‘1 India-1 APMC’ grid can be India’s Amazon, Alibaba and Google in agriculture and commodities’ trade and commerce.

 

For centuries, India is known for its prosperity and a unique wealth creation destination like a Sone Ki Chidiya. Babur to Lodhi to Mohammad Gazni and finally French, Dutch, Portugese, English and others came to India. The global maritime roots to India were discovered from the time of Fa Hein to Hiuen Tsang to Vasco Da Gama to Columbus and to many more who came only for India’s abundance and the pivotal reason for the wealth creation was always agriculture. On a larger scale, it was because of commodities which were traded locally and globally with undeniable roots in India. In 1991, the service industry started mushrooming in India, and till then, India remained a basically agrarian economy. Even now, dependency on agriculture is huge. It contributes about 20% of India GDP, with about 60% of India’s population linked to it. Additional prosperity in this sector can be a game changer, and the same can be replicated across India. To the best of my understanding, this is the vision of honourable Prime Minister Narendra Modi. Unlike software, agricultural prosperity is not limited to few cities. When agricultural goods produced get coupled with trading of the same goods, storage etc, the entire value chain generates an enormous amount of human incentives, one of which is new jobs. This possibility is matchless by any other method. The minimum additional job creation possibility in the Indian agriculture sector in view of the leadership of PM Modi can be at least 10 crores. Today, an estimated 5 crore people are earning their livelihoods from the APMC market eco system. This itself speaks volumes about the strength of India’s agriculture market. Once a well thought out and implemented mega APMC structure is put to use, the dream of having “1 India-1 market” can be realised in no time. The structure can evolve around digital technology, Thus the result can be a much bigger “digital agro revolution” than any “green revolution” conceived by M.S. Swaminathan or the “white revolution” conceived by V. Kurien, founder of Amul. The e-Nam project is where the PM has a wish to have inclusive growth across India. The framework explained here flows from the same grand vision and is about democratising prosperity across Bharat. This can be achieved with two objectives: 1. Right agriculture policy implementation and reforms in the sector with regard to the APMC Act. 2. Target of 10 crore extra job creation. The whole prosperity democratisation can be achieved without any load on the government treasury and not even asking for any cash subsidy. India has witnessed similar results .Examples are the paradigm shifts seen in the commodity and electricity sectors in the past through the Financial Technology group (FT group). What is suggested is a revitalized modified e-Nam model that can be built on the “Hub and Spoke” structure i.e. a national agriculture grid (Agri-Grid) built on technology, but not at the cost of existing regional markets, i.e. APMCs. This can create at least 10 crore jobs in India. The national Agri-Grid thus built can function as the combined power equivalent of Amazon, Alibaba and Google in agriculture and commodities. The Agri-Grid will be India’s unique creation at par with those global giants and will be in agriculture and commodities. It has the potential to make India again the world’s lead trading center from the east, more than that of Hong Kong, Singapore and Dubai combined.

History is the biggest teacher. If we leave aside the last 400 years, India and China commanded 50% of global trade and about 33% of world GDP. Today, in the current time when the world wants to eliminate China, we can achieve an even bigger position with support from the USA which is also keen to have partners that are alternatives to China in this part of the world.

 

Blueprint of
Agri-Grid

This blueprint was once actually conceived and implemented successfully, delivering five unicorns (balance sheet driven businesses) in the last 20 years with huge social impacts. It was just 10% of the total plan. However, it was dislodged by P. Chidambaram and his helpers through dubious plans and conspiracies. What e-Nam needs to do is what was done in Indian Energy Exchange (IEX) by creating a market with the national electricity grid. One common Indian electricity market was created through IEX, which brought traders, clearing entities and banks for settlement of all electricity trades. It also got industry, power trading companies, power generators, power distributors, load dispatch centers and power grid on a single ecology. This has been operational for more than 10 years now. Prior to this, all states had their own silos in the form of disjointed state electricity boards, regulators etc. Till the IEX came into being, an internal power market used to operate with disjoined entities. They used to trade power/electricity surplus or deficit with each other through bilateral negotiations, not as “1 India-1 market”. However, IEX created a federal market at the national level which co-exists with the state markets. The impact of this market has been so significant that The Economic Times covered it in a first page lead story and titled it as India’s Second Industrial Revolution. This was possible due to understanding of market models, structure, architecture and digital technology genetics by the FT Group. IEX is now India’s number 1 exchange. IEX in fact as per the original plan was to attract world trading of energy on its platform. However, after removing FT group from IEX through questionable methods by then Union Finance Minister P. Chidambaram and others, such a global reach was not possible. IEX today has not gone even to SAARC regions and not one additional successful product has been launched. India lost a big opportunity to establish itself as the world’s electricity grid and later to become the world’s energy grid. The country could have made energy assets trading in rupee as a currency to establish rupee as a leading international trading currency.

Our vision of becoming first pan India electronic electricity market could have become a larger regional market in south Asia and SAARC had we continued on IEX. Strangely, P. Chidambaram, assisted by K.P. Krishnan and Ramesh Abhishek, had other ideas. We were forced to sell IEX which affected product innovations on the innovative electricity grid. Despite this setback, IEX has democratised the electricity market, distributed the power of pricing to masses and created “1 India-1 Market” for the electricity sector. Unfortunately, without adding any values, some shareholders exited IEX by making huge profits, thereby using it as a money-making machine.

Likewise, MCX created a national level ecosystem comprising traders, warehouses, assayers, logistic service providers, spot market linkages etc. It has price sharing mechanism and integrated with the regional markets through technology DNA provided by the FT Group. It has brought transparency, uniformity and homogeneity in the grey, opaque and fragmented commodity market, particularly in metals. The MCX successfully covered gold, silver, copper, nickel, zinc, aluminum, cotton, edible oils etc since its inception. This has made India a number one market through model and technology from FT Group. MCX homogenized the opaque fragmented commodity market in India, particularly in gold and silver.

MCX made India rank number 1 globally in some commodities during 2007-12 period. In fact, the price discovery in MCX market became so significant that it started influencing the global market in gold, silver etc. On the occasion of holidays in India like Diwali, when MCX trading was almost negligible, the bid-ask spread in few benchmark venues like New York gold market reportedly became wider. MCX became a price setter in global market. MCX too was forcibly taken away from FT Group like IEX. MCX used to be among the top three exchanges in the world, but today clocks only about 20% of its peak trading value. Chidambaram ensured that one of the most powerful employment engines of prosperity in India become literally insignificant. The proposed Agri-Grid via e-Nam, would bring the entire agriculture and commodities ecosystem into one integrated market platform.

There are multiple reasons why such Agri-Grid can work seamlessly in India. India is amongst the top producers and consumers of many commodities. Usually when the underlying base is strong, such a National Grid can become a reality rather quickly. In the Indian case, the same is true as we already have an APMC market structure that is functional. There are at least two major improvements that are the need of the hour as far as upgrading the APMC markets, e-Nam etc are concerned. One, uplifting the existing market ecosystem into a single national grid as was done in power and commodities (including spot and derivatives). Second, we also need to attach segments that are key to any agriculture success story, including banking, trading, weather etc. Therefore, Agri-Grid is the solution and it will bring urban-rural markets, storage industry, logistic providers, assayers, producers and consumers with global linkages on one platform and thereby, provide the benefit of modern markets to Indian farmers. It is like the national river interlinking project.

Agri-Grid platform will also converge all financial services, banking, trading, agro-based industries onto one platform, considering that India now has good digital banking, telecom and road network. Considering India’s specific challenge of low literacy, language, logistics and socio-economic strata, Agri-Grid will encompass all within the country with those outside the country.

The management of this large ecosystem platform of Agri-Grid and associated data will be valuable in making the decision to trade in spot, forward; store, harvest commodities, global trading etc. Thus a central repository in the form of a robust secured encrypted data management system (through use of block chain technology), will be the heart of the whole network. The network can connect users by apps, web platform, tele-callers etc. The economic size of the consolidated market place and support infrastructure will be so significant that it will attract global investment interest in the much deprived agriculture sector. Hence, linkages with banking and financial markets are an integral part of the whole system.

In short, the system will have support systems such as: 1) APMC traders at national level, 2) digital platform for trading these commodities; 3) banking settlement; 4) a network of warehouses and godowns; 5) network with banks and financial service providers; 6) global trading firms; 7) local and global industries buying commodities and providing agriculture inputs; 8) knowledge and training partners; 9) transportation hub within the country and also outside through multi-modal means etc. The total value of agriculture produce in India is around Rs 15 lakh crore or approximately $220 billion.

Arithmetic suggests that with the basic underlying fundamentals remaining intact and some incremental value addition done, the underlying gets traded 8 to 10 times as it moves from producers to consumers in the value chain. If one creates a good derivative market over it, taking a minimum 10 multipliers, the value traded can reach much higher. I am not considering access to, and pulling in, of global players which could have higher multiplier effects.

Other way of looking at the market growth potential and the multiples possible is to take an agricultural produce like castor seed. Let us give a simple example. Castor seed is used in producing castor oil and at least 60 other derived forms of products that are used in our lives—many have industrial usages and global demands. This possibly illustrates the kinetic energy of such a nation-wide grid again.

These suggestions are not simply for fitting into a theoretical framework. Before Chidambaram swung into action, the FT Group had in fact implemented successfully an ecosystem structure for agriculture, electricity and financial products and services. The ecosystem created by the FT Group generated at least 10 lakh jobs in no time (as certified by the Tata Institute of Social Science in 2012 (see diagram ).

Elimination of FT Group from core innovative businesses has made India lose its chance to become the biggest global player in the commodities and financial markets such as equity, commodities, currency, bonds and electricity. Thus, the country lost the chance to create 10 crore jobs. With the proposed Agri-Grid through e-Nam, India again has a chance to become a powerhouse globally, if implemented successfully in its full scale. Once the power of digital technology such as blockchain, mobile payments, digital currency using crypto technology etc. are coupled with Agri-Grid, we can further eliminate a lot of asymmetric information. This will ensure security and speed of information flow as well. Redundancy in the form of information distortion and other opaqueness that exist currently across the agriculture value chain can be eradicated quickly. If we add the entire banking and financing sector to Agri-Grid, then the total value of the platform thus created can be best left to anyone’s imaginations. The proposed structure can create 10 crore jobs in 10 years. It is perhaps destined that global pandemic through Covid 19 has happened, and, therefore, the USA is perhaps searching for enabling a partner country to counter China. All these events are happening at the same time which is a great opportune moment for India. Today’s time is like kind of seven stars i.e. Saptarshi coming in one line that happens once in few thousand years. The opportunity has arrived during the period when the Prime Ministership is in the hands of Narendra Modi, whose abilities have been demonstrated time and again. The time has come to bring to fruition the vision of Prime Minister Modi for the all-important agricultural sector.

(Jignesh Shah is an innovator and entrepreneur who challenged the dominance of entities close to former Finance Minister P. Chidambaram, who thereupon ensured the downslide of several of his businesses. He has since revived his companies thanks to the impartial and independent judicial system in India)