Agricultural marketing involves the buying and selling of agricultural produce.
This definition would have been suitable for olden days, when the economy of rural areas was self-sufficient, where the farmers had no problems in marketing their product as they used to sell their product directly to the consumer on it cash or barter system, marketing of agricultural produce is quite different from that in olden days, as it passes through a number of hands before it ultimately reaches the consumer.
Agricultural marketing plays an important role not only in stimulating production and consumption, but also in accelerating the pace of economic development.
Its dynamic functions are of primary importance in promoting economic development. For this reason, it has been described as the most important multiplier of agricultural development.
1. Introduction to Agricultural Marketing in India 2. Functions of Agricultural Marketing in India 3. Structure 4. Types 5. Market Functionaries 6. Essentials of Sound Agricultural Finance
7. Regulated Markets 8. Marketing Committee 9. Benefits of Regulated Markets 10. Future Programmes of Regulated Markets 11. Defects 12. Challenges.
Agricultural Marketing in India: Functions, Types, Essentials, Future, Challenges and Problems
- Introduction to Agricultural Marketing in India
- Functions of Agricultural Marketing in India
- Structure of Agricultural Marketing in India
- Types of Agricultural Marketing in India
- Market Functionaries in Agricultural Marketing in India
- Essentials of Sound Agricultural Finance
- Regulated Markets in Agricultural Market in India
- Marketing Committee in Agricultural Marketing in India
- Benefits of Regulated Markets
- Future Programmes of Regulated Markets
- Defects in Agricultural Marketing in India
- Challenges to Agricultural Marketing
Agricultural Marketing in India – Introduction
As per the regulation of GATT, the developed countries like, USA, Canada, which were allowing subsidy on agricultural products upto 50% are now bound not to allow more than 10% subsidy.
In India subsidy on agricultural products in the international market may be less than in the developed countries of the world. India has to design a solid strategy as would maximise its agricultural production specially of those commodities which are in greater demand in international markets, so that the export of agricultural products may increase.
The export of agricultural commodities have increased sharply during the last few years. The data are as- In the year 1989-90 it was Rs. 234,50,000 thousand raised to Rs. 906,50,000 thousand showing an increase of 386.56%.
After the Green Revolution in the late sixties that the surplus in agricultural produce increase in huge quantities for sale on the markets, especially in rural areas, and it needed quick development of infrastructure for marketing of agricultural commodities to ensure that farmers would be paid remunerative prices for their produce.
In an ideal market, it is necessary that the interests of all the parties, i.e., traders and consumers are properly taken care of, but the farmers are still not getting remunerative prices for their produce because the marketing infrastructure in rural areas has not been able to maintain the pace of its growth along with that of production.
Further, the farmers are not fully aware of modern marketing practices. Due to the lack of facilities for packaging, storage and transportation, the farmers have also to incur significant post-harvest losses.
Though it is the responsibility of the state governments to improve the agricultural marketing system in rural areas, considering its importance, the Central Government has continuously been helping the states by taking a number of measures to overcome these problems.
An ideal marketing system has been defined by Moore, Johl and Khusro as, one that maximizes the long run welfare of society. To do this, it must be physically efficient; otherwise, the same output could be produced with fewer resources; and it must be allocative efficient; otherwise, a change in allocation could increase the total welfare where income distribution is not a consideration.
Agricultural Marketing in India – Functions: According to the Indian Council of Agricultural Research
Agricultural marketing involves the buying and selling of agricultural produce. This definition would have been suitable for olden days, when the economy of rural areas was self-sufficient, where the farmers had no problems in marketing their product as they used to sell their product directly to the consumer on it cash or barter system, marketing of agricultural produce is quite different from that in olden days, as it passes through a number of hands before it ultimately reaches the consumer.
A market is a place where goods and services are bought and sold. According to the American Association, “Marketing includes all activities having to do with effecting changes in the ownership and possession of goods and services. It is that part of economics which deals with the creation of time and place and possession utilities and that phase of business activity through which human wants are satisfied by the exchange of goods and services for some valuable consideration.”
According to the Indian Council of Agricultural Research, Agricultural marketing involves three important functions:
(i) Assembling or concentration of goods.
(ii) Preparation for consumption (processing).
(iii) Distribution of agricultural products.
According to the National Commission on Agriculture, Agricultural marketing is a process which starts with a decision to produce a saleable farm commodity, and it involves all aspects of market structure or system, both functional and institutional, based on technical and economic considerations and includes pre-harvest and post-harvest operations of –
4. Transportation, and
Agricultural marketing plays an important role not only in stimulating production and consumption, but also in accelerating the pace of economic development. Its dynamic functions are of primary importance in promoting economic development. For this reason, it has been described as the most important multiplier of agricultural development.
India’s age-old farming practices have taken a new turn in recent years. There has been a technological breakthrough evolution of high yielding variety seeds, increasing use of fertilizers, insecticides and pesticides, installation of pumping sets and tractorization. This technological breakthrough has led to a substantial increase in production on the farms, and to larger marketable and marketed surplus.
An efficient marketing system is essential to maintain and accelerate the pace of increasing production through technological development, but for success in this programme, the farmers must receive remunerative prices for their produce. Otherwise, they would not be interested in increasing their production.
Agricultural Marketing in India – Structure
Agricultural commodities are not produced only in particular regions or areas- these are produced in almost all the areas of the country. Usually, the production is in small quantities.
Some agricultural commodities are produced in one region, but sold in other regions of the country or of the world. The majority of farmers are not capable of selling their produce, because of its small quantity, in other regions of the country.
A number of middlemen are involved in taking the farm products form the place of production to the ultimate consumer. There may be several middlemen, engaged at different levels, and this increases the gap between price paid by the consumer and that received by the producer.
For reducing this gap, the Punjab Agricultural Marketing Department has recently started the concept of Apni Mandi, where the producers of agricultural commodities sell their produce directly to the consumers. For this purpose, the concerned government agencies in Punjab are providing a number of facilities.
In this way, the farmers are getting the benefit of having maximum remunerative prices for their produce, and the gap between the prices received by the producer and paid by the consumer has been minimised.
Agricultural Marketing in India – 6 Important Types: Local Level, District Level, Central, Wholesale, Sea-Board and Retail Markets
Type # 1. Markets at Local Level:
These markets are located in small nearby towns to which the farmers can conveniently bring their produce for sale to prospective purchasers. There are large number of farmers whose produce is in small quantities, and they are economically weak. They cannot arrange funds for taking their produce to district level markets where they can get remunerative prices.
Due to their weak economic position, they cannot store their produce for some time after harvest. They are, therefore, compelled to sell their produce in the local market to middlemen who offer to purchase the produce. The middlemen collect the produce of a large number of farmers, and send them to the district or central markets.
Type # 2. District Level Markets:
Some of the commodities are processed in the local markets, and they are directly purchased by the consumers. But, generally, most of the agricultural commodities are processed at the district level markets or large central markets. At the district level markets, huge quantities of agricultural commodities are assembled from the local markets.
After processing, these are transported to the central/regional markets, or sold directly to consumer markets.
Type # 3. Central/Regional Markets:
The huge quantity of agricultural commodities’ which are assembled at local and district level markets, are transported to the central/regional markets where the facilities of processing, storage and grading are available. From here, these are transported for marketing in different parts of the country or abroad.
In nature, these markets are professional buyers of different states and countries visit these markets but not the local ones. For these buyers, the large markets, where they are convenient. Further, these commodities can also be transported to their ultimate destinations within the country or outside conveniently.
Type # 4. Wholesale Markets:
Farm products are first of all assembled in large quantities in local or regional markets. Now, these have to reach the consumers in various parts of the country. Commission agents or middleman purchase the commodities in bulk and store them. After some time these goods are sold to retailers.
The operating scale of these markets is smaller than that of the central markets. The wholesale markets do not play an important role in determining prices. The wholesalers are interested in only those operations which are necessary to meet the needs of their retail market clients.
Type # 5. Sea-Board Markets:
As every farm producer or middlemen is not a position to enter export business, some markets have been established at seaports, where exporters purchase farm products brought from local or regional markets. They have the needed facilities of processing and packaging and arrange shipment of these products to other countries. The facilities for importing agricultural goods are also available in seaboard markets.
Type # 6. Retail Markets:
Retail markets are those where the agricultural commodities are sold to the consumers. They include small distribution centres or shops in different areas of cities, towns and villages. The consumers can purchase what they need in small quantities from the retail markets at any time.
Generally, retail selling prices are slightly higher than the wholesale prices, because the retailer would earn some profit for the services rendered by him.
Agricultural Marketing in India – Market Functionaries: Brokers, Factors or Commission Agents, Auctioneer and Merchants
Market functionaries have developed their own methods of operation, trade practices and business procedures. They are licensed in a regulated and organised market. The functionary has to pay license fee every year.
In every staple commodity, there are two main kinds of physical markets—the primary or local market and the central market. There are thousands of primary markets in important commercial crops such as cotton, wheat and other cereals. They develop in all producing centres and around convenient transport functions or routes so that the assembled stock can be easily forwarded to the large central markets situated in cities such as Bombay, Calcutta, Delhi, Madras, etc.
In all commodity markets, whether primary or central, we have a host of middlemen acting as essential functionaries.
They are expert mercantile agents in grades, qualities, trade and contracts terms as well as in problems of transport, storage and finance. They act as agents of buyer/seller either in the spot market or in the forward market. They have to negotiate and finalise the terms of sale/purchase on behalf of their employers. In India a commodity broker is called Dalai linking a seller and a buyer and operating purely as an agent.
2. Factors or Commission Agents:
They are general mercantile agents acting as buying or selling agents on a certain commission on behalf of their employers. They can buy or sell on their own account and need not reveal their employer or to the third party. They may also act as sole agents and work on the basis of consignment sale. They may enjoy exclusive sales agency. They are important in agricultural markets.
They are general mercantile agents specialised in auction sale. Many commodities are sold in an auction market through auctioneers.
Commission Agents in India:
All commission agents work for a fee or commission, e.g., 3 per cent to 5 per cent on sales or purchases.
In India, we have two types of commission agents:
I. Kutcha arhatiya, and
II. Pucca arhatiya.
I. Kutcha Arhatiya:
It represents the producers and is mostly found in the assembly or collection markets. He usually buys on account of pucca arhatiya and rarely on his own account.
II. Pucca Arhatiya:
Pucca arhatiya operates mostly in the central markets and he is concerned more with process of dispersion-wholesale distributing markets. He also buys on his own account occasionally. He operates usually on behalf of distant buyers. He finances Kutcha arhatiya, and kutcha arhatiya, in turn, finances producer or village merchant.
Kutcha arhatiya gives loans to producer or village merchants on the condition that the produce is sold in the mandi through him only. Pucca arhatiya makes advances to kutcha arhatiya for purchases made by them on behalf of his outstation buyers or clients. In the process of concentration both kutcha and pucca arhatiyas are important middlemen. But in the process of distribution pucca arhatiya is supreme and enjoys paramount importance in the wholesale consuming markets. He enjoys a virtual monopoly in the dispersion process.
Of course, he is interested almost equally with the collection and dispersion processes. He balances supply and demand in the process of marketing. Thus, he looks after concentration, equalisation and also dispersion processes. In India, the wholesale trade is a conduit pipe through which produce passes from a larger number of widely scattered producers, to be dispersed again to a large number of scattered retailers.
In business we have two kinds of middlemen- agent middlemen and merchant or dealer middlemen. A merchant buys, takes title to, and resells merchandise. The distinctive feature of this middleman lies in the fact that he takes ownership title to the goods he handles. Wholesalers and retailers are the chief types of merchants. In all primary and central commodity markets, we invariably have merchant dealers.
They are great risk-bearers of the physical markets. They are the backbone of our markets. These dealers act as principals, buying and selling commodities on their own account and at their own risk merely for a chance of profit. By selling to them, all producers can be free from risk of loss. They also act as ware housekeepers of the market and to that extent, manufacturers who are buyers are also free from risk of loss to a certain extent.
The development of the dealer—the risk-bearing middlemen between the producer and the manufacturer, and between the manufacturer and ultimate consumers—permitted the producers and converters to transfer some of their market risks to the dealer. The commodity dealer voluntarily absorbs both market and credit risks in the expectation of making profits. There is no assurance of profits.
The nature of crop determines the agencies in the chain of distribution from the producer to the manufacturer and the consumer.
In the marketing of paddy, e.g., paddy passes from the village trader to the mail or to the wholesaler in the assembling market. From the mill, rice passes on to the wholesaler in the consuming market and then through retailers to the consumer. Between the miller or wholesaler on the producing end and the wholesaler at the consuming end, we may have a number of middlemen merchants/agents executing orders on the strength of samples of rice.
Due to long chain of intermediaries there is a large price spread, i.e., the difference between the price paid by the ultimate consumer and the price received by the actual farmer. In regulated market this price difference is, however, reduced to a reasonable margin.
Agricultural Marketing in India – Essentials of Sound Agricultural Finance
1. Progressive elimination of private or non-institutional finance in agriculture.
2. Progressive replacement of institutional finance to provide adequate and chapter short-term and long-term loans to agriculture.
3. Development of trained, devoted and committed managerial personnel to manage co-operative societies and regional rural banks.
4. Rural credit only for productive purposes and that too in kind rather than in cash, e.g., in the form of seeds, fertilizers, pesticides, implements, etc.
5. Consumption loans only to small and poor farmers, landless labourers, etc., at low rate of interest.
6. Insistence on regular repayment of loan installment.
Improvements in Agricultural Finance:
1. All Five Year Plans actively promoted co-operative credit and brought about expansion in its coverage and utility.
2. Liberal loans to farmers were given for agricultural improvements without insisting on tangible security.
3. Special attention given for training of personnel to manage co-operative societies.
4. Nationalised commercial banks including State Bank of India are called upon to participate actively in the provision of rural finance.
5. Agricultural Refinance and Development Corporation was formed to provide long-term finance to poorer farmers.
6. Reserve Bank has taken all steps to expand institutional credit in rural areas.
7. Regional Rural Banks were established since 1975 to provide rural finance (183 by 1986 covering 23 states with 10,245 branches advancing around Rs.1, 000 crore credit to the weaker sections).
8. Since 1975, various steps have been taken to reduce and restrict the activities of moneylenders and to prevent exploitation of small farmers and artisans.
9. National Bank for Agriculture and Rural Development (NABARD) was established in 1982 as a new apex Bank for rural finance. It performs all functions performed by Reserve Bank in the field of rural credit. Up to the end of June, 1986, NABARD had sanctioned over 35,000 projects with a total commitment of Rs.8, 400 crores.
Agricultural Marketing in India – Regulated Markets (With the Features)
On the basis of recommendations of the Royal Commission on Agriculture, 1928, Madras, Bombay, Central Provinces, Mysore and Punjab passed the necessary legislation. Later on since 1951, many other states also passed legislation for regulation of markets. By now almost all states have passed the necessary legislation. The Central Government has developed a plan of assistance for the development of regulated markets with a grant-in-aid of Rs.one crore.
The legislation to regulate market (Agricultural Produce Market Act) covers all the agricultural, horticultural, livestock and livestock products. We have regulated markets for cotton, wheat, jute, paddy, bajra, oil seeds, tobacco, sugarcane, gram, and many other cash crops.
Physical or cash markets, whether local or central, maybe organised or unorganised, i.e., regulated or unregulated. We may have a special legislation controlling the affairs of the cash markets. When legislation is applied to a particular cash market, it is called a regulated market. A regulated market works under standard rules and regulations. It has an organised character in all respects.
The regulations usually deal with constitution, organisation and working of the market, trade practices, marketing services, standardisation and grading and such other important aspects of marketing of commodities. A market committee is in charge of management and operations of a regulated market. The interests of farmers are duly represented on the market committee. All trading interests are, of course, given due representation on the market committee.
The regulated markets ensure orderly marketing whose importance in a planned economy needs no emphasis. In India, many staple commodities such as cotton, wheat, oil-seeds, etc. have regulated markets. However, all physical markets in India are not regulated and still we have many unregulated markets.
In 1950-51, we had hardly 265 regulated markets. In 1972, 2,754 markets were regulated. By the end of 1985, there were 5,600 regulated markets.” By 1989, we would have additional 200 regulated markets, 50 terminal markets for fruits and vegetables and 1,500 primary rural markets.
1. Regulated market is an organised wholesale or central market regulated and controlled by the State Government through a marketing committee representing duly the interests of farmers and traders as well as the interests of co-operative societies and the government.
2. It may be established for one commodity or for a group of commodities under a notification issued by the State Government.
3. The marketing committee of a regulated market supervises and controls the trade practices and trading operations with the help of a code of rules and regulations and thereby ensures fair trade practices, equity and justice to all sellers and buyers.
4. Open auction sale is the usual basis of all sales. Sale under cover or by private negotiation is not permitted.
5. All functionaries in a regulated market must have a license from the market committee. No agent can represent the seller and the buyer in the same transaction. He may act only as a selling or a buying agent.
6. The marketing committee is authorised to hear and settle all disputes. If necessary, dispute can be settled through arbitration.
Agricultural Marketing in India – Marketing Committee (With Functions)
The Agricultural Produce Marketing Act governs the establishment and working of regulated markets. The Act authorizes the State Government to establish the agricultural produce marketing committee for every notified area. The members of the committee represent farmers, traders, local body, co-operative marketing society, and the government.
The marketing committee is given all necessary powers to manage and control the working of the regulated market in the prescribed area. The committee is responsible to ensure fair marketing practices, license market functionaries, conduct open auction sale arbitrate disputes and run the regulated market smoothly.
Functions of the Marketing Committee (Working of Regulated Market):
1. The market committee looks after routine management and administration of the market yards.
2. It fixes the market charges, particularly the commission, brokerage and handling charges.
3. It prevents all unauthorized deductions and allowances from the price paid to the farmer.
4. It ensures the use of correct weights and measures.
5. It provides the machinery for arbitration or settlement of all trade disputes regarding prices, quality, deductions and allowances, quantity, etc.
6. It charges standard fees or levies or to be paid by dealers, growers and operators in the market.
7. All market functionaries are duly licensed. For each commodity a separate license is issued by the committee.
8. The committee looks after the development, maintenance and other problems relating to the market yard, amenities and facilities.
9. It adopts open auction sale methods.
10. It has also the power to punish the dishonest and fraudulent practices discovered and proved in due course.
11. It is in charge of prevention of adulteration of agricultural produce.
12. It also looks after pooling, grading and standardisation of agricultural goods.
13. It is in charge of enforcement of the provisions of the Agricultural Produce Market Act. It prescribes the rules and regulations for the conduct of buying and selling in the specified market area.
14. It acts as a clearing house market information-collection and distribution of essential data on markets.
Agricultural Marketing in India – Benefits of Regulated Markets
The need for regulated markets has arisen out of the existing deficiencies in marketing. Regulated markets have appreciably succeeded in solving many glaring defects. Regulation of markets has been very helpful in securing reduction in village sales, systematisation of methods of sale and weighment, and reduction in market charges. Unauthorised deductions have been completely eliminated.
Regulated markets offer many economic and social benefits to the millions of cultivators in India.
These are mentioned below:
1. Rationalisation of market charges alone give a relief of 5 per cent of the annual turnover. Market charges are clearly defined and specified.
2. Reduction in market charges varying between 30 per cent and 60 per cent in various markets. In many markets these amount to almost one-half; marketing charges are commission, brokerage, weighment, loading and unloading charges and charity charges.
3. Standardisation of weights and measures and correct weighments are insured.
4. Market charges and market practices are standardised, regulated and made uniform.
5. All marketing functionaries are licensed.
6. Number of sellers bringing their produce for sale in the market has considerably increased. Now more than 70 per cent producers are entering the regulated markets.
7. Unjustified trade allowances and deductions like karda, batta, namuma, etc. are now eliminated.
8. Market information is concentrated and reliable marketing news can be regularly disseminated. The prices prevailing in all important centres are known to all. Regulated market provides up-to-date data on arrivals, stocks and prices.
9. Sales are conducted by open auction. All sales are subject to the Board’s regulations and open to scrutiny. Sale by open auction is the best method for securing a competitive price to the farmers.
10. The seller can receive prompt payment of price—a fair price—from the buyer.
11. All trade disputes are usually settled by arbitration and they are referred to an arbitration committee. There are standing rules for survey, arbitration, etc.
12. On account of reduction and standardisation of all marketing charges and elimination of all unwanted marketing functionaries, handling charges have been reduced to the minimum and marketing machinery has become much more efficient.
13. Various facilities and conveniences, unknown in many unregulated markets, e.g., seeds, trees, parking space, water for cattle, drinking water, hotel, storage rest rooms, sanitary arrangements, etc., are provided in regulated markets.
14. Suitable quality standards and standard contracts for buying and selling can be conveniently enforced in a regulated market.
15. Propaganda for agricultural improvements, e.g., use of good seed, fertilisers, pesticides, etc., adoption of improved methods of cultivation, grading of agricultural produce, use of machinery in farming and so on can be undertaken by a regulated market.
16. Sellers, i.e., farmers, are usually unorganised. They are small, innumerable, scattered and ill-informed about market conditions. Regulated markets alone can ensure fair marketing conditions for farmers through elimination of malpractices and unauthorised deductions. Interests of farmers are duly protected and they get a fair deal in marketing their produce.
The most important advantages of regulated markets are:
1. Reduction and standardisation of market charges,
2. Elimination of unwanted middlemen,
3. Open auction sale,
4. Elimination of all unfair trade practices,
5. Fair and better prices to farmers,
6. Best assembling of produce.
Co-operative marketing combined with regulated markets can remove many defects and deficiencies in agricultural marketing.
Agricultural Marketing in India – Future Programmes (Regulated Markets)
The development of regulated markets and co-operative marketing of agricultural produce should be recognised as an integral part of the infrastructure which can stimulate modern agriculture.
The Sixth and the Seventh plans have set the following tasks:
1. Strengthening arrangements for enforcement and inspection to ensure fair marketing practices and middleman’s margins.
2. Regulation of primary rural markets.
3. Further expansion of regulated markets.
Under the- Sixth Plan (1980-85):
1. Further expansion of regulated markets was planned to cover many markets and many commodities by 1986.
2. The machinery of administration and inspection was strengthened to assure regulation of open auction sale and development of fair marketing practices.
3. Development of organised rural markets was planned in areas where such facilities were not so far available. By 1990, the Government would bring about regulation of all markets.
Regulated markets are expected to play the role of growth centres providing all inter-related conveniences to the farmers to bring their stock of farm products to the market, get it duly processed i.e., cleaned, graded, etc. and displayed in the spacious yards with standard weights and measures and auction facilities so that buyers can obtain favourable prices and equitable sales. The market can provide modern unloading and material handling facilities to reduce handling losses to the minimum. The market committee can also arrange for cold storage for perishable goods.
Adequate transport and storage facilities would bring about smooth marketing operations. The market centre can also provide a convenient shopping centre for farmers to buy their farm requirements, such as seeds, fertilizers, pesticides and farm equipments. We should also have banks, machine service centres, market intelligence services, rest rooms, hotels, etc.
The modern regulates market centre can act as a model platform for rural development and community activities. Around the centre, we should also have agricultural processing units. We should have integrated agricultural development which will provide close co-ordination and integration between finance, production and marketing—three vital wings of any business.
Agricultural Marketing in India – Defects: Lack of Organisation, Forced Sales, Too Many Middlemen, Market Malpractices, Adulteration of Commercial Crops and a Few Others
In unregulated agricultural markets, even today we do come across numerous defects. On account of these defects, farmers are unable to secure higher prices and profitable marketing of their produce.
List of Main Defects:
1. Lack of organisation for professional selling.
2. Forced sales due to weak staying capacity.
3. Too many middlemen and two much margin of profit.
4. Many market malpractices exploiting farmers.
5. Widespread adulteration in produce.
6. Lack of storage facilities in markets.
7. Inadequate Transport.
8. Trader-cum-money lender enjoys monopoly in agricultural finance, and marketing.
9. Absence of grading and standardisation.
10. Absence of market information.
11. Unregulated local markets.
12. Absence of Co-operative Marketing.
13. Haththa system of price-fixing.
1. Lack of Organisation:
In agricultural marketing buyers are merchants and mercantile agents. They are well organised, well informed and professional buyers acting as resellers. But sellers are unorganised, illiterate, ignorant, ill-informed, small, poor, numerous and scattered farmers. Under such circumstances, in the process of exchange, we have unequal seller-buyer relationships. Hence, in the bargaining process, sellers are bound to be exploited by superior, well organised, large-scale middlemen buyers.
2. Forced Sales:
Indian farmers have the curse of chronic poverty and indebtedness. Their crops are usually mortgaged with the village money-Iender-cum-traders. The farmer sales his produce at an unfavourable place, at an unfavourable time, and at very unfavourable terms. A debtor is not a chooser.
Thus we have forced sales in the village and the lucky buyers are trader-cum- money-lenders, i.e. Sahukars In the village the agricultural produce is sold compulsorily to the sahukars, buniyas, beoparis and agents of wholesale merchants who are also the creditors. The vicious link between credit and sale is very difficult to break. Co-operatives alone have the capacity to break this credit-sale Gordian knot.
3. Too Many Middlemen:
We have too many middlemen in the channel of distribution between the wholesaler or the miller in the producing end and the wholesaler at the consuming end. In the marketing or’ agricultural produce e.g., paddy, we have numerous middlemen intervening and executing orders on the strength of samples. Many a time, we have more than ten middlemen in the process of assembling and distribution of agricultural produce.
In reality, farmer receives hardly 55 paise out of a rupee paid by the consumer in the retail market. This is too low a price received by producers. The superfluous middlemen are responsible for higher cost of marketing of agricultural produce in India.
4. Market Malpractices:
We come across a number of malpractices in marketing of agricultural produce in India, such as-
i. Manipulation of weights and measures in favour of buyer- traders,
ii. Practice of taking large free samples,
iii. Secret bargains (under cloth cover) between seller’s agents and buyer’s agents was very common till the advent of regulated markets. Sellers are unaware of secret price settlements.
iv. Arbitrary deductions and allowances to be recovered from seller-farmers from their sale proceeds under various grounds. There are so many incidental charges differing from mandi to mandi, e.g., tulai (weighment), hamali (handling charges), palladari (filling charges), dalali (brokerage), arhat (commission) and miscellaneous charges such as deductions for charities, market fees, payment to water-man, sweeper, etc.
In certain mandies a fixed percentage is deducted from the weight for impure contents known as Khad or refraction. At times, the buyer or his representative demands karda or an allowance on the ground of bad quality. Buyer demands karda or trade allowance when everything is settled and the sale is completed. This unfair deduction of karda is made at the time of payment of price. It is never a justifiable demand. The farmer hard pressed for cash is helpless and has to accept such a deduction.
5. Adulteration of Commercial Crops:
The reputation of Indian agricultural producers and traders in the world market is low. Adulteration i.e., mixing of inferior produce freely with superior produce is very common. Earth is mixed with wheat. Barley and other grains are mixed with wheat. Stones and pebbles are mixed with rice and other grains. Damping of cotton, chillies etc., is common. Even horse dung is mixed with agricultural produce. Adulteration in cash crops and food-crops has assumed tremendous proportion in India.
Since 1950 it has grown by leaps and bounds. Even suicide by taking a poison may not be successful due to adulteration. Prasad offered to our Gods in many temples also is not free from adulteration. Almost all our daily necessaries of life are never free from adulteration and misbranding. The produce of high grade quality subsidies low grade supplies and there is no incentive to raise the quality level of the produced commodity in agricultural marketing. The compulsory quality control is conspicuous by its absence in our home trade.
6. Inadequate Storage:
In India storage facilities are very inadequate and primitive. The farmers are forced to sell their produce as soon as it is ready because they are unable to provide adequate storage accommodation for their produce. Markets must have enough godowns and warehouses. Liberal loans should be available against warehouse receipts. Licensed warehouse receipts are necessary.
Warehouse receipt is a document of title to goods. It is freely transferable by endorsement and delivery. It can act as a good security against marketing loan. Licensed warehouse receipt enjoys a good status in the market. In many countries it is also recognised as a negotiable instrument just like a cheque or bill of exchange.
Elevators (for wheat) on the lines of the Canadian or American system should be constructed in India—small elevators for primary or local markets and terminal elevators for larger stations and consuming centres, and elevators at the ports also. Co-operative societies should construct cheap godowns where the agricultural produce can be pooled and graded.
7. Inadequate Transport:
In India, poor, uncoordinated and defective transport facilities constitute the greatest obstacle in the orderly marketing process. Best transport and communications provide the necessary infrastructure for organised markets. Cheaper and speedy movement of agricultural produce needs well developed rail-road transport in India.
8. Defective Marketing Finance:
In spite of huge federated superstructure of co-operative credit which v/as expected to replace village money-lender-cwm-trader in agricultural finance, Rural Credit Survey Report pointed out in 1952 that nearly 70 per cent of agricultural finance was supplied by money-lenders and hardly 8 per cent could be contributed through institutional finance (government, co-operatives and commercial banks).
Thus, the money lenders accounted for the lion’s share. Indian cultivator gets 75 per cent of the standing crop value as loan and he has to surrender the harvested crop to the mahajan or beopari under the loan agreement. Under such close linking how can our farmers have liberty to sell their produce in the open market at remunerative prices and favourable terms of sale?
We must have integrated scheme of rural finance which will fulfill all the financial needs of agriculture both for production and marketing as well as minimum financial needs for consumption. Commercial banks, co-operative banks and government can act as rescue boat for granting freedom to our farmers from the financial serfdom of existing financiers. The combined share of institutional agricultural credit has increased from 8 p.c. (1951) to around 40 to 45 p.c. (1985).
9. Absence of Grading:
Absence of grading and standardisation of agricultural produce is another great stumbling block hindering growth of markets and smooth marketing operations. Ungraded mixed qualities of goods like wheat, cotton, jute, etc., create two problems. The seller cannot command better price and his reputation also goes down in the market. Standardisation is a major marketing function for prosperous and wider marketing operations.
10. Lack of Market Intelligence:
In absence of regulated markets and co-operative marketing, we cannot have standing organisation for collection and distribution of essential and latest market information regarding supply, demand, prices and general marketing environment. Efficient and effective marketing process entirely depends upon the continuous flow of marketing information. Intelligent marketing is based on information (daily market news and market reports).
11. Absence of Regulated Markets:
All markets and market yards are not regulated. There are more than 14,000 markets spread over the entire country. We have regulated most of the wholesale mandies but most of our primary or local markets operating in the villages and small towns are still unregulated.
12. Absence of Co-Operative Marketing:
The farmers are still reluctant to pool their produce and allow a co-operative organisation to sell the pooled and graded produce. The development of co-operative marketing got the tempo only after 1960. The growth is relatively slow.
13. Price Fixation:
The net returns to the grower are influenced by the method of price fixation. Sale of open auction is the best method for assuring fair price to the farmer. In India m most of the periodical local markets, we have haththa system. Bidding is done under cover or secretly. The buyer makes his offer to the commission agents not openly or orally but by moving, touching or pressing of fingers under a piece of cloth.
The owner (farmer) stands aside, and he is not aware of these secret negotiations between the buyer and commission agent. Such secret bargains are always unfavourable to the producers or sellers in the agricultural produce markets. Rarely, farmers get remunerative prices in such under hand dealings.
The primary and secondary markets in India had very poor standards relating to trade and market practices. They did not have any voluntary code of conduct to ensure fair trading and equity to all. The village money-lender-cwm-trader usually buys the surplus stock from farmers either on his own account or as an agent of big merchants or of a mercantile firm in the central markets.
Indian farmers also sell their stock in the weekly bazaar or hat. Periodical fairs held in villages and towns or fairs during religious festivals also provide good outlets for the produce of the farmers. Village hat as well as town mandi or market are other channels for agricultural marketing in India.
The Royal Commission on Agriculture strongly recommended the establishment of regulated, i.e. organised, commodity markets on a large scale in India.
It laid special emphasis on:
1. The scheme of regulation to be applied to all agricultural goods.
2. Establishment of marketing committees in all regulated markets.
3. State Government to have special legislation for establishing regulated markets.
4. Government to give financial help to marketing committees for capital expenditure on markets.
5. Provision of machinery for arbitration for settlement of disputes.
6. Standardisation of weights and measures.
7. Standardisation of all market practices.
8. Adequate warehousing facilities in market yards.
9. Preventing brokers to act as agents of both buyers and sellers in the market.
10. Development of co-operative sale societies.
Unorganised markets become organised or regulated markets when the scheme of regulation is applied to those market by government notification. But regulation could not be made compulsory for these markets.
Agricultural Marketing in India – Challenges
After independence, in 1947 more attention has been paid to agricultural research, and thus has increased the pace of modernisation of lndian agriculture and introduction of technological innovations such as the use of high-yielding variety seeds, improved agricultural implements, and fertilizers and pesticides in the recent past, has brought about a big change in the production and productivity of Indian agriculture.
This development is popularly known as the Green Revolution. It has given rise to a number of problems in agricultural marketing. It is necessary that the pace, of green, revolution should be maintained, and farmers encouraged to produce more by offering fair prices for their produce.
For this, an orderly marketing system is required. Such a marketing system is possible only when the problems cropping up after the green revolution are dealt with effectively.
The following are some of the important problems dangers which have cropped up in the recent past due to increase in agricultural production listed as:
Challenge # 1. Means of Transport:
Increase in production and marketable surplus, the farmers and traders face a lot of problems for lack of adequate and quick means of transportation of agricultural commodities at village, district and inter-state levels. The transportation, facilities in rural areas are so poor that even big farmers having a large surplus for sale do not like to go to mandis.
In rural areas, most of the roads are kachcha, and become unusable in the rainy season. Thus the means of transportation available in rural areas are inadequate and far from satisfactory. Most farmers usually transport their produce in bullock or camel carts from the place of production or village to the market.
This means of transport; is costly and time consuming as the speed and carrying capacity of these carts are low. Where modern mechanised means of transport are available the cost is beyond the capacity of small farmer. Existing rail/road transportation facilities are inadequate for exporters of food-grains. Export would decline sharply because of weak infrastructure.
The marketing Sub-committee on Agriculture, Forestry and Fisheries has pointed out that the incidence of freight varies from 2.1 to 21.7 per cent in case of wheat, 0.7 to 13.2 per cent for rice, 1.2 to 15.4 per cent for linseed, and about 6.2 per cent for potatoes. It is thus obvious that the cost of transportation is very high. This leads the farmer to dispose off his goods in his village haat or shandi, where he does not get a good price.
As far as inter-market and inter-state markets are concerned, mechanised transport facilities, i.e., trucks and railways are available, but they need to be further strengthened by construction of more metalled roads.
It is the basic requirement for an efficient transportation system, especially in rural areas, so that the small farmers may find it easier to carry their produce to mandis, where they can get remunerative prices. For an efficient marketing system, efficient and cheap means of transport are necessary.
Challenge # 2. Market Yards—Problems:
Agricultural production has been increasing continuously, but spacious market yards are not available in rural areas as well as in urban areas. Business transactions are carried on in congested areas on the roadside.
Recently some market committees in the country have constructed spacious market yards from their own resources, but a majority of committees are not in a position to have such spacious market yards due to non-availability of funds and land.
For implementing market regulations strictly, a large number of market yards should be constructed in rural areas. They should have necessary modern marketing facilities. Spacious market yards are necessary for various marketing functions, namely, cleaning, grading and weighment of agricultural commodities.
For this purpose, the government should come forward to provide necessary assistance for increasing the number of spacious market yards in the country.
Challenge # 3. Lack of Storage Facilities:
There is lack of proper storage facilities in rural areas. As a result, farmers are forced to store their produce in carts, pits and kachcha store-houses which is unsafe. Whatever storage facilities are available in rural areas are inadequate, and they are so poor that about 10-20 per cent of the food-grains are lost due to rats, insects, other pests and diseases. But the National Commission on Agriculture has estimated it at only 6.2 per cent.
Non-availability of scientific storage facilities, the farmers do not like to store the food-grains; they try to sell them as early as possible to avoid damage. This situation substantially increases the supply of agricultural produce in rural markets, putting the farmers in a position where they do not get fair prices for their produce. In some areas, even mandis do not have sufficient storage capacity.
In the recent years warehouses have been constructed by the Food Corporation of India, the Central Warehousing Corporation of India, the State Warehousing Corporations, Cooperative Marketing Societies and the government. Individuals also have built up storage space. The available storage space in these warehouses is much less than required.
Hence, it is necessary that a large number of stores are constructed in rural areas by the central and state governments, market committees, cooperative societies and individuals so that the farmers may have adequate economical storage facilities in rural areas.
Challenge # 4. Market Intelligence:
Increased marketable surplus, the importance of market intelligence has increased. The farmers sell their produce in the village and nearby primary wholesale, secondary wholesale and terminal markets. As a result of the farmer’s ignorance, the traders take advantage of it.
They have full knowledge of the prices prevailing in the big markets and purchase the goods of the farmers at lower prices, and this reduces the profits of the farmers.
Though information is provided by the central and the state departments of Agricultural Marketing about the prevailing prices of a number of agricultural commodities through announcements on radio, TV and newspapers, the farmers are still being exploited by traders, as a majority of the farmers are illiterate.
By the time information about prevailing prices reaches the farmers, the market prices would have changed. The farmers are unable to get advantage of the available market Intelligence.
Thus, it is urgent that a system, through which information about the expected prices according to arrivals of different agricultural commodities in the market and their demand and supply can be brought to the notice of the farmers in the rural areas is designed. In this connection, panchayats can play a very important role.
The panchayats of the concerned villages should daily obtain information about the prevailing prices of different agricultural commodities, and this information should be displayed at their offices as well as in nearby local markets falling within their jurisdiction.
The introduction of a large number of varieties of various agricultural commodities such as wheat, rice and other food-grains has increased the importance of grading. The steps taken by the governments and the facilities made available for grading and standardisation of agricultural commodities are inadequate.
These arrangements are also not fully practised. As a result, the farmers as well as the consumers suffer. In the absence of proper grading and standardisation, the producer would sell his good quality produce along with produce of lower quality. The farmer would receive the same prices for his superior quality product and for his average quality product.
The consumer will also suffer because he has to pay the same price for a good quality product and for a slightly lower quality product. Proper grading ensures that the farmers/producers receiving prices of their products according to the quality. Proper grading also provides consumers with a safeguard against-any adulteration.
Adequate grading and standardisation facilities are not available, especially in rural areas. Hence, both the producer and the consumer are the losers and the middlemen, making attractive profits out of it are the gainers.
The state departments of agricultural marketing and other agencies of the state governments should come forward with a strategy to provide on a large scale facilities for grading and standardisation of agricultural commodities at the farm and market levels.
It is essential that the product is graded at the farm level, because, it is very difficult at the market level, where during the peak season, the stocks of different commodities are in huge quantity.
If adequate grading facilities are not made available in rural areas, the farmers would continue to be exploited and their profits would go into the pockets of commission agents/traders, making the farmers economically weaker. For removal of poverty from rural areas, it is also necessary that farmers receive prices according to the quality of their products and the major commission agents.
Challenge # 6. Regulated Markets:
Agricultural marketing operations are also being carried out in regulated markets. There are more than 34,000 markets in the country, but only 6,752 of them are regulated markets. Other than these, there are more than” 22,000 primary rural periodic markets. The Centre has requested to the States/UTs to regulate 15,000 more markets during Eighth Five Year Plan.
Every state has passed Market Regulation Acts. A large number of the markets set up under these Acts do not have even the basic infrastructural Facilities such as auction platforms, metalled roads, cart parks, rest-houses, water facilities, etc. All the technical services for weighing and grading of commodities should be available in the markets.
Malpractices like false weights and measurements should be eliminated. The existing rural marketing system needs elimination of the large number of intermediaries and the large deductions from the produce of the farmers made by commission agents/brokers who sell the produce on behalf of the farmers.
As the regulated markets are run by marketing committees, it is their responsibility to arrange for necessary funds for making agricultural marketing efficient and effective. These committees may request the concerned state governments to provide assistance for improving the business activities of the regulated markets.