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IAS Exam : Agriculture Marketing in India

Jun 23, 2016 12:39 IST

    Farmers do not have the mechanisms, tools; methods and infrastructure to sell the farm produce in efficient and lucrative market. They, therefore generally rely on the middlemen to sell their produce. Such arrangement takes a blow both on consumer as well as producer because of the high commission of middlemen and greater number of such middlemen. Farmers or the farm producers do not get the deserving amount for their labor and at the same time, end user has to shed heavy money for that same produce.

    Therefore, there needs to be an arrangement wherein a direct transaction can be done with the producer and the consumer. This will not only rein the high cost for consumer, but will also encourage the producers. This can be done only with the elimination of middlemen or their negligible presence. Designated agriculture markets are such places, which offer the farmers to sell their output and produce directly to the consumers. The role of the agricultural market is to deliver agricultural produce from the farmer to the consumer in the most efficient way.

    The National Commission on Agriculture defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre and post- harvest operations, assembling, grading, storage, transportation and distribution.

    The subject of agricultural marketing comprises of all the operations, the agencies conducting them, resources involved in the movement of farm-produced foods, raw materials and their outputs, from the farms to the final end users, and the consequential effects of such operations on all the stakeholders, i.e. farmers, middlemen and consumers. It deals with end to end activities from production to sell. The agricultural marketing system plays a crucial role in the economic development in country like India.

    Traditional Agriculture Marketing in India

    Following are some of the traditional agricultural marketing in India:

    Direct sale to moneylenders and traders: Most of the agricultural produces are sold directly to petty traders of the villages or the money lenders. These traders or moneylenders then work as intermediaries and sell these produce in bigger markets or to wholesalers, earning substantial profit.

    Rural Haats: A Haat is village market tvering couple of villages. They are held in periodic manner. The agents of wholesalers and different brokers visit such haats to buy the produce of the farmers or of the intermediaries. The Haats have very poor infrastructure facilities. They generally lack storage, drainage and other facilities. Smaller and marginal farmers are generally the main supplier of such haats.

    Mandi: A Mandi is a wholesale market, which serves a number of villages, localities and even towns. They are generally located in a city or a very big village markets. The businessmen who are functional here are calledAdhtiyas. These Adhtiyas buy from farmers via middlemen, moneylenders, intermediaries etc. and then sell it to wholesalers and suppliers who sell it to retailers. These Mandis are regulated by APMC acts of various states.

    Co-operative marketing: Such societies are formed by collection offarmers to get benefitedby collective bargaining. This improves the bargaining power of the members and they are able to obtain a better price for the produce, because the produce present in very large in terms of quantity. In addition to the sale of produce, these societies also serve the members in a number of other ways.

    Agricultural Produce Market Committees Act

    The Act s the provision of agricultural produce market committees (APMC) that are responsible for the operation of the markets in various states (since agriculture is the state subject). The entire State is divided and declared as a market area where in the markets are managed by the Market Committees constituted by the State Governments. Currently there are around 7,500 regulated markets in the country. Their main function is to provide the farmers a platform to sell their produce.

    The objectives of such committees are to ensure that farmers are get paid sufficiently and judiciously without getting exploited. These market committees are engaged in enhancing the market (mandi) infrastructure and make arrangements for the farmers to sell the products directly to the consumers or wholesalers.

    However, such committees create monopoly over the areas, charge commissions and taxes as per their whims, do not enhance storage facilities and related infrastructure, do not engage in standardization and grading of agricultural produce. Farmers are also forced to sell their products only in such markets.

    Model APMC Act:

    To tackle some of these problems, a model act has been enacted in 2003 to provide for development of efficient marketing system, to promoteagri-processing and agricultural exports and to lay down procedures and systems for putting in place an effective infrastructure for the marketing of agricultural produce.

    ICT and agricultural marketing  

    ICT, i.e. Information and Communication Technologiesconsist of various collections of resources and technical tools that are used for connecting, spreading, storingand managing information. They employ hardware, software, internet, Computers etc to make an impact on the purpose it is used for. Agricultural marketing can have tremendous benefit using ICT as evident by following points:

    • Using ICT causes fast accessibilityto the market, risingselection power, improving communication, identifying markets, saving in time and energy, improving marketing,
    • It also helps in the business costs reduction.
    • ICTs are used for real-time market research to obtain current information and help users gradually accumulate market knowledge and insight.
    • ICT can help in bysetting well-organized collection routes for agricultural produce.
    • It can also help in aggregation by assembling markets with sufficient critical mass to attract large-scale traders
    • ICT can prove to be a boon by coordinating directly with other farmers or truckers to organize times, dates, volumes, and so forth.


    One of the most popular and excellent example of using ICT in agricultural marketing is the establishment of e-choupal by ITC. ITC (Indian Tobacco Company Limited) started e-choupal with envisioning better integration and awareness of the marginal and rural farmers. ITC started small internet kiosks at the village level. Thisprogram installs computers with Internet access in rural areas of India to offer farmers up-to-date marketing and agricultural information. It Provides:

    • Direct procurement framework
    • Real time market information related to prices
    • Availability of inputs: seeds / fertilizers, their prices
    • Scientific farm practices
    • Weather, monsoon data
    • Dispute resolution between the company and the farmers.

      
    E-Agriculture Marketing in India

    E-Agriculture Marketing means selling, purchasing, making transactions, comparing prices etc of agricultural produce over the internet. It acts as a virtual market wherein everyone can interact and do business with any people across the country without going physically. E-agriculture marketing although started in India at pilot basis or at smaller levels or initiated by some private groups, has been revolutionized through the recently launched National Agricultural e-Market. This will create various e-mandis which will integrate the various vegetable markets across the country, bringing them all to one platform and registered farmers will now be able to sell their produce online in any of the markets where they can get the best price. In addition to this big private markets will also be allowed access to the software to enable better price discovery.

    Bottlenecks in implementations

    There are several bottlenecks in agricultural marketing. Majority of them revolve aroundlimited access to the market information, low literacy level among the farmers, multiple channels of distribution, lack of government funding of farmers, excessive dependenceon the local money lenders charging exuberant high rate of interest and so on. Following points explain such bottlenecks in detailed manner:

    Improper storage facilities: There is generally huge lack of proper warehousing facilities in villages. Due to which, farmers have to store their produce in temporary mud vessels and kutcha warehouses.Such storages lead to huge wastage of agricultural produce, ultimately leading to their quick disposal in the market or to intermediaries.Such problems can be solved to some extent by constructing godowns and storage facilities.

    Lack of grading and standardization: Proper grading standardization are almost absent in agricultural markets. Such lacks lead in improper selling of agricultural produce. Farmer does not able to get sufficient remuneration therefore there are no incentives to use better farm inputs and produce better varieties. All qualities of agricultural outputs are sold under one parameter. Thus the farmer producing better qualities is not assured of a better price.

    High prevalence of middlemen : There is high prevalence of middlemen in the agricultural marketing which hampers the prosperity of farmers substantially. Some of the examples of such middlemen are chain includes village traders, Kutcha Adhtiyas, Pukka Adhtiyas, Brokers, wholesalers, retailers etc.

    Inadequate transport facilities : Most rural clusters are not connected to urban centers by all weathered roads or railways. Due to these, farmers either have to carry their produce to local Mandi by foot or by Bullockcarts, or have to sell them to middlemen at considerable lowerprices.

    Market wrongdoings: Traditional Indian agricultural markets are unregulated and therefore, such markets are dominated by large moneylenders, brokers, middlemen etc. They levy many unjustified taxes and commissions on farmers.

    Inadequate market information: Farmers or peasant are generally unaware of the prevalent and just prices across the markets. They, therefore accept any amount as decided by the brokers and agents of the markets. Fortunately greater information dissemination is being provided with the help of internet and phone now a days, which have acted as savior for the farmers.

    Capacity Building Required

    Indian agricultural markets are reeling under various compulsions and rigidities, which if not ameliorated may cost very dear to the socioeconomic development of our country. The potential the rural economy in India has if nurtured properly will go a long way in eradicating the lives of crores of people. For all these, some sort of capacity buildings are required, which have been explained below:

    Provision of easy loans to the farmer at low rate of interest is imperative. This willfree the farmers from the clutches of local moneylenders who squeeze them. farmers generally live in perpetual debt throughout their lives. Poor farmers fall into the money lenders exploitative trap in the absence of institutional credit facilities, improper crop insurance, crop failure etc. Therefore, greater penetration of credit facilities and financial inclusion will go a long way in enhancing the capacity building. Recently launched Small and Payment banks may proved to be boon for this.

    • Farmers often face the problems of intermediaries. In fact, consumers also suffer a lot on this account. Multiple middlemen take majority of the profits entitled for farmers by the time the agricultural produce reaches to consumers. Therefore, there is an urgent need to make the distribution network of farmers as robust and as efficient as possible. Generation of distribution network that connects the farmers directly to the consumers to get maximum returns should definitely be a priority in capacity enhancement.
    • Black marketers and hoarders are another dampener in the efficient agricultural marketing by farmers. They buy the agricultural produce from farmers at very cheap prices  and create artificial inflation, thereby making the consumers suffer as well.
    • Due to the problems of accessibility, poor transportation and lack of warehousing facilities, it is of utmost importance to create local outlets at each village where the farmers sell their stocks directly to the consumers or the authorized buyers at fixed prices. This will be best done by the government and related authorities.
    • Governments, retail giants, local governments and cooperative farmers should revolutionize the construction and establishment of cold storages, warehousing facilities etc in rural areas.  Usually immediately just after the harvest the prices would be low and if the farmers are patient in holding the same for some time it would fetch better prices.
    • Farmers suffer from ignorance and unawareness. Lack of current prices, ignorance policies of governments, unawareness about futures and forward markets etc lead them to sell their produce at very cheaper rates. Counselling and information dissemination center at the remote rural centers and in villages can make the poor farmers realize the true worth of their produce. The role of various NGOs can prove to be very crucial in this regard.
    • Provision and encouragement to contract farming can be another vital area for agricultural marketing.
    • Government should also make endeavors tolevy single entry tax instead of levying multiple entry taxes either directly or indirectly for the transactions and activities that are involved in agricultural marketing such as transportation, processing, grading etc.
    • Efforts must be made to provide the opportunities to the farmers for direct selling of their produce without the help of any intermediaries and middlemen. This would provide the required incentives to farmers
    • Indian agricultural market lack tremendously the provision of standardization and grading. There should be all-round rationalization and standardization of the prices through legislative means.
    • Marketing committees which has the representation of growers, merchants, local bodies, traders and nominees from the government should also be constituted in efficient manner. This will surely address the grievances of farmers and keep on ameliorating their plight by various feedbacks.

    The way ahead

    Undoubtedly, a successful market is where a business can thrive; where businessmen become successful and where the sellers as well as buyer have full satiation in terms of the quality, cost and standard of the product in transaction. In addition to this, an efficient market should also employ certain virtues, principles and morality for its sustainability.

    Example of offering just and fair prices to the farmers who toil hard to till quite comprehensively adhere to the above statements. It is, therefore imperative to bring in necessary reforms along with proper price discovery mechanism through regulated market system to streamline and strengthen the agricultural marketing.

    Small and marginal farmers are generally devoid of the benefits agriculture can provide. Therefore, these poor farmers should be integrated, disseminated with ample and necessary informations and fed with adequate awareness with the market knowledge like fluctuations, demand and supply concepts which are the core of economy.

    The success of agricultural marketing can be ensured if it is looked from the collective and integrative efforts from various quarters by addressing to farmers, middlemen, researchers and administrators. The time has come, when we bring in substantial strategies, considerable innovations and creative measures to pluck the fruits of labour to the farmers.

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