Framework around Agricultural marketing in India

According to the National Commission on Agriculture – Agricultural marketing is a process which starts with a decision to produce a saleable farm commodity; involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre and post- harvest operations viz. assembling, grading, storage, transportation and distribution.

Marketing is an integral part of agriculture, it encourages the farmers to invest more and increase production.  The simplest form of agricultural marketing is the buying and selling of the farm produce. However, in modern sense, the agricultural produce undergoes a series of exchanges from one hand to another before it finally reaches the consumer.

Need for efficient agricultural marketing

Long ago, India agriculture was subsistence farming. With the development of means of transport and storage facilities, agriculture became commercial in character and the peasants grew those crops which fetch them better prices.

Thus, the cropping pattern is no longer dictated by what a farmer needs for his own personal consumption but what is responsive to the market in terms of prices received by him.

Further, the trade is organized but farmers are not conversant with the complexities of the marketing system. A farmer is handicapped by several disabilities as a seller and is forced to sells his produce at an unfavourable place, time and price. Due to all these there is a need of an efficient agricultural marketing system.

What should be the objectives of an efficient marketing system?

Agricultural products differ in nature and contents from industrial goods in the following respects. They are bulky and voluminous in comparison to industrial goods.

• They need special storage facilities because most of them are perishable goods.
• Many goods are seasonal, available in particular period only.
• The farm goods are produced on a large geographical area, their collection poses a serious challenge.
• Assorting and grading is difficult in case of farm produce.
• The farmers are generally cash stripped or debt burdened, so have to dispose off produce as early as possible.

Both demand and supply of agriculture produce are inelastic. This means that if there is a bumper crop, it will spell disaster on farmer and if there is deficit crop, he is unable to take the advantage. The advantage passes on to middlemen.

Thus, the objectives of the efficient marketing system should be:

• To enable farmers to get the best possible returns,
• To provide facilities for selling the produce at an incentive price,
• To reduce the price difference between the primary producer and ultimate consumer.
• To make available all products of farm origin to consumers at reasonable price and within reasonable time.

What facilities are needed for efficient agricultural marketing?

The following basic facilities are required by a farmer.

• Proper storing facilities.
• Holding capacity – to wait till best prices are fetched.
• Adequate and cheap transport facilities so that he is able to reach Mandi rather than disposing it off at his village only.
• Clear and timely information about the market prices so that he is not cheated.
• Organized and regulated markets so that he is not ripped off by Dalals and Adhtiyas.
• As small as possible number of intermediaries.

Problems with Current Agricultural Marketing System

Various problems in the agricultural marketing system in India are discussed below.

Improper storage facilities

No proper warehousing facilities in villages. The farmers are forced to store the produce in mud-vessels or katcha storehouses.  Result of this unscientific storage is either wastage or hastily disposing off the produce.  Remedy for this problem is establishment of Rural Godowns and warehouses. To some extent, setting up of Central Warehousing Corporation and State Warehousing Corporation has improved the situation.

Lack of grading and standardization

There is no proper grading and standardization of farm produce. This leads to Dhara (heap) sales in which all qualities of produce are sold in one common lot.  Farmer is unable to get better price for better produce and this implies that there are no incentives to use better farm inputs and produce better varieties.  Thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties.

Inadequate transport facilities

There are highly inadequate transport facilities because only a small number of villages are joined by railways and pucca roads to mandies. The result is that farmers carry their produce to Mandi on either bullock carts or other such means. The produce, which is perishable, has to be dumped to nearby market at considerably low market prices.

Large chain of middlemen

There is a large chain of middlemen in the agricultural marketing which drastically reduces the share of cultivator. This chain includes village traders, Kutcha Adhtiyas, Pukka Adhtiyas, Brokers, wholesalers, retailers etc.

Market wrongdoings

The market of the farm produce is largely unregulated where the trading scene is dominated by the brokers and Adhtiyas. Many charges such as Adhat (pledging charge) and Tulai (weighting charge) have to be paid by the peasants. Even now the number of unregulated markets in the country is substantially large.

Inadequate market information

If the proper market information is not available to the farmers, they accept, whatever price the traders offer to them. However, in recent times, this situation has changed drastically under the influence of information technology revolution.

Inadequate Farm Credit

The farmer needs to sell off the produce immediately after the crop is harvested though prices at that time are very low. He can be saved from this “forced sales” if credit facilities are available from the banks.

Current System of Agricultural Marketing

There are four major systems of agricultural marketing in India at present. They are as follows.

Direct sale to moneylenders and traders

Majority of the produce is sold by the farmers to the village traders and money lenders. The moneylenders then work as agent of the wholesalers.

Village Haats

A Haat is village market that covers an area of 5-10 miles. They are held weekly and here, the agents of wholesalers and different brokers visit to buy the produce.  The Haats are poorly equipped and lack storage, drainage and other facilities. Smaller and marginal farmers generally sell in these haats.

Mandi

A Mandi is a wholesale market, which serves a number of villages and is generally located in a city. The business here is carried out by the Adhtiyas. Adhtiyas buy from farmers via middlemen and then sell it to wholesalers who sell it to retailers. The system is different in case of sugar, paddy and cotton though. The Mandis are regulated by APMC acts of various states. There are various problems with them, about which you can read here.

Co-operative marketing

Such societies are formed by farmers to take advantage of collective bargaining. A marketing society collects surplus from it members and sell it in the Mandi collectively. This improves the bargaining power of the members and they are able to obtain a better price for the produce. In addition to the sale of produce, these societies also serve the members in a number of other ways.

Steps taken for Improvement of the Marketing System

A number of measures have been adopted to improve agricultural marketing. Some of the important ones are as follows:

• Establishment of regulated markets
• Construction of warehouses
• Provision for grading, and standardization of produce
• Standardisation of weight and measures
• Daily broadcasting of market prices of agricultural crops
• Improvement of transport facilities etc.

This further includes

AGMARK

• Under the Agricultural Produce (Grading and Marketing) Act the Government has set up grading stations for commodities like ghee, flour, eggs, etc. The graded goods are stamped with the seal of the Agricultural Marketing Department –AGMARK.
• Agmark goods have a wider market and command better prices.
• A Central Quality Control Laboratory has been set up at Nagpur and eight other regional laboratories in different parts of the country with the purpose of testing the quality and quality of agricultural products applying for the Government’s “Agmark” have been created.

Regulated Markets

• Regulated markets have been organized with a view to protect the farmers from the malpractices of sellers and brokers.
• The management of such markets is done by a market committee which has nominees of the State Government, local bodies, Adhtiyas, brokers and farmers. Thus all interests are represented on the committee
• These committees are appointed by the Government for a specified period of time. Their major functions are as follows:
  • Fixation of charges for weighing, brokerages etc.,
  • Prevention of unauthorized deductions, underhand dealings, and wrong practices by the adhtiyas
  • Enforcing the use of standardized weights,
  • Providing up to date and reliable market information to the farmers, and
  • Settling of disputes among the parties arising out of market operations.
  • The committee is responsible for the licensing of brokers and weight men. It is nested with powers to punish anyone who is found guilty of dishonest and fraudulent practices.

Provision of warehousing facilities

• To prevent distress sale by the farmers, particularly the small and marginal farmers, due to prevailing low prices, rural godowns have been set up. Government is also implementing a Rural Godown Scheme.
• Central Warehousing Corporation was set up in 1957 with the purpose of constructing and running go downs and warehouses for the storage of agricultural produce.
• The states have also set-up the State Warehousing Corporations with the same purpose.
• At present the Food Corporation is constructing its own network of go downs in different parts of the country. The total storage capacity in the country was 27 million tonnes at the end of the sixth plan.
• Government also encourages foreign direct investment in the godowns and Cold stores.

Directorate of marketing and inspection

• The directorate was set up by the Government of India to co-ordinate the agricultural marketing of various agencies and to advise the Central and State Governments on the problems of agricultural marketing.
• Activities of this directorate include the following.
  • promotion of grading and standardization of agricultural and allied commodities;
  • statutory regulation of markets and market practices;
  • training of personnel;
  • market extension;
  • market research, survey and planning and
  • Administration of Cold Storage Order, 1980 and Meat Food Products Order, 1973.

Government Procurement

• Government also announces Minimum Support Price for various agricultural commodities from time to time in a bid to ensure fair returns to the farmers. These prices are fixed in accordance with the recommendations of the Agricultural, Price Commission.