necessary in order to harness the full potential of an ICT intervention.

Prevalence of the Manual System

Manual processes of sale/purchase of the commodity are still prevalent even in the computerized mandis. Data generated at each step is first captured manually and then fed into the computers. Manpower is utilized separately for the manual and computerized processes, and duplication of effort is required for data entry and reconciliation in both. As a result, the process involves too many steps and is unnecessarily iterative.

In a pilot project initiated at Indore , smart cards were provided to farmers upon entry into the Mandi premises. At each subsequent step, data was captured onto the smart card through a hand-held device. For example, as soon as the auction rate was finalized, the rate was captured in the card along with the name of the seller and purchaser. The farmer found it convenient to use this smart card, which was to be returned to the Mandi office at the time of exiting the premises. The system was abolished as most farmers did not return the card, each of which cost the vendors (responsible for issuing the smart card and recording transactions) approximately Rs. 400. About five hundred such cards were issued to the farmers, and the failure of the farmers to return the card caused significant loss to the vendors.

Co-existence of the manual system also results in problems of non reconciliation of accounts. Often the records of the manual system do not coincide with those recorded through the computerized system, especially in case of tax payable by the traders. Vendors capture every transaction and report the receivables (tax payable) to the Mandi Board daily. Based on the receivables they are provided their revenue share. However, the actual tax collected by the Mandi office is always less than the receivables. This is on account of the fifteen day payment cycle (which is generally extended to nearly a month) allowed to traders, whereas the computerized data is generated on a daily basis.

Absence of Legislative Reforms and Process Reengineering

Computerization of Mandis in Madhya Pradesh has not been accompanied by any change in the fundamental processes. Any change in the process would be legally valid only after it is approved by the legislative assembly. For example, as per the Mandi Act, it is mandatory to issue documents such as auction slips, entry slips, etc. in a specified format and colour. Unless the computer-generated slips are given legal validity, it would remain mandatory to continue with hand-written ones.

Simultaneously, effort is required to undertake process engineering. For example, there has been no further decentralization of the Mandi. Farmers need to travel long distances in order to sell their produce. A better alternative could be to appoint agents at the cluster level who could offer the same rate as prevalent in the Mandi. This would reduce the harassment of the farmers to a large extent.

REFERENCES

Department of Farmer Welfare and Agriculture Development. (n.d.). Retrieved December 7, 2007, from http://www.mpkrishi.org/EngDocs/AgriLeft/alliedAgencies.aspx

Madhya Pradesh Agency for Promotion of Information Technology (2006, December). E-Agricultural Marketing in Madhya Pradesh. Retrieved December 7, 2007, from IFIP Newsletter:. http://www.iimahd.ernet.in/egov/ifip/dec2006/article1.htm