Agricultural marketing in India

Agricultural marketing in India till mid 1960s was almost in full control of private sector. Public intervention was minimal except in the emergency situation and for cash crops. Most of the produce was sold in the village itself to itinerary merchants, who then took that produce to markets in towns and cities.

A minor fraction of produce that was brought to agricultural marketing was subjected to numerous malpractices involving exploitation of producers. This left little incentive with the farmers to generate a surplus and participate in the market. The situation has seen a sea change after mid 1960s, when new highyielding varieties of rice and wheat became available for cultivation in the country.

Agricultural marketing in India

Since then the government has taken active interest in the development of infrastructure for “agricultural marketing” and trade and in influencing the structure and conduct of marketing. Besides physical measures, this has been done through institutional mechanisms, legal framework and regulations, and direct intervention in the market by public-sector agencies.

Agricultural marketing in India

The significance of agricultural marketing and trade increases further with liberalization of trade, which expands markets to global level and provides new competition and newer opportunities. It looks at the development of marketing and trade in the country, examines various dimensions and problems related to marketing and trade, and discusses the contemporary and emerging issues concerning them.

Characteristics of agricultural marketing in India

Indian agriculture is dominated by small sized peasant cultivators undertaking crop and livestock production on their own land or land partly or wholly leased in from other households. Except for cash enterprises, commodities produced at such farm are meant partly for family use and the remaining part is exchanged.

This surplus is disposed off in three ways:

(a) direct sales to consumers,

(b) sale in village itself to travelling merchants, and

(c) sale in the nearby market.

Sales in categories (a) and (b) are termed informal channels of marketing and those in category (c) are termed formal channel of marketing.

As the communication and transport facilities have improved and the market network expanded and reduced the distance between market and production points, the sales within the village have sharply declined and the proportion of surplus sold in the market has increased.

Another mode of sale of farm produce is direct sale by farmers to a commercial firm (engaged in processing or organised retail trade or export) under an arrangement like contract farming. This method of sale has gained considerable popularity after contract farming has been institutionalised under Model APMC Act.

Role and functioning of regulated markets in agriculture marketing

The sale or purchase of agricultural produce is carried out in the market area, yards or subyards as per the provision of the Act. Every regulated market has a market committee called Agricultural Produce Market Committee consisting of representatives of farmers, traders, commission agents, local bodies and state government.

This has changed the character of market from dominance of traders to representation of all interest groups and institutionalized market conduct. Day to day operations of market committees are looked after by administrative staff, comprising market secretary and auction supervisors.

Regulated markets are also required to be equipped with pucca auction place, rest house for farmers, parking place, cattle shed, and should provide other amenities to producers to encourage them to bring their produce to the market.

Prices in the regulated markets are fixed by open auction in a transparent manner in the presence of an official of market committee. Market charges like commission of the commission agent, labour charges for cleaning the produce, market fee etc. are clearly defined and therefore no other deduction can be made from the sale proceeds of farm producers.

Agricultural marketing in India

Any dispute regarding prices or sale transaction is settled by the subcommittee of market committee. Market charges vary from state to state and for horticultural and other produce. Specific information on market charges for selected states is provided in Annexure 28.I.

Establishment of regulated markets has considerably improved the functioning of primary markets for agricultural produce. This arrangement for transparent and orderly marketing, along with progress in the number of regulated markets, has attracted farmers to bring higher proportion of marketed surplus to these markets. This has also improved the price incentives for raising farm production.

However, experience in some states, especially in agriculturally less developed regions, shows that mere regulation does not help improve the market performance in the absence of adequate infrastructure. One-third of regulated markets in the country do not have common auction platform.

Infrastructure for “agricultural marketing” of perishables like fruits and vegetables, which require special facilities like storage and processing, is awfully inadequate. Less than 10% of regulated markets in the country are equipped with facilities like storage and processing. Even grading infrastructure is available in less than one-third of regulated market.

Infrastructure of agricultural marketing in India

Infrastructure is a key factor for performance and for improving the efficiency of any system. Marketing infrastructure involves physical and institutional infrastructure.

Physical infrastructure

The foremost marketing infrastructure is the network of well-established and regulated markets. There were around 1,000 regulated markets in India in the beginning of Green Revolution period i.e. in 1966. Since then the number of regulated agricultural produce markets has risen to 7,566.

This expansion of markets has greatly reduced the distance between production points and market, and had also resulted in vast expansion in space for market transactions needed to accommodate increase in the market supply due to production growth and increase in proportion of marketed output in total output. At present there is one regulated market in 434 sq. km area on an average.

Institutional infrastructure

Physical infrastructure alone is not adequate to improve the marketing performance. This needs to be supported by appropriate institutional infrastructure to meet the desired goals from agricultural marketing system. As private trade in India was underdeveloped and not equipped to meet the needs of growing economy, the government had set up several public-sector institutions and co-operative marketing organizations after Independence to improve the market structure, conduct and performance and to help growers in agricultural marketing in India and realization of better returns for their produce.

These institutions are:

1. Public sector institutions such as
  • Food Corporation of India (FCI),
  • Cotton Corporation of India (CCI),
  • Jute Corporation of India (J CI),
  • National Dairy Development Board (NDDB),
  • Commodity Boards for various plantation crops,
  • Special marketing / processing corporations, and
  • Commission on Agricultural Costs and Prices (CACP).
2. Co-operative marketing institutions such as
  • National Agricultural Cooperative Marketing Federation (NAFED),
  • State-level Agricultural Cooperative Marketing Federation,
  • State-level Agricultural Marketing Boards,
  • Primary, Central and State-level marketing societies or unions,
  • Special marketing or processing societies, and
  • Tribal Cooperative Marketing Federation (TRIFED)

Policies of agricultural marketing in India

Agricultural marketing policy in pre Independence India was one of laissez faire and the state intervention was minimal. This approach was based on the assumption that state intervention to stabilize prices through buffer stock and such policies would be fatal to the growth of private sector, considered so essential for long-term growth and self-reliance of marketing system.

However, exigencies of natural events, exploitative nature and limited capacity of private sector, and the innovations in agricultural production technology brought about a sea change in public policy towards agricultural marketing in India.

The government has been intervening in agricultural marketing in three ways, viz.

(a) by developing and creating market infrastructure

(b) through legal framework, and

(c) through direct intervention in markets.

Current issues in agricultural marketing

During the last decade economic and policy environment in India has undergone significant changes mainly due to new economic policy started with economic reforms in 1991, and domestic and global liberalization.

This has raised new kind of issues in agricultural marketing and necessitated changes in the existing regulations and system. Strong need is felt to increase private-sector participation in “agricultural marketing in India“. There are also serious concerns relating to regional and crop-wise benefits of MSP.

Government intervention in the form of remunerative prices needs to be extended to hitherto neglected agriculturally underdeveloped regions, which have vast unexploited potential for agricultural growth. Linking small holders to market and development of various types of value chains are the biggest challenges facing agricultural marketing in India.

Consumers are now attaching more value to quality, safety and product specificity like grades. There is also tremendous pressure and scope to reduce midddleman’s margin through supply chain management. A traditional marketing channel for agricultural products consists of different fragments usually involving different actors.

A well-functioning supply chain can reduce the cost of agricultural business marketing in India by linking farmers more closely to processing firm and consumers and guide the production to meet changing consumer preferences.

Modern supply chain also often involves private standards and their enforcement — that help coordinate supply chains by standardizing product requirements for suppliers over many regions or countries, enhancing efficiency and lowering transaction costs. The concept of supply chain is more beneficial to small holders who dominate India’s agricultural production and this concept needs to be promoted.

There is a lot of concern about new technology not getting adopted at farmers field, and this is often attributed to weaknesses in the extension system. A realisation is occurring that without information on market for produce farmers are not much enthused to adopt attractive innovations. This calls for developing and strengthening marketing extension, and integrating market related information with production technology.

In some states taxes on agricultural produce are quite high. There are reports that to avoid these market charges the produce is diverted without entering into regulated markets. These charges need to be rationalized and should commensurate with the services rendered in the market.

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