1. Historical Perspective of Regulatory Framework for Fruits and Vegetables Marketing in India: Recent Contradictions
V P S Arora
Vice Chancellor, Supertech University
Former Vice Chancellor, Kumaun University

2. India: An Overview
Total Geographical Area : 329 m.ha. No. of States : 29 No. of Union Territories : 7 Literacy Rate : 74% Population Density : 382 per sq.km. Rural Population : 69 % Life Expectancy : 70 years Per Capita Income : Rs 68,757 at current prices Rs 39,168 at prices
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3. 18 % of the world human population 15 % of the world livestock heads
OUR COUNTRY HAS
18 % of the world human population
15 % of the world livestock heads
BUT ONLY
2.4 % of the world geographic area
11.3% of the world arable land
1% of the rain water
1% of the forest cover
0.5% of pasture land
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4. India is the Front Ranking Producer of many Commodities
Goat & Sheep
million
Cattle / buffaloes
Largest in the world
million
Food Grains
#2 in the world
( Mn T)
Milk
Largest Producer
~ Mn T
F & V
#2 in the world
Mn T
Fisheries
Marine: Mn T
Inland : Mn T
Sugarcane
# 2 in the world
( Mn T)
Tea
Largest Producer
(0.96 Mn T)
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5. Indian Agriculture Backbone of the economy
Leading producer of agriculture , horticulture, and animal products
Wide variability of crops due to variability in agro-climatic conditions
To achieve double digit GDP growth rate, an agriculture growth rate of around 4% is required
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6. Complexities and Mistrust No single “agency” responsible
The Agenda for Agriculture has been written over several times by many agencies
Who will make it happen?
Multiple stakeholders, Multiple decision makers
Complexities and Mistrust
No single “agency” responsible
No single “stakeholder group” can make it happen
Need for neutral body to catalyze collective action
How can an integrated virtuous cycle that compliments and accentuates different positive forces Towards making it happen?
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7. The Agriculture & Food Value Chain in India
Farmers
Inputs (seeds, Pesticides/Fertilizers)
Implements & equipment
Extension Services
Technology including IT
Post Harvest Handling, Supply Chain, Logistics & Intermediation
Markets & Market Infrastructure
Processing
Packaging
Retailing
Exports
Potential Businesses in Agri Value Chains
Final Users
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8. Indian Agriculture – A health Check
Pre-Harvest
Declining average holding size
60% of area remain under rain fed agriculture
Inefficient last mile delivery of inputs
Eroding water tables and declining soil health
Post-Harvest
Regulated markets
Inefficient market systems and linkages
Knowledge and information gaps in grading, sorting, packing, pre-cooling etc.
No value addition at farm gate
The Key Issues
Needs massive infusion of Technology, Infrastructure and Market linkages
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9. Agriculture Transition – Forces at work
Retail revolution
Retailing in India is currently a US$ 800 billion industry with 70% share of Food & Grocery
Expected to % per annum for the next 3 years
90% growth in food and groceries
Modern format going for nationwide presence including Rural
Shift in consumption pattern from traditional crops to high value crops
High penetration of processed foods in the consumption basket
The Transition
Compulsion on Government to move away from subsidies to higher remuneration to farmers
Conscious policy shift for value added agriculture
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10. Challenges of Demand Driven Agriculture
Land fragmentation / lack of land markets
Inadequate knowledge of potential risk and returns
Poor credit and risk cover mechanism
Scalability
and sustainability
Uncertain Crop diversification Policies and Programmes
Lack of collaborations across value chains
Linking small farmers to new marketing systems
Lack of efficient Agri markets
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11. What Does Indian Agriculture Need Today
Food grain Sector
Massive infusion of technology and knowledge transfer for productivity enhancement
Irrigation
Rural Infrastructure
Credit and Insurance
High Value Agriculture
Policy and programs for transition to high value/demand led Agriculture
Crop diversification to suit commercial needs
Modern Technologies across Value Chains
Agri focused infrastructure including Cold Chain for linking farms to markets
Investments in rural infrastructure
Collaborations across value chains
Appropriate credit and risk management policy
Demand pull
Long term Competitiveness
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12. Critical Missions
Link Agriculture to Markets (state level reforms, marketing infrastructure, cold chains)
Greater private participation in extension and farm services
Develop mutually rewarding models for Agri risk management
Promote private sector investments in Agribusinesses and Agri infrastructure
State Governments to speed up reforms
Enable a globally aligned industry friendly food regulatory regime
Capacity building in the food processing sector
Promote promising Agri Value Chains
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13. Agricultural Marketing– Backdrop
Increased marketed surplus
Changed commodity mix with growing share of high value commodities
Increased urbanization and income levels
Increased linkages with distant and overseas markets
Changes in the form and degree of Government interventions
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14. Dimensions of Agricultural Marketing: S C P Issues
Agriculture engages about 52% of work force and contributes about 14 percent of GDP.
Small and marginal farms account for over 40% of total food grains viz.
- 49% of Rice;
- 40% of Wheat;
- 29% of coarse cereals;
- 27% of pulses; and
- over half of the total fruits and vegetables
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15. Marketing Channels
Agricultural commodities move through different marketing chains.
Market functionaries involved distinguish the Marketing channels
Length of the marketing channel depends on the size of market, nature of the commodity and the pattern of demand at the consumer level.
Agricultural marketing channels are in general divided into four broad groups:
- Direct to consumer : up to 2%
- Through wholesalers and retailers : about 80%
- Through public agencies or co-operatives : about10%
- Through processors : from 3 to 5%
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16. Evolution of Supply Chains
For centuries, traditional market was the only supply chain to handle goods
Farmer
Consumers
Markets
Price & Regulation
From simple to complex supply chains have evolved
Consumers
Farmer
Farm Owner
Consolidator
Trader / Transporter
Commission Agent 1
Commission Agent 2
Wholesaler
Hand Cart Vendor
Small Roadside Vendor
Medium / Large Retailer
Supermarket / Hyper market
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Source: Presentation by the World Bank in MACP Workshop

17. Marketing Agencies
Main functionaries in the marketing channel for agricultural commodities include village traders, primary and secondary wholesalers, commission agents, processors and retailers including vendors (Approx. 2 Million wholesalers and 5 Million retailers)
Public agencies, farmers’ co-operatives and consumers’ organizations also perform many marketing functions
Private sector handles around 80 per cent of the marketed surplus of agricultural products
Quantity of agricultural products handled by government agencies has been about 10 per cent of the total value of marketed surplus
Around 10 per cent marketed surplus was handled by producers or consumers co-operatives.
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18. Government/ Co-operatives in Marketing
Government intervention in purchase of agricultural commodities under-
- Minimum Support Price programme (MSP),
- Procurement of food grains,
- Market Intervention Scheme (MIS),
- Monopoly purchase,
- Open market purchases of commodities by NAFED, CCI, JCI and state oilseed federations
Basic objective of entry of these agencies is to safeguard the interest of producer- farmers along side providing food security to consumers through operating PDS
Food Corporation of India has entered as an important market functionary in the trade of cereals
Fair price shops also came as retail outlets for distribution of cereals to targeted sections of population
Co-operatives have also assumed importance in the marketing channel with the encouragement to producers or consumers cooperatives
In case of sugarcane, co-operative sugar factories play a dominant role.
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19. Historical Developments in Regulating Agricultural Markets
First Agricultural Market was regulated in 1896 at Karanja (Former Hyderabad State)
Cotton and Grain Market Law was enacted in 1897 in the Berar region (Hyderabad Assigned District)
Based on the recommendations of Indian Central Cotton Committee (1917) and Royal Commission on Agriculture (1928), various Provinces and States enacted Acts for establishing Markets
Before Independence, market regulation was in force in Bombay (1927), Central Province (1932, 1935), Mysore (1939), Punjab (1941), and Patiala (1947)
After Independence most of the States enacted Agricultural Produce Market Regulations Acts
The process of amendment in APMC Act by States restarted after Model APMC Act was framed at the national level in 2003
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20. Agricultural Markets in India as on 31.03.2014
5964 Wholesale Markets in India
22759 Rural Primary Markets (about 15% are regulated markets)
2483 Principal Regulated Markets
4631 Regulated Market Sub-yards
Total – 7114
(Only 250 and 286 regulated markets in August 1947 and1950 respectively)
Need for Regulated Markets within 5 sq. km radius whereas average all India availability is sq. km only.
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21. Salient Features of Regulated Markets
Democratically governed by APMC, consisting of 15 to17 representatives of farmers, traders, cooperatives, warehouses, and officials of marketing and other departments (Elected members not less than 11).
Bylaws, rules and regulations are framed by APMC
Secretary of APMC is appointed by the Government
National Commission on Agriculture (1976) recommended one regulated market at a radius of 5 sq km
Commodities notified varies from state to state
There is a provision of establishing Special Commodity(ies) Markets
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22. Contribution of Regulated Markets
Basic objectives have been-
- to ensure reasonable gain to the farmers by creating environment in markets for fair play of supply and demand forces,
- to regulate market practices and attain transparency in transactions
Aimed at providing proper method of sale, correct weighment, prompt payment and various marketing related services
Democratic set up to control and manage markets
Advent of regulated markets has helped in mitigating the market handicaps of producers/ sellers at the wholesale assembling level
Achieved only limited success and Rural Periodic Markets in general, and the Tribal Markets in particular, remained out of its developmental ambit.
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23. Various Reforms Initiated
Suitable amendments in the State APMC Acts to facilitate efficient and alternative marketing channels for farm produce
Progressive dismantling of controls and regulations under EC Act to evolve a national integrated market for agri-produce
Law for implementing Negotiable Warehouse Receipts System passed by the Parliament
Enactment of an Integrated Food Law to promote quality and single window regulatory system
Allowing futures trading/ electronic spot trading in agricultural commodities for better price risk management and price discovery
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24. Major Reforms through Model APMC Act
Central Government circulated Model APMR Act to State Governments for adoption in September 2003 and Model Rules in November 2007
Establishment of Private/ Co-operative markets/ Farmer-consumer markets/ Direct marketing
Safeguarding interest of the farmers through provisions for Contract Farming
Single point levy and payment of market fee/ Single point registration of functionaries
PPP in management & extension activities/ Promotion of e-trading/ Electronic Spot Exchanges
Encouraging professional management in APMCs
Promotion of Grading and Standardization.
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25. Myths and Realities
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26. WHERE IS REGULATION OF AGRI MARKETS?
India: 35% of wholesale markets and 25% of all agri markets
Karnataka: 30% and 40%; Tamilnadu: 90% and 30%; AP (old): 100%
Jharkhand:14% and 25%; MP: 100% and 33%; UP: 50% and 15%
UK:70% and 90%; Haryana: 35% and 60%; Punjab: 35% and 90%
Gujarat: 98% and 85%; Maharashtra:33% and 22%
WB: 14% and 20% and Orissa: 10% and 20%
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27. ABOUT AMENDED APMC ACTS
Is the farmer not free to sell anywhere s/he wishes?
If not, how are food supermarkets procuring? and how is contract farming going on across India? And how are farmers’ markets being held?
Direct purchase from farmers allowed in: Maharashtra (130), MP (8), Chattisgarh, Karnataka (258) Andhra Pradesh(171), Gujarat (21), Haryana (37), Himachal Pradesh (12), Odisha (46), Punjab (26), Rajasthan (77), Delhi, and Tamilnadu (179)
States with no APMC Act: Bihar (repealed w.e.f ),Kerala, and Manipur
MoFPI says 16 states have amended the APMC Act fully or partially, and have agreed to delist F&V from the APMC Act! Some have already done it (??)
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28. MAJOR F & V STATES IN INDIA
Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Bihar, Orissa, West Bengal, Jharkhand, Chhattisgarh, Madhya Pradesh, Gujarat, Maharashtra, Himachal Pradesh, Uttarakhand, Uttar Pradesh, Manipur, Arunachal Pradesh, Meghalaya, Sikkim, Tripura
Where are F&V growing fast: AP, Bihar, Jharkhand, Gujarat, Haryana, HP, J&K, MP, Chhattisgarh, Maharashtra, Orissa, UP, UK, WB, and the NE states
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29. ABOUT AMENDED APMC ACTS
Is contract farming not permitted anywhere in India?
States that permit Contract Farming: Punjab, Haryana, Himachal Pradesh, Uttarakhand, Rajasthan, Maharashtra, Gujarat, Chhattisgarh, Madhya Pradesh, Jharkhand, Andhra Pradesh, Orissa, West Bengal, Karnataka, Kerala
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30. MAKING AGRI MARKETS WORK
Scrutiny of contracts, public contract terms, and competition in procurement (monopsony)
Incentivise smallholder inclusion
Link credit to CF, though not mandatory or exclusive (lower interest rates for CF?)
Exempt F&V crops from APMC rules only for CF and Direct purchase
Promote Producer Companies to organise/encourage market oriented and business like co-operatives (New Generation Co- operatives) which can deal with CF agencies
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31. MAKING AGRI MARKETS WORK
Role of the state- How Much regulation? Bihar v/s Gujarat in APMC Act! Role of the state:
Promotion of producers’ organizations for marketing of farm produce as PPP
Provide more of marketing extension to growers
Market orientation in terms of improved marketing practices at the farmer level.
Incentivise/promote Group contracts to reduce information asymmetry between firm and growers, transaction cost of dealing with small growers and for better bargaining power to growers
Legal protection to growers like in Japan/USA
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32. MAKING AGRI MARKETS WORK
Reform APMC markets- free licensing for better competition, e-payment of market fee, ensure open auction system, better facilities, PC representation in APMC managment, denotification of CAs/Arthiyas like in MP, (APMC markets serve as competitors to contract and direct purchase and can help improve the terms offered by CF/DP to growers as contract/contact prices are benchmarked to APMC prices, Make warehouse receipts applicable to less perishable produce like potato/onions
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33. Farmers’ Need to Get Organized
Group/ Co-operative Society/ Producer Company formation can help in lowering transaction costs in marketing & purchase of inputs and increasing bargaining strength
Helps in aggregation of marketable surpluses & value addition and development of forward linkages with suppliers/ processors/ exporters/ futures market,
Facilitates access to technical services & credit,
Can help in owning & managing marketing/ processing facilities – Farmers’ Markets coming up in many States – V & F Promotion Council of Kerala, Ryathu Bazars in AP, Apni Mandis in Punjab are examples,
ATMA Scheme & other Government Programmes promoting group formation, capacity building, revolving funds, access to market information, etc.
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34. Future Challenges
Some States still not willing to allow direct marketing or private markets – political opposition to direct marketing/ contract farming/ organized retail chain etc.
Authorities are overprotecting existing marketing channels – not facilitating change/ competition/ new channels – also not modernizing APMC Yards or improving management through PPP
Trade/ movement restrictions still existing for certain commodities
Single point levy of tax/ single point payment yet to be facilitated in most States
APMC Rules not notified in many States for amended provisions (Notified only in AP, HP, Karnataka, Maharashtra, Rajasthan , M.P (only single license for more than one market), Haryana (Only CF) & Orissa so far.
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35. Way forward Execution and not intent of APMC can be questioned
India needs professionally managed APMCs to safeguard the interests of millions of Small and Marginal Farmers
Massive use of ICT will eliminate loose ends in the process
APMC should act as marketing entity rather then policing entity
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36. Thank You
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