An Insight to a New Settlement Paradigm

The price mechanism system often is the key aspect about which the market participants dramatised around. It’s establishment is central about the economy’s orientation towards independency of market forces, and in the idea mooted it’s implementation would be channelised in case of farm produce trades happening in the “urban” mandis of capitalist Indian metropolitans. 

Plainly, market role associates towards its independence from notorious rules & regulations, and active government intervention- looked at distortion of social welfare mechanism, but this “vanilla” definition is bland and lacks pragmatism towards facets of real-market application.

Locally in the Mandi market system in India, trades are executed at daily volatile prices which impose the risk of shattering margins for farmers over excessive cost. Surmounting the problem is the

lack of immediately available informational bases of supply of good for a particular period merged with poor cold storage facilities for farmers at marketplace, therefore widening the adversities of price volatility.

Looking at the endowments with farmers and middlemen (commissioners), former posses the real deal while latter benefits with asymmetrical information pertinent to buyers at large. The volatility of price fluctuations cascades into the net income of both but magnifies for farmers extending its losses to over 5% while the commissioner takes a hit on profits. Even the skewness of income earned over trades varies by doubling of averages for traders over producers, in a vacuum absence of this asymmetry can a good reflective supply of farmer can add 20% to their incomes. Even a proper cold storage facility can reduce wastage happening upto 10% on real goods, though the facilities still lacks for farmers. 

The notional idea of perfect competition should be established at linking fragmented mandis pan India and should be focused upon the amalgamation of demand and linking the supply chain to such buyers across India, managing the minimum cost-benefit - to establish varied prices across region based upon linking cost defined from such supply points, on a base price prevailing across the exchange platform. This could level off the playing field and would reduce unnecessary troughs but the graded quality of items traded should not be a hindrance for demand side. The commission charge should be then an equivalent marginal cost to this added service setting up the optimum level and the equilibrium where the parity lies in the real deal.