Agriculture Marketing

Agricultural marketing refers to the various services that link the agricultural produce of a farmer to the consumer.

It involves processes such as- transportation, storage, grading and packaging.

The agricultural marketing in India is serviced through a network of ~22,505 rural primary markets (RPMs) and ~7190 wholesale markets set up under various state marketing legislations in the country.

The marketing of the agricultural produce in India is governed by the Agricultural Produce Market Committee [APMC] Act enacted by the respective state governments.

As per the Act, every state is divided into different mandis, functioning under a Market Committee constituted by the state government.

A farmer can sell only to the authorized traders and commission agents are allowed to carry out procurement and distribution of agricultural produce brought by the farmers.

Agricultural Marketing: Issues

Agricultural Produce Market Committee [APMC] Issues:

1. Monopoly of the APMCs: Restricts the number of options available to the farmer to sell his produce and reduce the competition in the agriculture market.
2. Entry barriers: Getting a commission agent license in  the regulated markets mandates the owning a shop/warehouse, which restricts new players.
3. Uneven spread of mandis: There is a huge variation in the density of regulated markets across India. For instance, there is one regulated market per  118 sq. km. in Punjab while in Meghalaya it is one market per 11,214 sq.km.
4. Wastage: APMCs lack proper warehouses, cold storages due to which 30 percent of the produce is wasted.
5. APMC Commission and taxes: The market fees collected by the state governments range between 0.50 % to 2.0 % of the sale value of the produce. Commission charges also vary from 1 % to 2.5 % in food grains and 4 % to 8 % in fruits and vegetables. In some States, all such taxes total up to about 15 % which is excessive.
6. Cartelization: It prevents the actual price discovery of the commodities in the mandis. For example, the traders plotted to depress the prices at the mandis during the implementation of Bhavantar Bhugtan Yojana in Madhya Pradesh.
7. Non-uniformity: Each APMC is covered by the act of their respective state governments.

Systemic Issues:

1. Rural Infrastructure: Infrastructure deficit such as lack of electricity, inadequate cold storages leading to large food waste.
2. Cold storage facilities: Most of the  existing cold storages are single commodity storages. This has resulted in their capacities lying unused for the most part of the year due to the seasonal nature of agri-produce.
3. Lack of standardization and quality assurance: European Union (EU) has rejected more consignments from India as compared to consignments from other developing countries such as Turkey, Brazil.
4. Lack of Transportation Facility: Many of the rural areas don’t have proper road and rail facilities which makes discovery of the best price difficult.
5. Financial constraints: As per the 10th agricultural census, 86.2% of the farmers in India are small and marginal in nature. They lack access to formal credit facility.
6. Issue of cooperatives: Lack of a proper cooperative marketing structure further adds to the woes of small and marginal farmers. The decision making power in the cooperatives has also been monopolised by the large farmers to benefit themselves.

Policy Issues:

1. Delay in Market Interventions: Market Intervention Scheme[MIS] is used by the government when there is a large drop in the price of a commodity. The current  process to fix the MIS price is long [States approach the centre and then centre sets up a committee to examine the costs to fix MIS price].
2. Lack of Market Intelligence: The farmers usually do not have sufficient information regarding the prices of the agricultural produce in the market.
3. Large Number of Marketing Channels with Long Supply Chain:  As per the report of Ashok Dalwai Committee, a farmer only gets 15% to 40% of the price at which the commodity is finally sold to the consumer. It is due to the long value chains between the producers and the consumers. It includes a number of intermediaries, such as – wholesalers, brokers, commission agents, retailers
4. Malpractices in the Market:  A number of unregulated markets in the country adopt various malpractices such as : use of false weights, adulteration, black marketing.
5. Low adoption of contract farming: Only 15 states have notified rules related to contract farming. There is no independent authority to regulate contract farming in India.

Agricultural Marketing: Government Initiatives

1. Integrated Scheme for Agricultural Marketing (ISAM):

• Provides capital for the creation of agriculture infrastructure under the sub-scheme “Agricultural Marketing Infrastructure (AMI)”.

2.Model Contract Farming Act,2018:

• It takes contract farming out of the ambit of Agricultural Produce Marketing Committees (APMCs).
• It instead sets ups a Registering and Agreement Recording Committee, under which all the contracts have to be registered.
• The Model Act contains provisions for dispute resolution, such as : negotiation and reconciliation for a mutually acceptable solution, referral of the matter to a nominated dispute settlement officer.

3. Model Agricultural Produce and Livestock Marketing (Promotion and Facilitating) Act (APLM), 2017:

• The Act is meant to replace the APMC Act, 2003.
• The purpose is to create a single agricultural market with a single license. Both the  agriculture produce and livestock could be traded.
• The new model law has mandated establishment of a regulated wholesale agri-market at a distance of every 80 km.
• It has allowed the private market yards, warehouses and cold storages to be used as a regulated agri-market.

4. Grameen Agricultural Markets(GrAMs) :

• GrAM programme, under the Ministry of Agriculture and Farmers Welfare aims at modernizing and developing the infrastructure of  the rural markets.
• The GrAMs would be outside the ambit of APMC regulation.

5. SAMPADA(Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters) :

• SAMPADA  scheme aims to modernise the food processing sector.
• It will provide the linkage between the farmers and the food processing industries.

6. Operation Greens:

• It aims to stabilize the supply of Tomato, Onion and Potato (TOP) crops and reduce price volatility of these crops.

7. Electronic-National Agricultural Market (e-NAM):

• It aims to unify mandis across the nation into a single national market through electronic trading.
• In e-NAM,  a buyer located anywhere in India would be able to place an order in any mandi in India.

8. Agri-Market Infrastructure Fund (AMIF):

• It was created with NABARD for development and up-gradation of agricultural marketing infrastructure in Gramin Agricultural Markets and Regulated Wholesale Markets.
• AMIF  is a corpus of Rs. 2000 crores.

9. Agri-Udaan:

• The scheme will mentor the  selected agricultural startups to scale up their operations in agri value chain for effective improvement in agriculture.

Agricultural Marketing: Best Practices in India and World

India:

1. Amul’s aggregator model of cooperative farming:

• The Amul model of cooperative farming was based on establishing a number of collection centers which collected milk from the dairy farmers, aggregated them and sold it to the consumers.
• It reduced the influence of middlemen and ensured assured remuneration for the farmers.

2. Food world:

• It  has developed supply arrangements with  100 small-scale farmers and has ensured a constant supply of food products for the supermarket chain and assured income for the farmers.

World:

1. The Keprok Soe variety of mandarin (Indonesia):

• Established a linkage between the traders and the farmers;farmer groups were formed by NGOs.
• Workshops conducted for farmers by traders in areas such as : fruit fly control, organic farming, postharvest marketing.

2. Fruits (Ghana):

• Established a linkage between the exporter and the farmer.
• A food  processing  company processes pineapple, mango, watermelon, passionfruit and papaya for export.
• The company had taken on the technical and financial responsibility of certification for all its suppliers.
• The farmers gained by linkages with the export market while the company received an assured supply of fruits.

Agricultural Marketing: A way ahead.

According to the National Commission on Farmers (1976), the objectives of an efficient marketing system, are:

• Enabling the farmers to reap the best possible benefits.
• Reducing the price difference between the farmer and the consumer.
• Making available all farm produce of good quality to consumers at reasonable price.