2 TOPICS COVERED Introduction Size of the market Types of produce Unique characteristics of productsUnique characteristics of agricultural marketingBasic contents of rural marketing infrastructureMarketing infrastructureTypes of marketsRequirements of a modern terminal market
3 Contd…. Statistics of infrastructure Institutional support to marketingPresent scenario and problemsPresent regulatory frame workAgriculture marketing-why reformsI Phase of reformsII Phase of reformsContract farming related reformsSpecific issues related to reformsContract farming
4 Contd… Agmarknet - objectives Cooperative sector and agriculture marketingRole of corporate sectorDirect marketingCase study – ITC - e chaupalsWay ahead
5 INTRODUCTIONThe rural people were exchanging goods with surplus food grains even after independence.The progress in the fields of transport and, banking has resulted in reach of currency to the remote rural areas.This resulted in creation of organized markets for rural produce.The green revolution and white revolution brought enough surplus with the rural people to market it in organized way and influence the price of produce.
6 The various activities involved in taking produce from farm to consumer are included in agricultural marketing.The marketing chain is said to be successful if the produce reaches the consumer in desired quantity and quality.The marketing of agricultural inputs is also covered in the agricultural marketing.Taking the produce out of country for marketing is called agricultural trades.The agricultural marketing has covered a long journey i.e. from subsistence to high income generating exports after green revolution and introduction of technology in the sector.
7 SIZE OF THE MARKET Item Average annual production grains 220 million tonsmilk95Fruits and vegetables130sugarcane245Oil seeds25
8 TYPES OF PRODUCEThe various types of produce can be classified according to shelf life, nature or level of processing.The high shelf life products are food grains ,fibers or tree based products like natural gums or the handicraft items.The medium shelf life products are dry herbs, processed items etc.The low shelf life products are fruits, vegetable and animal products etc.
9 The produce can be classified as primary, secondary or tertiary on the basis of level of processing, the same has been covered under the food processing module.The produce can also be classified according to the nature of produce i.e. horticulture ,food grains, plantation crops, commercial forestry, forest collections ,agro waste ,fiber crops, handicrafts etc.The marketing of each type will be different from the other & has to be planned.O oooooo carefully.
10 Unique Characteristics Of Produce The produce is of low density, therefore space requirement for storage is high.The produce is generally perishable in nature.The produce of similar kind has large verities and grades.Cost of transportation and collection is high due to wide spread geographical area.The waste generated with processing or production is very high.The rates of the produce are not governed only by market forces but there are lot of other factors.
11 CONTD….The quantity of production is subject to lot of risk factors like suitable weather, good and timely rainfall, natural calamities, pest and disease etc.
12 UNIQUE CHARACTERISTICS OF AGRICULTURAL MARKETING The surplus available for marketing is much lower than international average due to small land holdings and bigger family size.The surplus is sold in three ways ,(a) direct sale to consumers-mostly vegetables are sold by this method (b) selling to whole sellers or bulk consumers visiting villages for collection of produce – milk collection or sugarcane collection from villages (c) sale in the nearest mandi or market yard.
13 CONTD….The most important thing is relationship between good harvest and remunerative price. Every bumper harvest results in fall of market price due to lack of storage, transport and processing facilities.The presence of large number of intermediaries is another unique feature.The intervention of government in determination of prices is frequent.
14 Cost build up for one kilogram of fruits COST ESCALATION WITHOUT VALUE ADDITIONCost build up for one kilogram of fruits220.127.116.11.13.3FARMERTRADERWHOLESALERRETAILERCONSUMER PRICERetail Markups350220160100MILKFISHFRUITS &VEGETABLESFARM GATE PRICES
15 BASIC CONTENTS OF RURAL MARKETING INFRASTRUCTURE Communication facilities between market and rural areas.Place for interaction with buyers.Facilities for drying and cleaning.Facilities for grading &packaging of produce.Long term or short term storage facilities.Modern weighing machines.Market information systems and other telecom facilities.The above facilities may or may not be available at one place.
16 MARKETING INFRASTRUCTURE Informal /traditional infrastructure : the informal structure includes local mandis, haats, melas etc. The traditional structure is still popular in some parts of country where the formal or institutional infrastructure has not developed.Regulated market yards: developed and maintained by APMC in various states. The regulated market yards generally provide all required facilities depending on size of the market.Indirect marketing infrastructure : contributing to stabilization of prices, like cold storage and rural godowns.
17 TYPES OF MARKETSPrimary markets: the primary markets are located near to villages and serve the farmers of its command area. The regulated primary market yards, local traditional haats or weekly markets can be classified in this category. The primary markets have some shops to meet the daily requirements of farmers and space for traders, commission agents and other market functionaries. The primary markets work as feeder markets for secondary and tertiary markets. Most of the small & marginal farmers have assess to primary markets.
18 CONTD……Secondary markets : The secondary markets are located in semi urban areas or towns/ district head quarters . The markets gets produce from nearby villages and have facilities for storage, auction and weighing etc. required for large number of farmers and traders. The markets also serve the farmers for purchase of the farm inputs. Most of the secondary markets have been set up by the APMC of various states. The amended APMC act has provision for setting up of the markets by private players. Some of the traditional mandis have facilities equivalent to a secondary market like traditional markets in Hapur, Bhatinda or Khanna in North India.
19 CONTD….Terminal markets: the terminal markets are located in big cities and get produce from entire state or some times from the near by states either by traders or the farmers in good quantity. The modern terminal markets are generally specialized in nature and cater to only one type of produce i.e. fruits, meat or grains. The markets are well equipped with the facilities like cold storage , godowns, shops, transport yards, platforms , grading and packing facilities etc.
20 CONTD……Now the terminal markets have been provided with the electronic display boards indicating rates prevailing for the commodities and the rates in other national level markets. The mandis have been connected with national level agri -market portal i.e. AGMARKNET.The demand for developed market places having fair dealings for farmers ,traders and consumers is huge and entry of private players will certainly help the farmers to get a fair price.
22 REQUIREMENTS OF A MODERN TERMINAL MARKET The terminal markets cover mainly perishable commodities.The markets are linked to several primary markets or collection centers for convenience of growers.These markets provide modern and latest facilities for grading, packing, transportation and storage facilities for domestic consumption and export.The aim is to provide better price to growers through integration of various components of marketing chain.
23 Modern Terminal Market Collection CentreModern Terminal MarketProducers/ Farmers and their AssociationsInfrastructure:Washing, grading, sorting, weighment, transport to TMServices:Collection & Aggregation of produce, Settlement of payment, advisory on inputs, prices, quality, multi-modal transportInfrastructurePackhouse, Quality Testing Facility, PalletisationTransport (incl. cool chain), Settlement of Payments, Banking, Market informationElectronic AuctionBanking InstitutionStorage:Cold Storage,Temperature controlled warehouse,Ripening ChamberProcessorExporterWholesaler/ Trader/Retail chain operatorDirect Selling
24 STATISTICS OF INFRASTRUCTURE The cold storage facilities are not properly distributed in India ,the highest number is located in UP and Uttaranchal.The approximate number of regulated markets is about 7150 against requirement ofThere are about rural haats .The number of whole sale markets is approxThe physical storage capacity is about 48 million tons.
26 CONTD……The total number of cold storages is approx.5400 with 2,40,00000 tons of storage capacity.However most of the cold storages are fit for storing potato only.The capacity of rural godowns constructed under government subsidy scheme is 256 lakh tonnes.The storage capacity is far from satisfactory level as the thousands of tonnes of food grains have to be stored in unfit storage conditions after every harvest season.
29 INSTITUTIONAL SUPPORT TO MARKETING Various institutions have been established under government or co-operative sector after independence to promote proper marketing of produce for benefit of growers as well as consumers.The major organizations are:Food Corporation of IndiaCotton Corporation of IndiaJute Corporation of IndiaNational Dairy Development Board
30 CONTD…..5.Commodity boards like coffee board, coir board and spices board etc.6.Corporations owned by state / central government for marketing or processing of produce (like MARKFED) .7.Marketing boards established by state government8.NAFED( National Cooperative Marketing Federation)9. Special marketing or processing societies.10.Tribal Cooperative Marketing Federation.11.National Horticulture Board12.National Medicinal Plant Board etc.
31 PRESENT SCENARIO AND PROBLEMS Considering the importance and the vast scope of innovations ,the potential and value addition from farmer’s point is still untapped.The present scenario of the market can not be termed as satisfactory as the gap between farm gate price and consumer price is very high i.e.50% to 300% depending on type of produce and its shelf life.The major concerns are listed below:Lack of marketing skills among farmers due to illiteracy and lack of information.Lack of developed markets within the reach of farmers.
32 CONTD….Lack of roads and other communication infrastructure and organized transportation in remote areas.Presence of middle men at many stages without any value addition.Poor processing facilities at rural level ,which results in glut situation during harvesting season.Shortage of economical and scientific storage facilities at rural level.Lack of media support to rural marketing, media coverage limited to technology dissemination.
33 CONTD… 8. Almost no market intelligence. 9. Presence of many languages and even more local dialects ,create problem in reach of information to people.10.Production not linked to demand, instead driven by other factors.11.Lack of primary grading facilities.12.Cold chains for perishable items are yet to be developed.13.Seasonal production and demand.
34 PRESENT REGULATORY FRAME WORK Agriculture produce (grading and marketing act)1937. The act deals with grading. sampling, testing, packing and sealing of the agriculture produce.The implementation is supervised by Directorate of Marketing & inspection. AGMARK certification is necessary for the items proposed to be exported.Prevention of food adulteration act(1954) :The act deals with the cases of adulteration in food items. The act is implemented by FDA officials of state government.Essential Commodities Act (1955)/(1981):the act was formulated to protect the interest of consumers ,so that the price, distribution and production etc. can be regulated for both agriculture and non agriculture commodities.
35 CONTD…..Fruit products order(1955): The order was issued under Essential Commodities Act . The main purpose of the act is to ensure that the quality is maintained during production and storage of fruits/vegetable products like pickles, ketchups, syrups and cold drinks etc.Cold storage act (1964):This act was also issued under section3 of Essential Commodities Act.The act is aimed at conserving the quality of perishables during storage.
36 AGRICULTURE MARKETING – WHY REFORMS ? Making agriculture a profitable venture rather than a subsistence activity.Paving way for private investment in marketing infrastructure which is inadequate at present.Reducing number of middlemen from the marketing chain.Removing restrictions on interstate movement of produce.Diversification of cropping pattern for high returns and insured income.Linking cropping decisions to market demands.
37 CONTD….. Promoting direct sale or purchase of produce. Creating legal frame work to support investment in this sector.Legal frame work for contract farming.Regulation of future trading prevalent in different forms in different parts of country.Creating a fair market for benefit of largely unorganized farming community.
38 I PHASE OF REFORMSAlternative models of marketing developed & Model APMC Act was circulated.Essential commodities act amended to remove some items.Integrated law related to food items was made and act passed, rules under the law are to be notified.Law for negotiable warehouse receipt system passed by parliament.Future trading permitted in respect of some commodities.
39 II PHASE OF REFORMSRural godown scheme launched to promote scientific storage at village level with subsidy component.Central assistance for improvement in marketing sector linked to reforms by state governments.Development of cold chains, air conditioned storage, pack houses, refrigerated cargo etc. through public or private investment .Market information system like AGMARKNET was developed to provide market information to farmers so as to take cropping decisions.
40 RECENT REFORMS (AT VARIOUS STAGES OF IMPLEMENTATION IN STATES)-MARKETING Establishment of Private or Cooperative markets/ Farmer-consumer markets.Direct marketing allowed.Protection of interest of the farmers through provisions for Contract Farming.Single point levy & payment of market fee/ Single point registration of functionaries to be ensured.Prohibition of Commission Agents for agriculturists and no deduction to be made towards commission.
41 Contd..6. PPP in management & extension activities/ Promotion of e-trading/ Electronic Spot Exchanges.7. Encouraging professional management in APMCs.8. Promotion of Grading & Standardization.9. Setting up special markets for commodities.
42 CONTRACT FARMING RELATED REFORMS Contract Farming Sponsor to register himself with a prescribed officer.The Contract Farming Sponsor to get the contract farming agreement recorded with a prescribed officer.No title, rights, ownership or possession shall be transferred or alienated or vest in the contract farming sponsor or his successor or his agent as a consequence arising out of the contract farming agreement.
43 Contd…. Fast Dispute Settlement Mechanism at local level Specification of Model Agreement for Contract Farming to ensure inclusion of terms & conditions safeguarding interest of both farmers & buyers.
44 SPECIFIC ISSUES RELATED TO REFORMS In some States, no provision for registration of contract farming sponsors, recording of contract farming agreement, dispute settlement mechanism, indemnity against the alienation of producer’s land on failure of contract and a model agreement format for contract farmingIn some States, no specific provisions for setting up of private markets/ direct marketing, setting up of consumers/ producers’ markets and fast re-dressal of disputes with regard to the same.
45 Contd…In some States, no provision for single point levy of market fee in the State.In some States, Licensing provided instead of registration for market functionaries; No provision for single point registration for trade and transaction in more than one market area.In some States, no provision to promote and encourage PPP in management of markets/ extension activities and e-trading.
46 Contd……In some States, registration of contract farming sponsors or processors vested with the Secretary of the APMC – should be out of APMC’s purview (better at State level)In some States, contract farming dispute settlement authority is State Level/ Divisional Officer – should have been kept at below District level for easy access to farmersIn some States, Private Markets have been restricted within a specified distance from the existing regulated markets under the Rules.
47 CONTRACT FARMING-AN ALTERNATIVE CHANNEL Contract farming is not new to Indian farmers but it was informal restricted to some sectors only.An agreement is entered between buyer and farmer.The agreement covers the price offered, quality and sometimes quantity of produce also.In most of the cases the buyers supply the seeds, technology ,bank/institutional credit and other required facilities.The crops presently being grown are sugarcane, cotton ,potato, coffee, soyabean, medicinal plants and spices etc.
48 Contd….Some of the firms entering into contracts are Pepsi, ITC, Cargill India, Godrej, Dabur, Himalya, Health Care , United Breweries etc.INDIAN EXPERIENCEThe contracts are still oral and documentation is poor.The well planned and implemented contracts resulted in increased farmer’s income.The farmers were introduced to technology, ideas and new markets.The farmers got inputs at door step.
49 AGMARKNET - OBJECTIVES To establish a nation-wide information network for speedy collection and dissemination of market information for its efficient utilization.To ensure flow of regular and reliable data to producers, traders and consumers to derive maximum benefit of their sales and purchases.To increase the efficiency in marketing by effecting improvement in the existing market information system.
50 Contd……..To computerize data on market fee, market charges, total arrivals, arrivals by agencies, prices (variety wise/quality wise), storage, dispatches with destination, mode of transportation, costs, sold and unsold stocks, sources of supply with destination, method of sale, payment, weighting, grading facilities, quantities graded, market personnel (trained/untrained), market functionaries, market finance.
51 Contd……Development of programmes, infrastructure facilities, constitution/ composition of Market Committee, income and expenditure and other activities of the APMCs, State Marketing Boards and DirectoratesThe network covers about 3000 nodes, more than 300 commodities in 10 languages.
52 COOPERATIVE SECTOR AND AGRICULTURE MARKETING The Cooperative sector can play a vital role in marketing of agriculture produce.The AMUL experiment has been covered in detail in earlier module.The similar type of system can be evolved for different parts of India.The SAFAL is also doing a good job by direct procurement of items from farmers of even remote and hilly areas.
53 Contd……The self help groups (which can be termed as mini informal cooperatives) can play role in marketing.The groups can collect the produce from various small producers and can do the primary processing like grading, cleaning, packing etc.The sale of produce though groups will also save the time of individual farmers and also reduce the transport cost.
54 ROLE OF CORPORATE SECTOR During pre reforms period ,the agri marketing was out of purview of corporate sector (except public companies).The entire trade was carried out either by traders or the public sector companies.The corporate sector entered into the business after reforms.The market was opened not only for purchase but also for retail sale.The agro processing industry started the procurement directly from the farmers and also integrated them for production of specific varieties.
55 Contd……BENEFITSThe farmers were able to sell the produce at predetermined price or pricing methodology (SAFAL pays as per Azadpur Mandi rates minus transportation cost).The weighing is being done through electronic machines.The middlemen and commission agents have no role.The consumer is also getting food at low price.The adulteration like colouring is avoided.The farmers get cash immediately.
56 Contd…….7. The farmers are diversifying into high value crops and off season vegetables due to assured buying.8. The wastage of produce due to on availability of cold chain is reduced.9. The traders are also offering incentives to farmers to have share in the market.10. Due to on- farm purchase ,the farmers save their time and can use it gain fully in other activities.11. It also results in indirect saving to nation in form of fuel as the produce is generally collected from the collection centers.
58 Contd…….LIMITATIONSOnly selected and quality produce is purchased ,whereas every thing can be sold in traditional mandi at different price.The supermarkets, mega stores or the food processing companies insist for specific varieties of their choice which may or may not be locally adapted. Farmers have suffered huge losses on this account. this also act as deterrent to bio –diversity. This may finally result in vanishing of local vegetables and fruits.
59 Contd..3. A large number of persons engaged in trade will slowly become unemployed.4. People also feel that the corporate sector may act as monopoly after having a grip on the agriculture produce market and may determine the cropping pattern of country for its own advantage.5. The local traders/ middlemen though generally termed as cheats, sometimes come to rescue of the poor farmers when they need money and the organized sector is not able to deliver due to its limitations.
60 Contd……Now, with introduction of reforms , the farmers have a choice to sell their produce, at least in some parts of rural India.The healthy competition between traders, corporate buyers or cooperative marketing system will be beneficial to farmers and consumers.
61 DIRECT MARKETINGWe have already discussed in various modules that the price of agriculture produce increases up to four times without any value addition due to presence of large number of middlemen. this situation can be avoided by encouraging direct marketing of produce by farmers.Some of the states are already encouraging the direct marketing by allowing Apni Mandi or Kisan Mandi in towns or cities where the farmers sell the produce directly to the consumers.The places like Dilli Haat have been created for non farm rural produce. Similarly the organized marketplaces can be created for farm produce.
62 Contd……Direct marketing by farmers will not only benefit farmers and consumers in terms of money but it empower them in many ways.The farmers will learn the various aspects of marketing by day to day experience and will be able to link the production to market.The availability of this channel will also create beneficial conditions in other marketing channels and the bargaining power of the farmers will increase.
63 Case study – ITC’s e-chaupals The idea of e-chaupal was launched by ITC which has a agro business division.ITC provided an ICT kiosk with internet access in the house of Sanchalak( a trained farmer). Solar Energy was used to break the power barrier.The portal gives lot of information to farmers related not only to market but also to weather, agriculture, education ,training etc.The farmer can take decision on selling the produce without visiting the market and without the pressures of middlemen.
66 Contd…… The farmers can sell the produce to ITC or elsewhere. The chaupal sagar or hubs have been developed to provide various physical facilities to farmers like electronic weighing, supply of quality inputs etc.The experiment is successful and slowly covering large number of villages in various parts of India.
67 Way aheadHuge investment is needed in the sector to bring the facilities at par with international level.Opening of the sector will definitely be beneficial to all.A mix of all channels will not only bring competition but also restrict creation of any monopoly.The more e-chaupal type innovations can fill the information gap at low cost.Primary or secondary level processing at village itself will not only generate extra income but it can avoid distress selling.
68 SUM UPThe agriculture marketing is changing and moving from subsistence to business level.The field is now open for competition.The ultimate aim is to make agriculture a profitable activity.The present concerns are to increase number of organized markets, create infrastructure for saving the perishable commodities and ensure better farm income.