Why Government Agencies Procure Commodities From Commission Agents

Why Government Agencies Procure Commodities From Commission Agents Government agencies procuring commodities from commission agents

Commission agents in mandis deal with a variety of buyers. These include government agencies who send their officials to directly procure commodities for them. This is part of the Essential Commodities Act that came into effect in 1955 and was later amended in 2020. This Act was created to provide essential commodities to the general public and also to control the production, supply, distribution, and trade of certain commodities. The main aim is to prevent hoarding of essentials, especially during times of high need. For example, between March and June 2020, hand sanitizers and masks fell under the Essential Commodities Act to ensure that they were not sold at marked-up prices. 

Government agencies often find it easier to procure directly from mandi auctions; it is difficult to buy from multiple farmers since it calls for a lot of coordination. Even though the new farm laws allow farmers to sell directly to government agencies and food processing companies, it is still a logistical challenge. Therefore, the preferred route for procurement is still via commission agents in mandis. 

The important government institutions which buy agricultural produce are:

  • The State Trading Corporation (STC)
  • The Food Corporation of India (FCI)
  • The National Agricultural Cooperative Marketing Federation (NAFED)
  • Cotton Corporation India (CCI)
  • All India Cotton Co-operative Federation Limited
  • Jute Corporation of India (JCI)
  • National Oilseeds and Vegetable Oils Development (NOVOD) Board
  • Agricultural Processed Products and Export Development Agency (APEDA)

Government institutions directly procure commodities from mandis for a variety of reasons, namely:

  • To ensure proper pricing: Government agencies ensure that essential commodities are supplied to consumers at reasonable prices on a regular basis and that farmers get fair prices too. All consumers don’t have the same buying power, therefore this ensures that they have access to essential commodities at a set price. Similarly, the government ensures that farmers don’t suffer losses when there is a surplus harvest of a commodity and a corresponding fall in its prices.
  • To prevent hoarding: Government agencies keep a check on hoarding activities and black-marketing to ensure that prices and the demand and supply of agri commodities are not disrupted. Production and consumption of commodities are usually affected during emergencies like the pandemic, and government involvement ensures that both consumers and producers aren’t taken advantage of.  
  • To control price fluctuations: Government agencies minimize violent price fluctuations occurring as a result of seasonal variations in supply and demand. 
  • To maintain buffer stock: The government maintains buffer stock as part of it’s food policy that aims to minimize the short-term effects of production or supply shortfalls. As of April 2021, India is carrying 3.5 times more stocks than those dictated by buffer norms set in January 2015.
  • To ensure food security: The Public Distribution System (PDS) ensures household food security, especially in rural and lower-income areas. This was taken as a proactive step to fight poverty, especially for the economically weaker sections of the population.

It’s very clear that the players in the agricultural supply chain play an important role in ensuring the wellbeing of the people of the country. The commission agents who are at the core of the mandi system play a particularly important role here. Their days are filled with activity since only a few of their processes can be automated. Thankfully, ChargeERP is a tech solution that allows them to automate their accounting work. ChargeERP is an online accounting software that cuts down their accounting time by 90%, allows for remote collaboration with teams, and digitizes functions like bill, receipt, and report creation. A more efficient commission agent means a more efficient mandi. If you are a commission agent who wants to cut down time spent on accounting and spend more time doing business, then sign up at www.chargeerp.com or dial +91 9311341199 and book your free demo today!