ASSIGNMENT ONPROBLEMS OF AGRICULTURAL MARKETING IN INDIA

Submitted to : Submitted by :Dr. S. K. Srivastava Priyanka UpretiScientist roll no. 20499NCAP m.sc. Ag. Economics

WHY TO STUDY PROBLEMS OF AGRICULTURAL MARKETING : To understand the nature of problems. To know why markets are not developing. To suggest some measures required to

develop the market. To improving marketing system and various

marketing functions like grading, standardization, storage, processing, packaging etc.

1. LARGE NUMBER OF MIDDLEMEN : Varies with the commodities and the marketing

channels of the products. The producer’s share in consumer’s rupees is reduced. For instance, a study of D.D. Sidhan revealed, that

farmers obtain only about 53% of the price of rice, 31% being the share of middle men (the remaining 16% being the marketing cost). In the case of vegetables and fruits the share of farmers was even less, 39% in the former case and 34% in the latter. The share of middle- men in the case of vegetables was 29.5% and in the case of fruits was 46.5%. ( challenges in rural and agriculture market – by Hardeep singh , Manoj kr. Goel, Amit kr. Singhal in VSRD international journal of business and management research)

2. SMALL AND SCATTERED HOLDING : Marketed surplus is very small.3. FORCED SALES :o farmer, in general, sells his produce at an

unfavourable place and at an unfavourable time and usually he gets unfavourable terms.

4. TECHONOLOGICAL DEVELOPMENT PROBLEMS IN FARM PRODUCTION :

o paddy harvesters are identified to increase the moisture content problem in paddy.

o ; mechanical picking of cotton associated with the problem of mixing trash with cotton.

o potato diggers are found to cause cuts on the potato.

o sugarcane harvesters effects the problem of trash mix with the cane, etc

5. LACK OF TRANSPORT FACILITIES : Absence of the transport service in

reasonable agricultural marketing areas. Unsuitability of the present transport

facilities for transportation of some products like fruits, vegetables, eggs, etc.

Insufficient vehicles to carry goods from the farms to the rural markets and from the rural markets to the towns.

High transportation cost.

6. POOR HANDLING, PACKING, PACKAGING, AND PROCESSING FACILITIES : Extent of food processing of agro products of production

in India ( journal of Indian statistics – 2009-2010) : Cereals 4.4% pulses 19.6% Fruits 1.7% spices 10.2% Vegetables 2.4% milk18% Egg 1.2 % meats 4.9% Fish 1% While the extent of food processing in fruits and vegetables in

brazil accounts for 70%, in Malaysia it is 83% and in Philippines it is 78%.

Processing of dairy products is >90% in Australia and USA and only 18% in India, indicating backwardness of Indian dairy sector. The farmers share in consumers basket is increasing in Australia while it is stable in informal sector dominated market India. This study is done by A.V.Manjunatha , M.K. Gana Shruthy and V.A. Ramachandra published in Indian journal of marketing, October 2013 under the topic Global marketing systems in the dairy sector : a comparison of selected countries.

7. GREAT EXTENT OF POST HARVEST LOSSES (JOURNAL OF INDIAN STATISTICS: 2009-10)COMMODITIES LOSS(%) LOSS(QTY)

IN MTLOSS(MONETARY VALUE) IN CRORES

Durables 10 23 23000Semi durables 15 6 1800Perishable 20 42 63000average 14.8 71 87800

Buffer stock of rice was 17.4mt in jan 1995 as compared to actual minimum stock requirements of 7.7mt. So this is indicating great export potential but India is not meeting the quality specification required by global market.

8. LACK OF UNIFORM STANDARDIZATION AND GRADING : To facilitate grading, grading centres have

been established only in 1321 markets so far But the quantity graded at producer’s level is still almost negligible.

to enhance the quality of agricultural produce, 956 laboratories have been established.

On an average not even one laboratory is available for serving an area of one thousand Sq. Km.

Such facilities are completely absent in all the NE states, Sikkim and Goa. ( Agricultural marketing infrastructural facilities in India – state wise analysis by M.S. Jairath )

9. INADEQUATE STORAGE CAPACITY AND WAREHOUSING FACILITIES : . About 40% of government’s foodgrains is stored

in an unprofessional way due to acute shortage of storage capacity to the tune of 35 mt .

Currently 70% of the total warehousing capacity of 112mt is owned by the government.

Additional 35mt of storage capacity is required in the 12th five year plan (2012-2017) period.

only 12% of the total warehouse capacity accounts for agricultural commodities, while the maximum is industrial warehousing. ( agriculture today – august 2014 edition)

o Due to the lack of these facilities often account for increasing cost of marketing and, hence, retail prices.

10. LACK OF COLD STORAGE FACILITIES : Currently, India has 6300 cold storage facilities unevenly

spread across the country, with an installed capacity of 30.11 million metric tonnes.

Studies have shown this is half the amount of cold storage facilities that India actually needs.

The 3 biggest challenges that India is facing in spreading cold storages are:

1. High lifecycle costs for a cold storage facility that typically needs land and buildings to hold 6000 metric tonnes of food.

2. Uneven distribution of cold storage facilities with 60% of existing facilities located near the point of production in just 4 states and too few closer to distribution points in the other 24 states.

3. Low awareness of best storage practices amongst industry players.

( agriculture today – august 2014 edition )

11.FAILURE OF STATE APMC ACTS: . Apart from Kerala, Jammu and Kashmir and

Manipur all other states have enacted marketing legislations known as APMC Acts.

these markets have become restrictive and monopolistic markets, providing no help in direct and free marketing, organised retailing and smooth raw material supplies to agro-industries.

Exporters, processors and retail chain operators cannot procure directly from the farmers as the produce is required to be channelized through regulated markets and licensed traders.

So resulted in increased cost of marketing and farmers are getting low price.

Monopolistic practices and modalities of the state controlled markets have prevented private investment in the sector.

12. ADULTERATION OF PRODUCE AND MALPRACTICES IN MARKET : The manipulation of weights and measures. Sale under cover method of sale. inferior commodities are mixed with superior

ones and are sold as superior commodities. The no. Of regulated markets are 7157 in march

2010. On an average, each regulated market in the

country serves an area of 459 square kilometre. The National Commission on Agriculture (1976)

has recommended that the facility of a regulated market should be available in general, within a radius of 5 km.

Accordingly the country needs 41838 markets.

13. COMMUNICATION PROBLEM : Rural areas are inadequately placed with

reference to posts, telegraphs and telephone. Low literacy rates among farmers.14. LACK OF INFORMATION ABOUT PRODUCTION

AND MARKETING : Awareness of farmers on different components

of market information and its utility was very poor (11-37%) as compared to that of traders (75%). This study is done by A .Vedivelu and B. R. Kiran 2013 published in journal international journal of agriculture and food science under the topic problems and prospects of agricultural marketing in India : an overview.

15. LACK OF FARMERS ORGANISATION : The marketing system constitutes

unorganized farming community on one side and organized and powerful traders on the other side.

farmers will be generally exploited and do not get remunerative prices for their produce.

16. INADEQUATE RESEARCH ON MARKETING o Need to know about new technologies in

food storage and preservation. o Need for research on consumer demands

and preferences, handling and packaging.

17. INADEQUATE CREDIT FACILITIES : though the overall flow of institutional credit

has increased over the years, there are several gaps in the system like inadequate provision of credit to small and marginal farmers.

Though KCC are introduced in the recent years but the share of small farmers in total credit appears to be falling to a certain extent. This study is done by Rakesh Mohan published in Reserve bank of India bulletin under the topic agricultural credit in India : status, issues and future agenda.

18. RISING COST OF PRODUCTION AND TRANSPORTATION : Due to hike in power tariffs and the price of

fertilizers , seeds and fuel . On an average, India’s international

transportation costs are 20-30 per cent higher than those faced by other countries.

Indian products are 5 to 15 per cent more expensive than their foreign counterparts simply on account of high international transportation costs. ( Case study on horticultural and agricultural export from India by public private infrastructure advisory facility)

High transportation cost is causing barrier to export of perishable agricultural products from India.

19. MARKETING UTILITIES CAUSING FOOD SAFETY PROBLEMS : In case of place utility,the further a food product travels

between producers and consumer, the wider the information gap that exists between economic agents and the increased hazard of food contamination.

In case of time utility perishable livestock products such a fresh milk and unprocessed meats as well as some horticultural products present opportunities for adulteration in order to extend the life of the product.

In case of form utility often there are various , less than transparent, ways of transforming the goods and producers may pursue least cost ways inconsistent with the provision of safe foods. (agricultural marketing and food safety in china: a utility perspective – by David L. Ortega, Colin G. Brown and Scott A. Waldren, H. Holly Wang in journal of agribusiness in developing and emerging economics )

20. POOR PERFORMANCE OF COOPERATIVES : Due to poor relationship among the members of

cooperatives there is poor performance of cooperatives.

A cooperatives uncertainty about its farmers behaviour has a direct and negative impact on its performance.

The higher the environmental uncertainty , the lower the cooperatives performance.

This study is done by Gustavo Marcos-Matas, Miguel Hernandez- Espallardo and Narcisco Arcas- Lario published in journal- outlook on agriculture , vol 42, June 2013 under the topic Transaction costs in agricultural marketing cooperatives : effects on market performance.

REPORT OF THE WORKING GROUP ON AGRICULTURAL MARKETING INFRASTRUCTURE, SECONDARY AGRICULTURE AND POLICY REQUIRED FOR INTERNAL AND EXTERNAL TRADE FOR 12TH FIVE YEAR PLAN (2012-2017) BY AGRICULTURE DIVISION ,PLANNING COMMISSION , GOVERNMENT OF INDIA Private sector unwilling to invest in logistics or

infrastructure under prevailing conditions. Price setting mechanism not transparent. Mandi staff ill-equipped and untrained. Primary or Periodic Markets (haat / bazaars) are most

neglected – basic amenities not available. Low density of regulated markets in some States-

farmers have to travel long distances. Multi-Point Levy of Market Fee (Varies from 0.5 to 2%)

and Multiple Licensing System. Restrictions on movement of goods inter-state and

even intra-state.

SUGGESTIONS TO IMPROVE AGRICULTURAL MARKETING : 1. ESTABLISHMENT OF REGULATED MARKETS : benefits: Farmers are encouraged to bring their produce directly to the

markets Farmers are protected from the exploitation of market functionaries Farmers are ensured better prices for their produce Farmers have access to up-to-date market information The marketable surplus of the farmers will be increased Marketing costs are lowered and producers share will be increased. 2. IMPROVED MARKETING CHANNEL / DIRECT MARKETING: Apni

mandi/ kisan mandi in Punjab Hadaspar vegetable market in pune Rythu bazaar in Andhra Pradesh Uzhavar sandies in tamilnadu Shetkari bazaar in Maharashtra Krushak bazaar in Orissa Mother dairy booths in delhi

3. CONTRACT FARMING / CONTRACT MARKETING : To the farmer, contract farming- Reduces the risk of price/ production Ensures the price as market is assured Increases the quality consciousness Ensures higher production because of better quality seeds and pesticides Reduces marketing costs Provides financial support in cash or kind Ensures efficient/ timely technical guidance almost free of cost To the processing company, contract farming- Ensures supply of quality agricultural produce at right time and at lesser

cost to the company. Canalizes direct private investment in agricultural activities. Ensures that the toxicity level is reduced as per requirement for export.

The ministry of food processing industries of government of India has launched a scheme entitled ‘grant under backward linkages’ to promote contract farming. Under this scheme, a grant of 10% of value of raw material purchased from the contract farmers (subject to a maximum of rs. 10 lakh per annum) is provided to food processing units up to 3 years. (Condition is that number of contract farmers is at least 25)

4. STANDARDIZATION AND GRADING : Simple, clear and uniform standardization and

grading. Standardization and grading should be such that

it will meet the global standards.5. IMPROVEMENT IN HANDLING AND PACKING :6.PROVISION OF STORAGE FACILITIES : A licenced warehouse has the following benefits: Reduces the wastage in storage of various commodities

by providing scientific storage facilities Assists the government in orderly marketing of

agricultural commodities by introducing standard grade and specifications

Issues warehouse receipts, a negotiable instrument in which commercial banks advance finance to the producers and dealers

Assists government in the scheme of price support operations.

7. IMPROVING TRANSPORT FACILITIES :

8. MARKET INFORMATION :9. MARKET RESEARCH : it is the study of consumer

demand by a firm so that it may expand its output and market its product.

10. MARKET EXTENSION : This involves the dissemination of needed information on marketing to producers. The farmers will be advised on consumer preferences, grading, packaging, transport, etc., in order to help them to secure better returns.

11.  PROVISION OF AGRICULTURAL MARKETING TRAINING TO FARMERS :

The farmer needs to be trained in product planning i.e. crops and varieties to be grown, preparation of produce for marketing, malpractices and rules and regulations, market information, promotion of group marketing, etc. 

12. COOPERATIVE MARKETING : A cooperative setup may eliminate the middlemen

dominated market. o In a cooperative model farmers get at least 70% of

market price of their produce ( said R. B. Singh , former president of national academy of agricultural sciences ).

o In fertilizer production and distribution the Indian fertilizer cooperative commands over 35% of the market.

o In the production of sugar the cooperative share of market is over 58% and in cotton they have share of 60%.

o But the cooperative should be a viable one having successful and good relationship among its members.

13. AMENDMENT OF APMC ACT : In amendment there must be provision for establishment

of private market yards, direct purchase centres, market for direct sales and promotion of PPP in the management and development of agricultural markets.

Till now only 16 states have amended their acts.

14. GOVERNMENT PLANS IN UNION BUDGET 2014-15 : An amount of rs. 100 crores set aside for “agri- tech infrastructure fund”. To meet the vagaries of climate change a “national adaptation fund” with

an initial amount of rs. 100 crore will be set up. To mitigate the risk of price volatility in the agriculture produce, a sum of

rs. 500 crore is provided for establishing a “price stabilization fund”. Central government to work closely with the state governments to re-

orient their respective APMC acts. A target to rs. 8 lakh crores has been set up for agriculture credit during

2014-15. Allocation of rs. 5000 crores provided for the warehouse infrastructure

fund. Restructuring FCI, reducing transportation ans distribution losses and

efficacy of PDS to be taken up on priority. Government when required will undertake open market sales to keep

prices under control. Rs. 100 crore is provided for kisan TV, to disseminate real time

information to the farmers on issues such as new farming techniques, water conservation, organic farming etc.

To incentivize expansion of processing capacity, reduction in excise duty on specified food processing and packaging machinery from 10% to 6%.

REFERENCES :1) Agriculture today magazine – august 2014 edition2) Challenges in rural and agriculture market – by Hardeep singh ,

Manoj kr. Goel, Amit kr. Singhal in VSRD international journal of business and management research

3) Global marketing systems in the dairy sector : a comparison of selected countries by A.V.Manjunatha , M.K. Gana Shruthy and V.A. Ramachandra published in indian journal of marketing, October 2013.

4) Journal of Indian statistics 2009-105) Agricultural marketing infrastructural facilities in India – state wise

analysis by M.S. Jairath6) Problems and prospects of agricultural marketing in India : an

overview by A .Vedivelu and B. R. Kiran 2013 published in journal international journal of agriculture and food science .

7) Agricultural credit in India : status, issues and future agenda by Rakesh Mohan published in Reserve bank of india bulletin.

8) Case study on horticultural and agricultural export from India by public private infrastructure advisory facility

9) agricultural marketing and food safety in china: a utility perspective – by David L. Ortega, Colin G. Brown and Scott A. Waldren, H. Holly Wang in journal of agribusiness in developing and emerging economics

CONTD…10. Transaction costs in agricultural marketing cooperatives : effects

on market performance by Gustavo Marcos-Matas, Miguel Hernandez- Espallardo and Narcisco Arcas- Lario published in journal- outlook on agriculture , vol 42, june 2013

11. Report of the working group on agricultural marketing infrastructure, secondary agriculture and policy required for internal and external trade for 12th five year plan (2012-2017) by agriculture division planning commission government of India.

12. Status of agricultural marketing reforms by Gokul Patnaik under the workshop on policy options and investment priorities for accelerating agricultural productivity and development in India.

13. How transportation costs affect fresh fruits and vegetables prices by Richard Volpe, Edward Roeger, Ephraim Leibtag – a report summary from the economic research service

14. The major problems confronting agricultural marketing in Nigeria by the Federal university of technology Akure ( department of agricultural economics and extension ).

15. Can producer associations improve rural livelihoods? Evidence from farmer centres in India by Raj M. Desai and Shareen Joshi – the journal of development studies

16. Agricultural marketing in India by S. S. Acharya and N. L. Agarwal