CHAPTER 3 AGRICULTURAL MARKETING SYSTEM IN INDIAN CONTEXT

Transcription

1 CHAPTER 3 AGRICULTURAL MARKETING SYSTEM IN INDIAN CONTEXT INTRODUCTION India is an agrarian society and one third population depends on the agricultural sector directly or indirectly. Agriculture remains as the main stray of the Indian economy since times immemorial. In the olden days selling of agricultural produce was easy as it was directly between the producer and to the consumer, in simple, barter system was followed with exchange of goods for goods and against services 72. Later, gradually with time, produce and goods were exchanged for money that led to the agricultural produce trading practices in traditional manner and with involvement of middlemen and commission agents, who kept their margins and moved the produce further to different channels, which turned gradually in to agricultural marketing concept. Now, with open economy and modern technology most of the commodities traded that include cereals, pulses, sugar, cotton, jute, milk, tea, coffee, areca nuts, etc. are handled solely by large enterprises, such as cooperative Indian sugar factories, spinning mills and medium and small-sized enterprises, such as rice mills, oil mills. Mostly, the trading is assisted by different cooperative bodies at national, state, regional and local levels 73. Today, in current scenario agriculture markets are the hub of rural economy. Agricultural marketing today means more than linking the producer with consumer, it includes creation of favorable economic environment for farmers to enthuse them to grow more and get proceeds from transactions. Many alternative forms, such as cooperative marketing, group marketing, contract marketing, futures trading, direct marketing and e-commerce are in vogue. Agricultural produce markets are nerve centers 72 S.S. Acharya, and N.L.Agarwal, 1996, Agricultural Marketing In India, 3 rd edn, (New Delhi: Oxford and IBH Publishing Co.Pvt.Ltd,1999, p Ibid..,Supra n.2, pp

2 from where marketing impulses are transmitted to put all the marketing activity on track and safeguard the interest of both farmers and consumers. With use of modern production technologies massive marketable surplus is existing in the field of agriculture that has genuinely created need for proper and adequate infrastructural requirement for fostering the marketing of the farm produce efficiently. Infrastructure is instrumental in effective marketing, pricing, reducing huge losses during post-harvest period and converting the produce into acceptable quality in the international market. Specific infrastructural facility is crucial requirement of importers to stimulate farmers to produce more to cope-up with the increasing demand. Marketing infrastructure includes facilities and amenities, which cater to the need of cost-effective movement of produce from farm to the consumer either inside or outside the country 74. THE CONCEPT OF AGRICULTURAL MARKETING Marketing is as important as production of agricultural crops. So, marketing reforms should be integral part of any policy for agricultural development 75. Agricultural marketing system is defined in broadest terms as, physical and institutional set up to perform all activities involved in the flow of products and services from the point of initial agricultural production until they are in the hands of ultimate consumers. According to the National Commission of Agriculture (XII Report, 1976), Agricultural Marketing is a process that starts with a decision to produce a salable farm commodity, and it involves all aspects of market structure or system, both functional and institutional, based on technical and economic considerations, and includes pre and pro harvest operations, assembling, grading, storage, transportation and distribution 76. Marketing system is the critical link between farm production sector on the one hand and non-farm S.S. Acharya, and N.L.Agarwal, 1996, Agricultural Marketing In India, 3 rd Edtn., New Delhi: Oxford and IBH Publishing Co.Pvt.Ltd,1999, p S.S. Acharya and N.L.Agarwal 2014, Agriculture Marketing in India, Oxford and IBH Publishing Company Pvt. Ltd., Asian Games Village side, New Delhi, India. 36

3 sector, industry, and urban economy on the other. Besides the physical and facilitating functions of transferring the goods from producers to consumers, the marketing system also performs the function of discovering the prices at different stages of marketing and transmitting the price signals in the marketing chain 77. In general Agricultural marketing system can be defined as a set up that performs all the required activities to move the produce from the point of initial agricultural production to till it reaches the hands of final consumers. This includes assembling, handling, storage, transport, processing, wholesaling, retailing and export of agricultural commodities as well as accompanying supporting services such as market information, establishment of grades and standards, commodity trade, financing and price risk management and the institutions involved in performing the above functions 78. According to Khols, Marketing is the performance of all business activities involved in the flow of goods and services from the point of initial agricultural production until they are in the hands of the ultimate consumer 79. Agricultural marketing also reflect another dimension from supply of produce from rural to rural and rural to urban and from rural to industrial consumers. As it is well known more the number of mediatory more will be the costs as each transaction incurs expenses and invites profits. Ultimately when it comes to the producer the cost of the produce goes up steep. In the entire process of marketing the producer gets the lowest price and the ultimate consumer pays the highest as the involvement of more middlemen in the entire distribution process. There are several complexities involved in agricultural marketing. The pricing of the produce depends on factors like seasonality, perishability, demand, supply, storage, 77 Ramesh Chand, 2011, Agriculture Marketing, Khel Sahitya Kendra, New Delhi, India. Pp. 264, ISBN : Report of the Working Group, , Report of the Working Group on Policy Required for Internal and External Trade for the XI Five Year Plan Wrkgrp11/ Wg11_ Agrpm.pdf, p Kohls, R. L., 1976, Marketing Agricultural Products, Macmillan, London. P-9. 37

4 time to the market, volatility, physical loss, transport, etc., and all these are interwoven and ultimately make a deep impact on agricultural marketing with more number of intermediaries involvement in process of marketing. Though the model has turned into distributive handling, but with the liberalization, privatization and globalization in the current economic scenario, it seems the term distributive handling has reinvented itself with more number of retail giants participation, who are the major buyers in bulk quantity. But these big giants constantly look for differentiated, graded, standardized, processed and packaged products rather than undifferentiated once. They also look for qualitative and quantitative supply of agricultural stocks continuously to beat the competition in the retail sector 80. With globalization drastic changes have happened in India across all sectors and it is more so on farmers, agriculture, etc., and made a deep impact on agricultural marketing. It is basically because of majority of Indians are farmers. It has brought several challenges and threats like uncertainty, turbulence, competitiveness, apart from compelling them to adapt to changes arising out of technologies. But with Globalization, in the dark cloud there is silver lining like having excellent export opportunities for our agricultural products to the outside world 81. For the past ten years, India has become the major exporter of agriculture commodities. As per 2013, India has been the world s seventh-largest exporter of agricultural products with exports increasing to $39 billion compared to $5 billion in The Indian government s support for both production and exports has contributed to the rapid growth in shipments, which are increasingly destined for developing nations including least-developed nations (as classified by the United Nations). Postindependence, improving research in terms of seeds, fertilizers, irrigation techniques and machinery have supported in increased agricultural production, now India ranks second worldwide in farm output. But, as per The State of the Indian Agricultural Report for

5 , the average holding size of land has come down over the decades. The report says As per Agriculture Census , the average size of holdings for all operational classes (small & marginal, medium and large) have declined over the years and for all classes put together it has come down to 1.16 hectare in from 2.82 hectare in and in this, small and marginal farmer s holdings are less than 2 hectare and account for 85 percent of the total operational holdings and 44 percent of the total operated area 83. As per latest estimates released by Central Statistics Office (CSO), the share of agricultural products and Allied Sectors in Gross Domestic Product (GDP) of the country is 13.7 per cent in at prices, compared to 51.9 per cent in This indicates with globalization, other sectors have improved and are contributing to the better portion of GDP of the country, but agriculture sector contribution has reduced and this needs to be addressed to increase the contribution to country s GDP. As agricultural holdings in Asia are small (2 ha or less) and in many instances are getting smaller, there is currently a sharp debate among academics as to whether small-scale agriculture can continue to play its historic role. In short, how will agriculture be commercialized? Can small farms have productive cultivation that alone provides the minimum output required to earn a livelihood? Does commercialization of agriculture imply larger farms? It holds good for India as well. So is there a need of policy ramification in terms of agricultural marketing and other parameters based on the farm size State of Indian Agriculture Government of India, Ministry of Agriculture Department of Agriculture and Cooperation Directorate of Economics and Statistics ) 84 Central Statistics Office (CSO) 30/news/ _1_gdp-foodgrains-allied-sectors,

6 TYPES OF AGRICULTURAL MARKETS Agricultural markets can be categorized mainly into, a. Primary markets: These markets are periodically held, either once or twice a week. Agricultural produce comes from neighboring villages. In these markets, major part of the produce is brought for sale by producers itself. Transaction usually takes place between farmers and retailers/primary traders. There are around such markets in India and these are the oldest trading centres and are mostly unregulated in nature. These are located in rural and interior areas and serve as focal points to a great majority of the farmers. Sometimes these markets also function as collection centres for adjoining secondary markets, but lack most of the basic marketing facilities. The commodities collected in these markets find their way to the wholesale assembling markets in the process of movement to consumers. These markets mainly deal in the sale of fruits, vegetables, food grains, and all household requisites etc. for e.g. Village market b. Secondary Markets/Assembly Markets: These are also as mandis. Small merchants purchase from primary market and sell in these markets. Some cultivators directly sell their produce in these markets. Here, transactions take place between different traders and market intermediaries, but these are typically located at district or taluka headquarters. Large cities and commercial centers. Marketing practices are controlled as per Agriculture Market Produce Committee (APMC) rules where ever it is regulated; else market practices are as per age old established customs. People participating in these markets have to pay certain fee. Space provided for these market yards and sub yards are sufficient to provide facilities for auction platforms, shops, godowns, rest houses and parking land, etc. c. Wholesale Markets: In this market commodities are bought and sold in bulk. These markets are much larger in area and volume of transaction is more compared to secondary markets. So 40

7 larger and better physical infrastructure is must in such markets along with regulations to protect the interest of both the producer and the consumer. These markets are regulated and come under the purview of APMC act. These markets are used as transit for supplies to the hinterland and distant markets and terminal market for supplies to the retailers for local consumption. Such markets are found in cities like Bangalore, Mumbai, Kolkata, Delhi etc. d. Terminal markets: These are the markets in which the produce is finally disposed off, it is direct to consumer or processors or assembled for shipment to foreign countries. These markets have better facilities of warehouses and storages and cover a wide range of area may be state. In these markets rather than producers, traders are the sellers unlike the primary and secondary markets. An effort is being made by the governments to bring the producers to such markets to provide better prices, by linking them directly through collection centers. The proposed terminal market complex will be in hub and spoke format, with terminal market as hub and collection centers near to the production areas as spoke. The terminal markets provide multiple options to farmers for disposal of produce. Such markets are expected to reduce post harvest losses and increase farmers realization. e. Retail markets: These are an assembly of retail shops centralized and located at a specific place or in a building constructed for the purpose. Retail markets handling food items are the most active elements in the food distribution chain, particularly low and middle income consumers. They serve the needs of inhabitants in a particular locality. Directly serving the common man, they constitute last links in the marketing chain. Millions of retailers are involved in the task of providing food items through retail markets to the consumers in the country. The MOM and POP stores are popular in the country as they provide food produce at the next door of the consumer. In recent times, there is tremendous interest in setting up of retail chains for food items including fresh produce. 41

8 Numbers of private corporate are jumping into this area and it is expected to revolutionize the system of handling of agricultural produce. AGRICULTURAL MARKETING SYSTEM IN INDIA Market is a place where buying and selling of goods/produce takes place and consists of open place, small and large buildings for carrying-out the activities. The market may extend to a locality, village town, region or a country according to the demand of a commodity. Market includes both place and region in which buyers and sellers are in free intercourse with one another. Marketing includes those business activities that direct the flow of goods and services from producer to consumer. REGULATION OF MARKETS There was a need of market regulations for creating an efficient system for buying and selling of agricultural produce in the country, so India along with union territories and states proposed Agricultural Produce Marketing Regulation Act to regulate agricultural produce markets 86. Now most of the states have accept and follow Agricultural Produce Market Committees constituted as per APMR Acts for managing the markets, few rural primary markets and most of the whole sale markets come under this act. As per 2010, number of regulated markets are 7157 compared to 236 in Postindependence, during first five year plan in There are markets spread across the country, of which number of primary rural markets are and remaining 6261 are wholesale assembly and terminal markets. Average area served by a market is 115 sq. km while an average area served by a regulated market is 454 sq.km, still it may vary from state to state, though some wholesale markets are outside the purview of the regulation under APMR Acts. 86 S.S. Acharya and N.L.Agarwal 2014, Agriculture Marketing in India, Oxford and IBH Publishing Company Pvt. Ltd., Asian Games Village side, New Delhi, India.Pp

9 These changes have brought in, construction of better roads by linking the primary markets with secondary wholesale and terminal markets; better prices for the small and medium farmers by the process of price discovery at the primary market level where they dispose most of their produce; increased accessibility to the main markets to the smaller farmers having low-marketed surplus, who are unable to transport their surpluses to long distances due to increased transportation costs. Though there is no accurate data available to decide on the percentage of benefits got by small and marginal farmers due to of regulated markets, there is evidence to show that expansion of such physical infrastructure in rural areas has helped small and marginal farmers more by increasing their access to the markets. With such improvements it is still too early to say everything is fine in all regulated markets, as facilities continue to be in inadequate. Still with lack of well established facilities and standards, problems persist with grading, cleaning, storage, packaging of the produce before the sale, due to less popularization by committees in sufficient scale. Although the purpose of establishment of State Agricultural Marketing Board is almost the same in all the States where Statutory Boards exist; a broad variation has been observed in their composition/constitution and functioning. It is necessary to bring more uniformity in powers and functions of Boards and demarcations of activities between the Directorate of Marketing and State Agricultural Marketing Boards. This can facilitate proper regulation of marketing practices as well as building more infrastructure facilities so as to achieve a faster growth and bring in better private participation. As per the target of National Commission of agriculture (1976), the facility of regulated markets should be available within the radius of 5km (approx. 80 sq km). But with existing infrastructure and markets available the area served per market yard is high which is above norms except Delhi and Pondicherry. As there is no uniformity across the states/union territories, it varies with area served per market yard from as high as sq.km to 7095 Sq. Km in Sikkim, 1326 Sq. Km in Himachal Pradesh, 385 Sq. Km in Karnataka, etc. The previous studies have indicated that there is a positive impact on 43

10 agricultural productivity with increase in the density of market. It seems by developing and converting the existing rural periodic markets and remaining wholesale markets into regulated markets, the target can be reached as per National Commission of agriculture in Optimum density of the markets cannot be only assessed by the area served, as it may not be the right indicator because of addition of non-cropped area. So ideal indicator would consider gross cropped area served by each market for assessing the density of the markets and adequacy of number of markets in a state. For example in Andra-Pradesh single market exists for ha, similarly for West Bengal, it is ha and in Punjab ha. Accordingly on an average of ha to ha of gross cropped area can be considered as ideal to meet the farmers requirements. Finally along with these factors, the actual requirement will have to be assessed based on the field study, depending on the cropping pattern, seasonality, and production of crops, the reason being during season the market arrivals may be maximum which would indicate inadequacy of the infrastructure, requiring need of more opening up of collection centres/sub yards compared to less requirement in the non-season with less arrivals. Availability of better facilities/amenities at the markets provides benefits to the farmers along with good number of regulated markets. Two-thirds of the regulated markets do have both covered and open auction platforms exist in. Common drying yards are available in One-fourth of the markets. 63 percent of the markets have traders modules namely shops, godowns and platforms in front of the shops. 9 percent of the markets have cold storage units and grading facilities exist in less than one-third of the markets. The basic facilities viz., internal roads, boundary walls, electric light, loading and unloading facilities and weighing equipment s are available in more than eighty percent of the markets. Farmer s rest houses exist in only half of the regulated markets S.S. Acharya and N.L.Agarwal 2014, Agriculture Marketing in India, Oxford and IBH Publishing Company Pvt. Ltd.,Asian Games Village side, New Delhi, India.Pp

11 GRADING: SYSTEM AND INFRASTRUCTURE Grading means sorting the unlike lots of the produce into different lots according to the quality specifications laid down 88. Products are graded according to quality standards. But lot of confusion gets developed as quality specifications vary from seller to seller. To avoid such issues, it is necessary to have fixed grade standards that are universally accepted and followed by majority people carrying out trade. As per XII Five Year Plan, Grading at primary market level is grossly inadequate. There are only 1637 grading units at the primary level, which include 125 units with cooperatives and 144 units with others. In Regulated markets, there are only 1368 grading units in a total of 7246 market yards/sub-yards. Only around seven percent of the total quantity sold by farmers is graded before sale. Grading facilities exist in less than 1/3rd of markets. During , 7.97 million tons of agricultural produce valued at Rs crores were graded at primary market level. Due to lack of proper handling (cleaning, sorting, grading and packaging) facilities at the village level, about seven percent of food grains, 30 per cent of fruits and vegetables and 10 per cent of spices are lost before reaching the market. AGMARK is a certification mark employed on agricultural products in India, assuring that they conform to a set of standards approved by the Directorate of Marketing and Inspection. The AGMARK is legally enforced in India by the Agricultural Produce (Grading and Marking) Act of So far, grade standards have been notified for 213 agricultural and allied commodities. The purity standards under the provision of the PFA Act and the Bureau of Indian Standards (BIS) Act, 1986, are invariably taken into consideration while framing the grade standards. International standards framed by Codex/International Standards Organization (ISO) are also considered so that Indian produce can compete in international markets. During ; Grading at Producers level was MT worth Rs lakh, for domestic trade MT, worth Rs lakh, for export MT worth Rs 9175 lakh. As a result of special efforts were initiated to promote grading under AGMARK, and as per report of DMI statistics ; Grading at 88 Ibid., Pp

12 Producers Level was MT worth Rs lakh, for domestic trade Rs MT worth Rs lakh, for Export 31425MT worth Rs lakh 89. STORAGE AND WAREHOUSING Storage is an important marketing function, which involves holding and preserving goods from the time they are produced until they are needed for consumption. Storage protects the quality of perishable and semi-perishable products from deterioration. It helps in the stabilization of prices by adjusting demand and supply. The storage of goods, therefore, from the time of production to the time of consumption, ensures a continuous flow of goods in the market. Some times to cope with the seasonal demand, for example woolen garments, these have seasonal demand and production of the same on a continuous basis and storage become necessary. In India, the storage system has three tier methods namely, at village, district level and National/State level. Cooperatives are providing storage facilities at the primary and marketing society s level, which are located at village/taluk. At state centers and district level, State Warehousing Corporations (SWCs) and the State Governments are providing the support. The Central Warehousing Corporation (CWC) is providing warehousing facilities at the centers of India. Food grains are procured and stored by Food Corporation of India (FCI) godwons that are collected for distribution and buffer stocking. It constructs storage capacity at certain nodal points, keeping in view its requirements. The CWC constructs/creates storage capacity for FCI as well as for the general warehousing 90. The Food Corporation of India is the single largest agency which has a capacity of million tones. The warehousing capacity available in India, in public, cooperative and private sector is about million tons. The warehousing capacity available in India, with various agencies/sectors shown in table DMI STATISTICS, , 90 Working Committee Report,2011, Report of Working Group on Warehousing Development and Regulation for the twelfth plan period ( ) supra n.12, p.81 46

13 Table 3.1 Availability of Warehousing Capacity in India Name of the Organization /Sector Storage Capacity (in million tons) Food Corporation of India (FCI) Central Warehousing Corporation (CWC) State Warehousing Corporations (SWCs) State Civil Supplies 11.3 Cooperative Sector Private Sector Total Source: Report by the committee for strengthening negotiable warehouse receipts by the Warehousing development and regulatory authority in the country. Due to record levels of procurement in the last four years, several states have been facing a problem of covered storage capacity. In the Rabi Marketing Season (RMS) , the FCI has procured more than lakh tons of wheat which is around 30 lakh tons higher than the earlier record procurement. As per , FCI was holding 65.5 million tons of the wheat and rice which was the highest level, ever achieved. This is against the buffer and strategic norms of 319 lakh tons of food grains. The storage capacity available with FCI and a part of the warehousing capacity available with CWC and SWCs is used for the storage of food grains procured by government agencies for central pool. The storage space available in the country is not sufficient to cater to the procured stocks. As a result, a substantial quantity of food grains is stored in Cover and Plinth (CAP) Storage. As per FCI reply to a query sought by an RTI activist in February 2014, as much as lakh million tons of food grains was wasted in India between 2005 and March 47

14 2013. It also said that of the damaged stock, around 84% was rice and 14% wheat 91. Preventable postharvest losses of food grains are estimated at about 20 million tons a year, which is nearly 10.5 percent of the total production. The scheme of warehousing was initiated at the center and state level after the enactment of the Agricultural Produce (Development and Warehousing) Corporation Act, The State Government also enacted the Warehousing Acts during July 1957 to August, The Government of India bi-furcated the Warehousing Act of 1956 in to the National Cooperative Development Corporation Act 1962 and the Warehousing Corporation Act of Over a period of time, sizable scientific storage/warehousing capacity has been developed by various agencies and they have plans to increase it further. At current The Food Corporation of India is the single largest agency which has a capacity of million tones. The total storage capacity available with different public sector agencies is million tons. In the cooperative sector, NCDC has assisted in creation of million tons storage capacity with the rural cooperatives. In addition, a capacity of 16.6 million tons has also been created under Rural Godown Scheme 92. As per Twelfth Five Year Plan, The Committee has indicated that with regard to food grains, the Department of Food and Public Distribution has initiated steps for creation of 17 million tons of additional storage capacity including 2 million tons in the form of silos. TRANSPORTATION AND HANDLING OF FOOD GRAINS In June, 2000 a National Policy on Handling, Storage and Transportation, was made in order to reduce storage and transit losses of food grains at farm and commercial level, to modernize the system of handling, storage and transportation of food grains procured by the FCI and to bring in additional resources through private sector participation. The policy aimed at, reducing storage and transit losses at farm level where 91 FCI admits 1.94 LMT food grain wasted between The Hindu, February 12, 2014 accessed on 30 September Working Committee Report, supra n.12, p.81 48

15 about 70% of the total food grains production is retained and consumed and also to encourage the farmers to adopt scientific storage methods, to modernize the system of handling, storage and transportation of food grains procured by the FCI and also to harness efforts and resources of public and private sectors, both domestic and foreign, to build and operate infrastructure for introduction of bulk handling, storage and transportation of food grains in the country. In the policy it was envisaged that, for development of infrastructure for the integrated bulk handling, storage and transportation through measures such as Build- Own-Operate-Transfer (BOOT), Build-Own-Lease-Transfer (BOLT), Build-Own- Operate (BOO), and Lease Develop-Operate (LDO), Joint Ventures etc, would be encouraged with participation of private sector participation, with generation of funds through 100% FDI and public issues by private enterprise. GRAMIN BHANDARAN YOJANA Construction of rural godowns in the name of Gramin Bhandaran Yojana was launched 2001, aiming at creation of scientific storage capacity to control the quality of the produce to avoid distress sale immediately after harvest and to improve the marketability. This scheme provides the 25 percent subsidy to the project cost of construction/renovation of rural godowns to all categories of farmers, agriculture graduates, cooperatives and CWCs/SWCs. During (up to ) 1210 rural godowns with a capacity of lakh million tons have been sanctioned by NABARD/NCDC. RURAL STORAGE METHODS Since substantial quantity of food-grains produced in the country (65-70% of total production) is stored by farmers in their houses and remaining marketable surplus is handled by traders, cooperatives and government agencies and to avoid considerable post-harvest losses of food-grains at farm level, in this regards farmers use, mud bin or Kachha kothi with capacity ranging from 2 to 5 quintals are indoor, circular storage 49

16 structures made of mud mixed with wheat or paddy straw, baked earthen containers of kg capacity, wooden bins and underground structures. Though these are not scientific ways of storage of produce, still farmers use this method and around 10 percent of postharvest loss in incurred. In order to avoid such losses improved storage structures should be adopted, like Coal tar Drum bin, that are recommended by Central Institute of Agricultural Engineering (CIAE), Bhopal for grain storage at farm level that have a storage capacity of about 1.5 quintals. Pusa Bin, developed by Indian Agricultural Research Institute (IARI), New Delhi. It is a LDPE (Low density polythene sheet) sandwiched bin. About 10 MTs grain can be safely stored in this bin. Domestic Hapur Metal Bins, developed by IGMRI previously known as Indian Grain Storage Institute (IGSI) Hapur, UP. These are made of galvanized iron sheet or aluminum sheet of 18 gauges and have covered inlet and outlets. Their capacity ranges from 2 to 10 quintals. In addition to above rural storage structures, outdoor reinforced brick bin (capacity ranging from 3.5 to 10.5 mts), reinforced cement concrete (RCC) bins (capacity ranging from 1.0 MT to 2.5 MTs) and indoor pucca kothi (capacity 2.0 MTs) developed by IGMRI, Hapur are also used for storage of food grains by farmers 93. COLD STORAGE India produces around 11 percent of worlds' vegetables and 9 percent of worlds' fruits. Presently all horticulture crops put together cover approximately 7 percent of the cropped area of the country. The present marketing system of agricultural produce in the country, particularly for fruits and vegetables, lacks systems approach. Producers sometimes fail to realize expenses incurred on transportation of fruits and vegetables to markets, let alone the cost of production and capital investment, during the period of glut. Fruit and vegetable growers are receiving only a small part of price paid by the consumers as lion's share is either lost in the marketing chain or taken by the middlemen. The profit margin of intermediaries is disproportionate to their services. There is also considerable loss and wastage due to inefficient handling, transportation and storage 93 Report of Working Group, 2011, Report of Working Group on Warehousing Development and Regulation for the Twelfth Plan Period ( ). Pp

17 methods. It is estimated that as high as 25 to 30 percent losses occur in different perishables depending upon the type of produce, the season and length of journey. The lower returns to the farmers act as disincentive for higher production. Thus, to extend the shelf life of fruits and vegetables, cold storage and cold chain system is essential. Cold storage has been largely adopted for long term storage of potato, orange, apple, etc. The cold chain concept is employed for high value crops like grapes, pomegranates, flowers, seasonal and perishable nature of potatoes, other vegetables and fruits. The provision of adequate storage, under scientifically controlled conditions, is one such mechanism which could ensure that a crop harvested over a period of one or two months meets a year round market demand. The role of cold storages/storages in cutting down of losses due to spoilage, avoiding gluts and distress sale by grower's, reducing transport bottlenecks at the peak period of production, and maintenance of quality of the produce cannot be under estimated. Since the production of potato is usually bulked between December and March, the consumption needs and seed requirements for rest of the year have to be met out of the stored stocks. This obviously leads to a situation which is characterized by: (a) Crashing of prices during the peak season which forces the growers, particularly the small & marginal farmers, to dispose of stocks at a price which sometimes may not even cover the cost of production; (b) Wide price disparity between peak and lean period arrivals sometimes ranging up to percent; (c) Control of the market by such traders and agents who command large cold storage capacity spread over different states and thus regulate the flow of supply to different markets; and (d) The erratic price and arrival pattern leads to discouragement of farmers who have taken up this crop for cultivation. Lack of adequate cold storage accommodation makes this decision almost inevitable. With this background, the only suitable option to tide over the problem caused by seasonal surpluses is to undertake expansion of cold storage capacity and integrate it with a sound marketing system. 51

18 Table Sector-wise and Commodity-wise Cold Storage Capacity in India (As on 31/12/2005 is as given) Sector Number Capacity (lakh tons) Private Cooperative Public Total Source: Directorate of Marketing and Inspection, Government of India, and National Institute of Agricultural Marketing. Currently cold storage units exist only in 9% of markets. The government of India has decided to assist in development of market infrastructure projects to State Agencies/APMCs under NHM and MI Schemes, subjected to waiving of market fees for perishable horticultural commodities and permit direct marketing by farmers to consumers, processing units, bulk buyers of cold chain facilities/storage/contract farming. However, it has been provided that reasonable user charges can be levied for use of market facilities and infrastructure. As per the Mid Term Appraisal of Eleventh Five Year Plan, The National Horticulture Mission has not been able to get adequate attention from the states for postharvest management and market development. While only 11 states have taken an initiative in establishing 109 cold storages and eight states have established 51 apni mandis, there is virtually no progress in the setting up of wholesale markets except in Kerala. This reflects concerns and points out the challenges for future. COMMODITY FUTURES AND FORWARD MARKETS With effect from , government permitted futures trading in commodities. In recent times futures trading have drastically increased. Currently there are 6 national level commodity exchanges and 20 regional commodity exchanges in India. The national 52

19 level exchanges are MCX, NCDEX, NMCE, ICEX, ACE and UCX. These 26 commodity exchanges carry out futures trading. Currently 43 of the 113 commodities that are notified for futures trading are actively traded in 4 national exchanges and 6 commodity-specific exchanges trading in the commodities. Agriculture commodities turnover has increased from Rs crore in 2001 to Rs crore in 2010 to Rs in 2012, but there is a slight decrease in 2014 to Rs crore. The major agricultural commodities traded in futures exchanges are guar seed/gum, gram, soya oil, sugar, raw cotton, gur, castor seed, rubber, wheat, rice and other oilseeds/edible oils. Futures trading being a risk-mitigating instrument both for buyers and sellers, it requires a conducive and effective regulatory mechanism. The regulatory body is Forward Markets Commission (FMC) which was set up in As of September 2015 FMC is merged with the Securities and Exchange Board of India, SEBI. CENTRES FOR PERISHABLE CARGO Major problems faced by the Indian exporters of perishable products relate to the poor and inefficient handling of the perishable commodities at the cargo centres resulting in poor quality of products reaching the international markets. It hampers the export performance and also damages the image of Indian goods in the international market. During summers, when temperature crosses 35 degrees Celsius, the handling is inefficient and palletisation procedure is slow resulting in spoilage of perishable commodities. The documentation procedure is also cumbersome and time consuming. This necessitates more efficient and well-equipped cargo centres for perishable commodities. The improved and well-equipped centre for perishable cargo is an important platform in the supply chain of horticultural products from the farms to the international markets and ultimately to the consumers. The APEDA has established six CPCs at Bangalore, New Delhi, Chennai, Thiruvananthapuram, Hyderabad, and Mumbai of varying capacities. The total handling capacity at these six CPCs is 2.16 lakh tons per annum. The operating and ground handling agencies have been designated for each CPC. The prescribed charges for users vary from Rs 0.35 per kg to Rs 2.29 per kg. In addition, APEDA has signed MoUs for setting up of CPCs at Cochin, Ahmedabad, Amritsar, 53

20 Kolkata, Bogdogra, Lucknow, and Goa. As an interim measure, APEDA has provided walk-in type cold rooms at Kolkata, Agartala, Guwahati, Lucknow, Coimbatore, and Ahmedabad 94. AGRI EXPORT ZONES (AEZS) AND FOOD PARKS The importance of agri export zones can hardly be over emphasized. Already 60 AEZs have been notified in different states for specific commodities including basmati rice, fruits, vegetables, flowers, spices, wheat, vanilla, tea, coriander, cumin, sesame seed, cashew-nuts and potato. The estimated investment varies from Rs 3.5 crore to Rs crore which will be shared by the centre, state governments and private entrepreneurs in varying proportions. The present approach of diffused operation of the AEZs should be reviewed and provide for convergence of fund flow of various schemes, farmers can benefit from AEZs only if they organize into groups and are linked with players in AEZs directly or through contract farming arrangements. During the last six years, AEZs could not attract targeted private investment mainly does to lack of public investment and diffused definition of AEZs (whole district is defined as AEZ) 95. As India is the second largest producer of fruits & vegetables. With a view to tap export markets and catering to the need of bulk buyers, mechanical graded and packed house are required in the horticulture growing areas. Certain activities like cleaning, washing, grading, packaging, refrigerated transportation etc, needs to be undertaken in conformity to international trade. To address these problems, APEDA an implemented a scheme for catering Export Oriented Agri- Zones. Under the scheme so far about 111 grading and pack houses has been established so far to answer the need of export markets. Besides these, food parks have also been established in the country with a view 94 Report of the Working Group on Policy Required for Internal and External Trade for the XI Five Year Plan , P Report of the Working Group on Policy Required for Internal and External Trade for the XI Five Year Plan , P

21 to give exposure to farmer producer. Though 56 food parks have been established in the country, yet their availability is confined to only 20 states 96. PROCESSING INFRASTRUCTURE A strong and effective food-processing sector plays a significant supportive role in diversification and commercialization of agriculture. Processing function adds value to the products and enhances the income of the farmers in addition to generation of employment in the economy. A number of agro- processing units for processing of different agricultural products have been established in the country in recent past with the increasing consumer demand for processed products. The processing capacity of the existing units has also been enhanced. Huge post - harvest losses of fruits and vegetables is there in absence of the processing units. Presently only 2.3 per cent of total production of fruits and vegetables is being processed in the country. Though the country offers vast potential for establishing agro-processing units like for oilseeds, food grains and sugarcane, yet their availability in the number of State is almost negligible. There are several thousands of bakeries, traditional food units and fruit/ vegetable/ spices processing units in unorganized sector. In the organized sector there are over 516 flour mills, 568 fish processing units, 5293 fruits & vegetable processing units, 429 sugar mills, 725 solvent extraction plants and 1.50 lakh rice mills along with modern rice mills. There are more than 15 thousand pulse mills having 16 MT capacity spread over the country. Though the country offers vast potential for establishing agro processing units like for oilseeds, food grains and sugarcane, yet their availability in the number of states is almost negligible. MARKET INFORMATION SYSTEM The system of market information has continued to be far from satisfactory. While the traders and processors use their own informal sources, farmers depend both on formal and informal sources. Though, both market news and market intelligence are 96 Report of the Working Group on Policy Required for Internal and External Trade for the XI Five Year Plan and XII Five Year Plan

22 equally important but farmers are more interested in market news. Market news of interest to farmers is collected/compiled by APMCs, SAMBs, and State Departments of Agricultural Marketing, field staff of Directorate of Economics and Statistics and Department of Food. There are 435 market information systems (MIS) centers in the country. Wholesale prices of important agricultural commodities from selected markets are collected daily by these centers and are transmitted to Head office for further transmission to TV and AIR stations. The information is disseminated through display boards in market yards, by announcements during open auction by newspapers, radio broadcasts and TV channels. Farmers also gather information through personal contacts with other farmers and traders. However, the market news is able to provide only a broad overview to the farmers due to several defects in the system. The price quotations are not backed by grades and the information is available with considerable time lag. This information is not linked to local grade standards. Quite often, a range of prices is made available, which is of little use to farmers. There is also a serious misconception about the buying and selling price, which is distinctly different. 90 However, developments in information technology have opened new opportunities for dissemination of real price information across the country. Agmark net, a public portal connecting 2900 markets all over the country and display of information of about 400 commodities on daily basis is the most successful intervention in this area. An amount of Rs 35 crore has been spent during X Plan period 97. MARKETING INSTITUTIONAL INFRASTRUCTURE Following marketing institutions have been created in the country during the last 60 years: 1. Public Sector Marketing Organizations: (a) Food Corporation of India (FCI) (b) Cotton Corporation of India (CCI) (c) Jute Corporation of India (JCI) 97 Report of the Working Group on Policy Required for Internal and External Trade for the XI Five Year Plan , P

23 (d) (e) (f) (g) (h) (i) (j) (k) (l) State Trading Corporation (STC) Commodity Boards Tea, Coffee, Cardamom, Rubber, Tobacco, Spices, Areca nut, Horticultural Crops, Dairy Products (NDDB) Directorate of Marketing and Inspection (DMI) Agricultural Produce Market Committees (APMCs) State Agricultural Marketing Boards (SAMBs) Council of State Agricultural Marketing Boards (COSAMB) Commission for Agricultural Costs and Prices (CACP) Commodities Export Councils Agricultural and Processed Products Export Development Authority (APEDA) 2. Cooperative Marketing Institutions (a) Primary, Central and State level Marketing Societies, Unions, and Federations. (b) Special Commodities Marketing Societies (Sugarcane, Cotton, Oilseeds, Milk etc.) (c) Processing Societies - Cotton Processing and Ginning Societies - Oilseeds Processing Societies - Fruits and Vegetables Preservation Societies - Sugarcane Crushing Societies - Milk Processing and Chilling Societies; etc. (d) National Agricultural Cooperative Marketing Federation (NAFED) (e) National Cooperative Development Corporation (NCDC) (f) Tribal Cooperative Marketing Federation (TRIFED) MARKETING CHANNELS Farmers producing agricultural produce are scattered in remote villages while consumers are in semi-urban and urban areas. This produce has to reach consumers for its final use and consumption. There are different agencies and functionaries through which this produce passes and reaches the consumer. A market channel or channel of 57

24 distribution is therefore defined as a path traced in the direct or indirect transfer of title of a product as it moves from a producer to an ultimate consumer or industrial user. Thus, a channel of distribution of a product is the route taken by the ownership of goods as they move from the producer to the consumer or industrial user. The marketing channels for agricultural commodities in general can be divided into four broad groups as direct to consumer, through wholesalers and retailers, through public agencies or cooperatives, through processors and online marketing. These channels have great influence on marketing costs such as transport, commission charges, etc. and market margins received by the intermediaries such as trader, commission agent, wholesaler and retailer. Finally this decides the price to be paid by the consumer and share of it received by the farmer producer. That channel is considered as good or efficient which makes the produce available to the consumer at the cheapest price also ensures the highest share to the producer. Some of the important marketing channels are as explained below, Direct Marketing: Direct marketing by farmers is being encouraged as an innovative channel. Some examples of these channels are Apni Mandi, Rythu Bazars, and Uzhavar Sandies. These channels are mostly adopted in sales transactions of agricultural commodities like fruits, vegetables and flowers which are highly perishable. In this channel, the produce move quickly from farmers to consumers due to lack of middlemen. If farmers directly sell their produce to the consumers, it not only saves losses but also increases farmers share in the price paid by the consumer. Farmers Markets were introduced with a view to eliminate the middlemen and arrange facilities for the farmers to sell their produce directly to the consumers at reasonable rates fixed every day. On account of the scheme, both the consumers and farmers are benefitted. 58