Chapter XIX

1. 2-1 Chapter XIX Marketing of Agriculture Produce

2. Learning Objectives • Be acquainted with development of Indian agriculture in post-independence scenario • Understand marketing of agricultural produce in Indian context • Comprehend the role of different stakeholders: government, cooperatives, private sector in the development and marketing of Indian agriculture • Be sensitized with challenges in marketing of agricultural produce • Be aware of the strategies for promoting the marketing of agricultural produce

3. Development of Indian Agriculture in Post Independence Scenario • From a nation dependent on food imports, India today is not only self-sufficient in grain production but also has a substantial reserve. • India’s agricultural production of $104 billion (Rs.4,68,000 crore) is ranked 2nd in world. • Increase in agricultural production has been brought about by: bringing additional area under cultivation, extension of irrigation facilities, use of improved high-yielding variety of seeds, better techniques evolved through agricultural research, water management, plant protection, judicious use of fertilisers, pesticides and cropping practices.

4. Development of Indian Agriculture in Post Independence Scenario • The 1970s saw a multi-fold increase in wheat production that heralded the Green Revolution. In next decade rice production rose significantly. • In 1995-96, rice production was 7.96 crore tonnes. The total grain production crossed 21.1 crore tonnes in 2001-02, a big leap from 5.1 crore tonnes in 1950-51.

5. Indian Agricultural Produce Marketing: A Brief Profile • There are primarily three types of players involved in marketing of agricultural produce: Government: Government has direct & indirect intervention: • Indirectly: by enacting policies and regulatory framework, facilitating infrastructure development • Directly: through Boards, Commissions, Corporations, etc. Co-operative Societies: Intervene through procurement, processing and marketing of agriculture produce. Private Sector: Involved as: itinerant merchants, traders, processing firms and corporate based contract farming.

6. Indian Agricultural Produce Marketing: A Brief Profile • Agricultural produce marketing system in India operates primarily according to market forces of supply and demand. • Government intervention is to protect interests of producers and consumers and promotion of organized marketing.

7. Role of Government • Govt. has played an active role to improve agricultural produce marketing • These steps include: establishing regulated markets, constructing warehouses, grading and standardizing produce, standardizing weights and measures, and providing information on agricultural prices. • Agricultural Produce (Grading and Marketing) Act, 1937, requires compulsorily grading for more than 40 primary commodities for the purpose of exports and voluntarily grading for internal consumption.

8. Role of Government • The Ministry of Agriculture's Directorate of Marketing and Inspection is responsible for administering federal statutes and conducting market research about marketing of agricultural produce. • Regulation of commodity markets is a state function as per constitution, but Directorate of Marketing and Inspection provides marketing and inspection services and financial aid down to village level to set up commodity grading centers.

9. Role of Government • Various central government organizations are involved in agricultural marketing: Commission for Agricultural Costs and Prices (decides minimum support price (MSP) for certain crops), Food Corporation of India (FCI), Cotton Corporation of India (CCI) and Jute Corporation of India (JCI). • There are specialized marketing boards for rubber, coffee, tea, tobacco, spices, coconut, oilseeds, vegetable oil, and horticulture, which overlook and coordinate the marketing of the produce in their respective area. State governments have also established different entities for similar purpose.

10. Role of Government • Food Corporation of India (FCI) was established in 1965 as public-sector marketing agency responsible for implementing government price policy through procurement and public distribution operations. It was intended to secure for government a commanding position in the food-grain trade. • By 1979 FCI was operating in all states as the sole agency of central government in food-grain procurement. FCI uses services of state government agencies and cooperatives in its operations.

11. Role of Government • FCI is sole repository of food grains reserved for the Public Distribution System (PDS). Food grains, primarily wheat and rice, account for between 60 and 75 percent of the corporation's total annual purchases. • Food-grain procurement was 89 lakh tonnes in 1971, 130 lakh tonnes in 1981, and 178 lakh tonnes in 1991. FCI has functioned in providing price supports to farmers through its procurement and in keeping a check on large price increases by providing food grains through the PDS.

12. Role of Government • PDS is a network of 350,000 fair-price shops that are monitored by state governments. Punjab, Haryana, and western Uttar Pradesh provide more than 80 percent of the supplies of grain to the PDS. Food grains supplied through the PDS amounted to 78 lakh tonnes in 1971, 130 lakh tonnes in 1981, and 170 lakh tons in 1991. • Central government’s Central Warehousing Corporation operates warehouses at major points. By 1980s, warehouses for storing agricultural produce and farm supplies started to play an increasing role in government price control programs and in distributing farm commodities and farm supplies.

13. Role of Government • The public warehouses issue a receipt to the owners of stored goods on which loans can be raised, warehouses are also becoming important in agricultural finance. Their growth has resulted in a decline in weather damage to produce and in loss to rodents and other pests. • In 1991 there were 6,640 regulated markets to which the central government provided assistance in the establishment of infrastructure and in setting up rural warehouses.

14. Role of Co-operative Societies • A network of cooperatives at the local, state, and national levels assist in agricultural marketing. • The major commodities handled are food grains, jute, cotton, sugar, milk, grapes and areca nuts. • Established in 1958 as the apex of the state marketing federations, the National Agricultural Cooperative Marketing Federation of India handles much of domestic and most of export marketing for its member organizations.

15. Role of Co-operative Societies • Large co-operative enterprises, such as cooperative sugar factories, spinning mills, and solvent-extraction plants mostly handle their own marketing operations independently. • Medium- and small-sized enterprises, such as rice mills, oil mills, cotton ginning and pressing units, and jute baling units, mostly are affiliated with cooperative marketing societies. • Cooperatives also operate warehouses in towns and villages.

16. Role of Co-operative Societies • In late 1980s, there were some 2,400 agro-processing units in the cooperative sector. Cooperative sugar factories have achieved notable success. The number of licensed or registered cooperative sugar units were 232, of which 211 had been installed by March 1988. • During the Oct 1987-Sept 1988 sugar season, 196 cooperative sugar factories were in production. They produced nearly 53 lakh tonnes of sugar, accounting for about 57.5 percent of the country's total production of 92 lakh tonnes.

17. Role of Co-operative Societies • In the early 1990s, cooperative marketing structure comprised 6,777 primary marketing societies: 2,759 general-purpose societies at the mandi (wholesale market) and 4,018 special commodities societies. • There were also 161 district or central societies covering nearly all-important mandis in the country and twenty-nine general-purpose state cooperative marketing federations.

18. Role of Co-operative Societies • The total value of agricultural produce marketed by cooperatives amounted to about Rs.5,420 crores 1988, compared with Rs.1,800 crores in 1979. The total value of food grains handled by marketing cooperatives increased from Rs.500 crores in 1979 to about Rs.1,13,000 crore in 1986.

19. Role of Private Sector • Farmers sell most of the agricultural produce in the private sector to traders who are also moneylenders (to whom the farmer may be indebted) or to itinerant merchants. • Agricultural produce is sold in many of the following ways: • At a weekly village market (haat) in the farmer's own village or in a neighboring village. • At irregularly held markets in a nearby village or town • In the mandi. • To traders who come to the work site. • Directly to the corporate sector for processing or exports through Contract Farming.

20. Challenges in Marketing of Agricultural Produce • Numerous Intermediaries in the Distribution Channel: In absence of marketing linkages, intermediaries were in position to exploit the farmers and were making the most at the cost of farmers. • Lack of Adequate Infrastructural Support: Significant %age of fruits and vegetables rot in farms/ transportation and markets before reaching the consumers homes.

21. Challenges in Marketing of Agricultural Produce • Absence of a Structured Network for Information Flow: Indian farmers suffered heavily on account of lacking information on where to buy cheap and where he could get the best price for his produce. • Dependence on Environment: Topography and climate dictate, which crop can be grown in an area and for that suitable markets may not be available. Over large areas of India farmers are forced to rely on subsistence crops.

22. Challenges in Marketing of Agricultural Produce • Sharp Fluctuation in Prices: Returns to the farmer can vary as prices fluctuate. At present guaranteed minimum prices are only available for rice and wheat. • Lack of Pest Control: In India, annual losses due to pests is greater than Rs.5000 crores. Pesticide industry remains dependent on monsoon because large cultivated land does not have assured irrigation and farmers find it difficult to invest in pesticides in significantly large parts of rural India.

23. Challenges in Marketing of Agricultural Produce • Fragmented Landholdings: Indian farms are small, and getting smaller as land is divided after every generation. Around 60% of landholdings are less than 1 hectare. Farmer is not able to make investment in mechanization, fertiliser, agrochemicals, irrigation, etc. Thus the overall productivity of the output goes down. Another 20% of the holdings are between 1 and 2 hectares. If we include the land holdings up to 4 hectares they constitute for 91% of land holdings in India.

24. Strategies to Promote Marketing of Agricultural Produce • Amendments in Agricultural Produce (Grading and Marketing) Act, 1937: This allows farmer to take his produce to markets and buyers who are ready to give him the best price for his produce. The farmer will not be restricted to area where he can market his produce. This will involve relaxing physical controls on trading of key crop such as edible oils and cotton. Cotton is treated as a strategic crop and is purchased by the government under the Monopoly Procurement Scheme.

25. Strategies to Promote Marketing of Agricultural Produce • To built Distinctiveness in Specific Agricultural Product- Markets: Different countries have developed distinct image for themselves in a certain product segment. • Brazil inPoultry, New Zealand in niche markets for special, high value apples in Europe, (produces less than 1% of world apples, but has a share of 14% in world exports), Israel’s export of citrus fruits (developed in desert areas) account for 3.6% of total exports of Israel (1.1% of world exports) and 2.5% of its GDP. Mexico supplies tomatoes to US for about USD 500 million

26. Strategies to Promote Marketing of Agricultural Produce • By focusing on specific crops/products and markets, these countries have become important global players and provided significant impetus to that industry in their countries. India can do the same in case of select crops. • Increasing Turnover for Agricultural Companies: Size is important in food and agribusiness as it enables investment in the supply chain and market development. Food processing industry in India needs significant consolidation and have international presence to successfully compete with MNCs.

27. Strategies to Promote Marketing of Agricultural Produce • Better Supply Chain Management: Effectiveness in supply chain management leads to improved quality, ability to be price competitive and improved market development. The government should allow processors to purchase directly from farmers and bypass the mandi. Input companies should be permitted to sell their products directly to the farmers. This would enable the companies to interact directly with farmers, without incurring unnecessary non-value adding costs.

28. Strategies to Promote Marketing of Agricultural Produce • Crop Insurance Subsidy: Crop insurance business in India has been loss making primarily because of poor economic viability. Experience in other countries suggests that subsidy is required for crop insurance business to be beneficial to a wide section of farmers. Central government can reconsider its decision to end crop insurance subsidy. • Enabling ‘Bulking’: By enabling ‘bulking’ in agri-commodities, government can significantly bring down costs. For example, it is estimated that about 3.5 per cent of the value of soyabean is lost due to repeated bagging. The investment required for creating bulking infrastructure could be obtained from the private sector. Government needs to remove the controls on agri-commodities to make these projects commercially viable.

29. Strategies to Promote Marketing of Agricultural Produce • Infrastructure Development: Roads, ports, railways, mandis, needs to be improved to improve productivity, transportation, storage and distributions of farm produce from fields to consumers tables. This can create better return for all the stakeholders. • Organised Retailing: Efficient linkages directly with the producer sans intermediaries can be effective in streamlining the whole supply chain. It will reduce prices by making savings by direct arrangement with producers and improvement in the quality. Food retailers bring operational expertise, technology and capital, which provide gain to all the stakeholders.

30. Strategies to Promote Marketing of Agricultural Produce • Making use of agricultural waste: Agriculture generates enormous quantity of by-products, which are usually not used economically. By making an economic use of what is treated as waste can increase the income of farmers. Paddy alone produces straw, leaves, stem, nodes, inter-nodes and husk as by-product. Scientists have opened up new possibilities for the utilisation of paddy straw. It can be used as industrial fuel, as feed for cattle and their bedding, as compost, as mushroom culture and for making paper, chipboard and panel products. • PAU has exploited maize cobs to produce citric acid. Pine needles going waste in hill areas can be used as insulation material in cold stores. Insulation With this material, a saving of about 30 per cent can be affected in constructing a cold store.

31. Strategies to Promote Marketing of Agricultural Produce • PAU has designed a biogas plant that uses wastes such as straw, leaves and kitchen waste instead of cattle dung to produce biogas. About 20 kg of straw waste fed to the plant daily produces about six cubic meters gas. The residue may be used as manure. • Large number of chemicals may be produced from agricultural wastes. A process to produce polymers and convert them into plastic foams also has been developed. Reinforced foam has been evaluated as a suitable material to make roofs and panels. • With these innovations a new market for what was considered waste will be developed and will lead to better income for farmers and create employment opportunities.

32. Conclusion • Effective marketing of agricultural produce is critical not only for the development of rural economy but it is also crucial if India aims to achieve higher then the average rate of growth. • There is need of appropriate marketing linkages to link the fields with consumer homes within and outside India. • Already there have been initiatives on the part of government and corporate sector to develop policies and business models, which can provide effective platforms to bring prosperity to the farmers by eliminating the non-value adding chain of intermediaries.

33. Summary: Points to Ponder • Agriculture is backbone of Indian economy because of number of people involved and dependent on it. • A truly strong and vibrant India might not be achieved till we have an effective system to market the farmers’ agriculture produce. • India’s agricultural production is ranked second in the world and this increase in agricultural production has been brought about by bringing additional area under cultivation, extension of irrigation facilities, the use of improved high-yielding variety of seeds, better techniques evolved through agricultural research, water management, and plant protection through judicious use of fertilisers, pesticides and cropping practices.

34. Summary: Points to Ponder • The agricultural produce marketing system in India operates primarily according to the market forces of supply and demand. Government intervention is limited to protection of the interests of producers and consumers and promotion of organized marketing of agricultural commodities. • The government has played an active role to improve the manner in which agricultural produce is marketed by: establishing regulated markets, constructing warehouses, grading and standardizing produce, standardizing weights and measures, and providing information on agricultural prices. Various central government organizations are involved in agricultural marketing. There also are specialized marketing boards for rubber, coffee, tea, tobacco, spices, coconut, oilseeds, vegetable oil, and horticulture.

35. Summary: Points to Ponder • Network of cooperatives at the local, state, and national levels assist in agricultural marketing. The major commodities handled are food grains, jute, cotton, sugar, milk, grapes and areca nuts. • Farmers sell most of the agricultural produce in the private sector to private traders who are also moneylenders (to whom the farmer may be indebted) or to itinerant merchants. • Agricultural produce is sold in the following ways: at weekly village market (haat), at irregularly held markets in a nearby village or town, in the mandi, to traders at work site, directly to the corporate sector for processing or exports through contract farming.

36. Summary: Points to Ponder • Challenges in marketing of agricultural produce are as following: numerous intermediaries in the distribution channel, lack of adequate infrastructural support, absence of a structured network for information flow, dependence on environment, sharp fluctuation in prices, lack of pest control and fragmented landholdings. • There is need of marketing linkages to link the fields with consumer homes within and outside India by eliminating the non-value adding intermediaries.

37. Summary: Points to Ponder • Some of strategies to boost marketing of agricultural produce are: amendments in agricultural produce (grading and marketing) act, 1937, building a distinctiveness in specific agricultural product-markets, Increasing turnover for agricultural companies, better supply chain management, crop insurance subsidy, enabling ‘bulking’, infrastructure development, organised retailing and using agricultural waste.