Agriculture Marketing Concept and Importance The study of agricultural marketing comprises all the operations, and the
agencies conducting them, involved in the movement of farm-produced foods, raw materials and their derivatives, such as textiles, from the farms to the final consumers, and the effects of such operations on farmers, middlemen and consumers. Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement of farm inputs by the farmers and the movement of agricultural products from the farms to the consumers. The agricultural marketing system is a link between the farm and the nonfarm sectors. It involves all the aspects of market structure or system, both functional and institutional, based on technical and economics considerations, and includes pre and postharvest operations, assembling, grading, storage, transportation and distribution. A dynamic and growing, agricultural sector requires fertilizers, pesticides, farm equipments, machinery, diesel, electricity and repair services which are produced and supplied by the industry and non-farm enterprises. The expansion in the size of farm output stimulates forward linkages by providing surpluses or food and natural fibers which require transportation, storage, milling or processing, packaging and retailing to the consumers. Importance Agricultural marketing plays an important role not only in stimulating production and consumption, but in accelerating the pace of economic development. The agriculture marketing system plays a dual role in economic development in countries whose resources are primarily agricultural. Increasing demands for money with which to purchase other goods leads to increasing sensitivity to relative prices on the part of the producers, and specialization in the cultivation of those crops on which the returns are the greatest, subject to socio-cultural, ecological and economic constraints. It is the marketing system that transmits the crucial price signals. Agricultural Marketing is one of the manifold problems, which have direct bearing upon the prosperity of the cultivators, as India is an agricultural country and about 70% of its population depends on agriculture. Most of the total cultivated area (about 76%) is to under food grains and pulses. Approximately 33% of the output of food grains, pulses and nearly all of the productions of cash crops like cotton; sugarcane, oilseeds etc. are marketed, as they remain surplus after meeting the consumption needs of the farmers. Development of technology, quick means of communication and transportation has introduced specialization in agriculture. Agriculture supplies raw materials to various industries and therefore, marketing of such commercial crops like cotton, sugarcane, oilseeds etc. assumes greater importance.
With the introduction of green revolution agricultural production in general and food grains in particularly has substantially increased. Agriculture once looked as a subsistence sector is slowly changing to a surplus and business proposition. The interaction among producers, market functionaries, consumers and government that determine the cost of marketing and sharing of this cost among the various participants. The producer, middleman and consumer look upon the marketing process from their own individual point of view. The producer is primarily concerned with selling his products. Any increase in the efficiency of the marketing process, which results in lower costs of distribution at lower prices to consumers, really brings about an increase in the national income. A reduction in the cost of marketing is a direct benefit to the society. Marketing process brings a new varieties, qualities and beneficial goods to consumers and therefore, marketing acts as a line between production and consumption. Scientific, systematic marketing stabilizes the price level. An improved marketing system will stimulate the growth of number of agrobased industries mainly in the field of processing. A marketing system can become a direct source of new technical knowledge and induce farmers to adopt upto date scientific methods of cultivation. Marketing is therefore, playing an important role in the economic development and stability of a country. Structure and Types Of Rural Marketing
Most Indian farmers are small cultivators, they produce crops that are seasonal in nature, vulnerable to failure, differ from area to area (region to region) and are certainly perishable. Economically agricultural produce is inelastic because it is difficult to vary the output in response to the price. Agricultural produce is bulky in nature hence difficult to transport and very much vulnerable to the forces of nature. Next, these small cultivators are unorganized and scattered all over the country. They have little time or inclination for gaining knowledge about the marketing side of their operations. These farmers cannot organize themselves so as to bargain on equal terms with buyers to operate on a large scale and have powerful organizations behind them.
Further most of the Indian farmers have loans for sowing and are heavily in debt. Thus they are forced to sell their produce immediately after the harvest and that too in their own villages. Significance of agricultural marketing The 2 basic elements of agricultural system are production and marketing. Marketing of agricultural produce is as important as production itself. As a link between producers and consumers marketing plays an important role not only in stimulating production and consumption but also in increasing the pace of economic development. Its dynamic functions are thus of primary importance in promoting economic development activities and for this reason it has been described as the most important multiplier of agricultural development. The problem of marketing agricultural produce has assumed added significance particularly after the advent of modernization in agriculture. The call to “produce more” without providing efficient marketing machinery, which can ensure fare, returns to the producer-seller. Carries no conviction with the farmer. The United Nations conference on food and agriculture held in October’ 95 at Quepec says, “Marketing is the crux of the whole food and agricultural problems”. It would be useless to increase the output of food and would be equally futile to setup optimum standards of nutrition unless means could be found to move food from the produce to the consumer at a price, which is remunerative to the producer and within the consumer’s ability to pay. The cost of marketing agricultural produce forms a substantial percentage of the price the consumer pays for it. This cost includes expenses borne by the cultivators till the assembly stage and those borne by wholesellers, distributors and retailers. The total marketing cost cannot be considered independently without relating it to the ultimate price realized by the producer. The marketing sector, infact, plays an active role under certain circumstances by changing the demand and cost functions in agriculture in such a way so as to encourage its expansion. 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 academic consideration and involves pre and post harvest operations assembly, grading, storage, transportation and distribution”. In Agricultural marketing we are concerned with demand and supply conditions, marketing operations including marketing functions, functionaries and cost, price fixation, market structure, conduct and performance and marketing efficiency. Fundamentally there are 3 entities involved in the marketing system they are as follows: 1. Producer 2. Consumer
The middlemen would aim at realizing the largest possible net profits from the deal. Thus the farmer in general sell his produce at an unfavorable place at an unfavorable time and usually gets very unfavorable terms. therefore. it may work as a disincentive to increase production. Wholesale Market The wholesale markets fall into 3 subcategories Primary Secondary Terminal Primary wholesale markets
. An efficient marketing system should. These middlemen take away the Lion’s share of the price paid by the consumer and consequently the farmer-seller gets a poor price in his share. 1. Increase production resulting in greater percentage increase in marketable surplus accompanied by increase in demand from urban population calls for a rapid improvement in the existing marketing system. Firstly. The consumer on the other hand would like to get his required quantities of goods of pure quality at the least possible price. Secondly. The Middlemen Each of these entities has its own objectives. aim at balancing this conflicting interest in such a way that each entity gets a fare deal. If the system does not support supply food-grains and other agricultural commodities at reasonable prices to the consumer at the time and place needed by them.3. which often conflict with the others interest. The producers after making a lot of investment and putting in lot of hard work would naturally look forward to get the largest/best possible returns for his produce. If the additional produce does not move to the market to bring additional revenue to the farmers. increased production has no meaning and plays no role in the welfare of society. It is necessary to improve the marketing system to aid the process of agricultural development for 2 reasons. Markets for agricultural commodities may be broadly classified into 3 categories viz. It could be observed that inadequate credit facility to the farmer is the root cause of all defects in the agricultural marketing system in India where the poor peasants are under the firm grip of the moneylenders. The market structure in India is saddled in the long chain of middlemen between the cultivators and the ultimate consumer.
Service Tax c. Here transactions are generally between wholesalers or between wholesalers and retailers. In some cases it is only one village but in others it may have a radius of 6 or 7 miles.
. The area served by a hat or a shandy varies considerably.. Such markets are organised by village panchayats and every shopkeeper has to pay some rent for the space he occupies. important trade centres or near railway stations. The traders who purchase from the primary markets in wholesale trade. These markets deal in sale of Fruits and vegetables. Sales Tax
b. Such markets are known as Painths or hats in U. where the bulk of arrivals is from village or village hats. The manufacturers who use agricultural produce as a primary input purchase raw material in wholesale in these markets. The village bania acts as a middleman in return for a small commission. Agricultural produce. Secondary wholesale markets Secondary wholesale markets.700 such markets in the. There are about 1. lac and glass bangles and articles of daily use and transactions take place either for cash or exchange in household requisites. food grains. There are about 22000 such markets located mostly in the interior of the country. earthen wares. stretch over a wide area covering from 10 to 20 miles. In these markets. the bulk of the arrivals is from other markets. P. The wholeseller performs the marketing function of assembly and distribution. Place Tax
However in practice a large number of ritualistic deductions and local taxes are applied to the produce sold here. Secondary Markets functions are usually in urban and semi-urban areas. These market are periodically held.Primary wholesale markets. a. Mostly wholesale as well as retail trade both take place in the same complex simultaneously. These are usually situated in the district and taluka headquarters. also known as mandis and Gunjs. It may be noted that the actual producer the “Farmer is completely absent in wholesale markets”. they buy in these markets. or livestock or both are sold in these markets. Here facilities of storage and banking are available. cloth. either once or twice a week or at longer intervals or on special occasions. A large number of intermediaries exist in these markets. Orissa and West Bengal. country. For the up keep of such markets superficially 3 types of taxes are collected viz. and Shandies in south India. Bihar. Here haggling and bargaining is a common feature.
. hardware market. Such fairs are organised by District Officers. Cloth market. 3. Garhmukteshwar and Pushkar. Such religious fairs are Maghmela at Allahabad. These fairs are held annually specially between the months of October and May and the duration of livestock fairs varies from one day to 3 months. grain mandi. shoe market. distribution and exchange of goods moving from villages to bigger cities. Maharashtra. cows.700. donkeys. horses. It may be observed that a particular market may function as a Primary wholesale market for some agricultural commodities. They are owned by the retailers subject to municipal control.. Retail Markets These markets are found scattered all over the town or a city or concentrated in particular localities. 2. sweetmeat market and grocery market are usually found located in different parts of the city. 10% deal both in live stock and produce and 40% deal in agriculture products only. M. They serve as convenient points fro assembling. even for the same commodity a market may function as primary wholesale market for certain parts of the year and as a secondary wholesale market for the rest of the year. Fairs These are held. Local bodies or private agencies. P. bullocks. which are produced locally and as a secondary market for other commodities. Such markets are usually the ports. Retail (Primary) Markets are basically assembly markets that are not regulated. While live stock fairs are held in U. on religious occasion. which possess sufficient warehousing and storage facilities and cover a very wide area extending over even a State or two.Terminal Markets Terminal Markets are those in which the produce is either finally disposed of directly to consumers or processors or assembled for shipment to foreign destinations or for redistribution to surrounding areas. Produce fairs are all found in Bihar and Orissa only. Kartikisnan mela at Kurukshetra. sharafa market. sheep and goats are usually sold at these fairs. bulls. Punjab. of the city people as well as the surrounding villages. Gujarat. Again. P. vegetable market. They usually deal in all types of produce and serve the needs. Of the total 50% deal in live-stock only. at pilgrim centres and number over 1. for consumer goods also these primary assembly markets become convenient points for reverse movement from industrial sectors (big cities) to the villages. The trader being both buyers (of agricultural produce) and sellers (of consumer goods) ignore the interest of the farmers. Haryana and West Rajasthan.
b. Imperfect markets are: a. milk. vegetables. any buyers can purchase from any sellers. Long period markets: Time span available is long to adjust supply to meet demand even by managing production.
. fish. Oligopoly market: There are more than two but a still a few sellers of commodity
d. c. b. there must be a good number of buyers and sellers. Produce exchange. These commodities are like foodgrains and oilseeds. Imperfect market: A market is said to be imperfect where. Commodity markets
b. c. On the basis of free intercourse or degree of competition a. The principle underlying a perfect market expects that there must be a uniform price for any one standardized commodity at a particular time at any place. there should not be restriction on the movement of a commodity. There is restriction for movement of goods. cotton exchange Mumbai. Perfect market: A market said to be perfect. These markets can be for machinery and manufactured goods 3. Monopolistic competition: A large number of sellers will deal in heterogenous and differentiated form of a commodity 2.commodities are produced and not manufactured. On the basis of nature of commodities (Type of goods transacted): a. Monopoly market: There is only one seller of the commodity Duopoly market: It has two sellers of a commodity. b. On the basis of time: a. Short period market: In these markets commodities are perishable and can be traded for some time. etc. some buyers or sellers or both are not aware of the prices at which transactions takes place. Very short period markets: These are for few hours and are mostly for highly perishable commodities like fruits. Generally one market in one commodity.g. when all potential sellers and buyers are promptly aware of the prices at which transaction takes place.There are various dimensions of markets which can be classified on the basis of the following dimensions: 1. e.
4. Leather exchange of Kanpur Precious stones: These are highly specialized and well organized markets of world for e. National Markets: Buyers and sellers are at National level e.g. Durable goods such as Jute. 2. Village Markets: Buying and selling activities are confined among buyers and sellers of the village or nearby villages mostly for perishable a commodities.g. Tea. London Foreign exchange market: It is international market and largely concerned with export and import trade of countries. Manufactured goods markets: These are markets of manufacture and semi manufactured goods. On the basis of area of coverage:
1. Village Markets: Buying and selling activities are confined among buyers and sellers of the village or nearby villages mostly for perishable a commodities. Tea. Gold.
. For e. These are at large trading centers like Mumbai. Regional markets: (District/ Sate) Buyers and sellers for among commodity are drawn large area than the local markets in India there generally exist for food grains. 2. Durable goods such as Jute. On the basis of area of coverage:
1.g Calcutta and Madras stock exchange 4. 3. 3. World Markets: Buyers and sellers drawn from the world biggest markets form area point of view and exist for commodities having world wide demand e. 4.g. silver..g.g. Stock exchange: This is market for investments stocks bonds debentures shares are purchased and sold in different parts of the countries for e. bullion market of Mumbai Capital markets: Money markets: Broad term include a number of agencies providing a finance to business. Coffee. Regional markets: (District/ Sate) Buyers and sellers for among commodity are drawn large area than the local markets in India there generally exist for food grains. National Markets: Buyers and sellers are at National level e.
On the basis of no.g. Primary Wholesale markets: These are located in big towns near the centres of production of agriculture commodities. b. are brought & sold. Secondary Wholesale markets: These are generally located at districts headquarters or important trade centres near railway stations. Terminal markets: Here produce is either finally disposed off to the consumers or processors or assembled for export. 7.
6. World Markets: Buyers and sellers drawn from the world biggest markets form area point of view and exist for commodities having world wide demand e.4. On the basis of volume of transaction: a. 5. Ø Fairs: These are held on religious occasions. Coffee. Ø Sea board markets: These are located near seashore and are mainly meant for import and export of goods. Spot or cash markets: Here goods are exchanged for money immediately after sale of within reasonable short period of time. c.
. Specialized markets: In these transaction takes place only in once or two commodities. such as foodgrains. b. 8. b. gut fiber crops etc. oilseeds. of commodities in which transaction take place: a. Wholesale markets: Here commodities are brought by and sold in large lots or in bulks. On the basis of nature of transaction: a. General market: In these markets almost all the types of commodities. madras and Calcutta. These are located in Metropolitan cities like Mumbai. silver. Produce is handled in large quantity.. transaction mostly take place between farmers and traders. On the basis of location or importance: a. b. Retail markets: Her commodities are brought by and sold to the consumers as per their requirement. Forward or future markets: Here a transaction takes place for a standardized commodity with a promise to pay and deliver a commodity at some future date. Gold. Transaction takes place generally between traders.
Cotton markets etc. In some cases transactions are settled under a cover of a cloth with the help of fingers and signs. These are located generally in thickly populated areas. Chapter 6.g. There is yet another method known as “Dhara Sale” under which heaps of grain of different qualities are sold at a flat rate. Every method has its merits and demerits. where production is adequate. They are located producing areas. Traders frame rules and conduct business. Forward Sale Under this system the producer-seller sells his anticipated future produce in advance to the trader directly at a price fixed at the time of striking the deal
. Food grain markets. b. b. We shall discuss each one of these methods in detail. Ways and means in which transactions takes place in the Indian agricultural market. It is however possible that you may find some of these methods having no visible merits at all. 9. Regulated markets: Here business is done as per the rules and regulated by statutory market organization. On the basis of extent of public intervention: a. 1. Still another practice is to settle the trade deal on the basis of the sample of the produce. separate markets exist e. On the basis of stage of marketing: a.Methods Of Sale One of the most important aspect of marketing in India is concerned with different methods of trading employed in markets. 10. Market charges are standardized and fixed and practices regulated by Agril Produce Market committee. Many methods of sale are in vogue and simultaneously co-exist in different markets even in the same market different methods are followed for different commodities and some times even the same commodity. but the benefits of such methods are rational and convenience based. Unregulated markets: Here business is conducted without ant set of rules and regulations. Producing markets: These markets mainly assemble goods for further distribution to other markets for production purpose. Consuming markets: Here produce is collected for final disposal to the consuming population. In other cases agricultural produce is auctioned in the open market and the buyer with the highest bid takes the produce. These markets suffer from various defects in functioning. Under another method sellers settle the sale separately and individually with buyers.For every group of commodities.
producer as well as traders stores notified agricultural produce. Such price quotations are in most cases abnormally low. When such depositors will send their stock representative. The trader usually enters into a contract with a speculative motive and when the price declines subsequently he may force the seller to reduce the price by refusing to lift the produce. After the establishment of warehousing facilities in some regulated markets.
3. This is only an oral contract and is not enforceable in any court of law. 4. further if the crop fails to give the expected return the buyer may force the producer to reduce the price further. In return the buyer is supposed to pay the price ruling on the delivery day. Sale by Sample It is the most convenient method of sale where the produce is systematically graded. 2. Usually the Jalap Sale goes against the agriculturalist seller as the price is fixed and determined by the buyer on the basis of the urgency to sell and not on the basis of the prevailing market rates.either in the village or at the business place of the trader depending upon the willingness of the party that initiates negotiations. Jalap Sale Under this method the trader’s purchase the standing crop of the producer well in advance of the harvest at a price fixed on the date of the bargain. They can use this as a certified sample
. It saves the cost of transportation and inspection. This method is usually adopted in interior areas where price fluctuations get communicated within a conventional time lag. The produce or the commission agent shows the sample to the trader and finalizes the price. Samples are given to them from their produce. This method is followed when cultivators borrow from traders or where their residence is far away from the market. However utmost honesty in the dealing is to be followed. Maghum Sale or Unbhav Sale Under this the seller is bound to deliver the produce to the buyer on a set date within a period prescribed by a verbal understanding between the 2. The price is usually coated in lump sum for the entire crop and the seller may receive 50% of the value of the sale transaction in advance. It is usually beneficial to the farmer as he dictates the price and the buyer should pay on a future date of his choice.
oligopsony may result in depressing the prices. The sale under this system is open to a variety of malpractices as the seller remains in the dark all the time and it is only the commission agent and the ultimate buyer who really knows the negotiated price. In regulated markets. Sale by Open Auction Under this method the produce is sold through an open auction by the general commission agent or the brokers or some other auctioneer in the presence of the seller or his agent and the competing traders.of this produce. Oligopsony means the state of a market controlled by a few buyers in relation to many sellers. Disputes may arise when the samples prove to be unrepresentative. Also the buyer may exploit him through over weighing. 6. The objective of the system is to create conditions of perfect competition by eliminating undercover practices and providing for the interaction of the forces of supply and demand in relation to the
. open auctions can also be conducted on the basis of such representative samples. The highest offer made is intimated to the seller and if he agrees. a sale with an open agreement is said to have been made. Thus the Hatta system of sale operates to the disadvantage of the producer. Further. Thus a sale gets confirmed. 5. as he is unaware of the price offered. Sale by Open Agreement Whenever the grower or the farmer deals with the buyer to enter into a sale/transaction with him. In such kind of a sale. However there is no guarantee that the benefit of this higher price always goes to the producer. ignorance of market conditions may prove to be damaging. The buyers make these offers in a secret language. which is mostly understood only by the commission agents and the buyers. The Tobacco and Cotton are the two important commodities sold by an open agreement. There are no middlemen and it is the seller who moves from one buyer to another in search of a remunerative price or offer. Most of this secret language is a sign language that involves pressing fingers and finger joints. The offer of the highest bidder is accepted with the consent of the seller. the bid is closed. manipulation of accounts deductions of unauthorized allowances and delays in making payments. There the seller has the discretion to refuse the offer of the bidder if he considers the bid too low. Hatta Sale (Undercover) Popularly known as undercover or secret sale. Under this system the commission agent covers his hand with a kerchief and invites offering individually from each buyer. 7. This regulated market process is called quoting on samples.
This clearly indicates that the prices quoted are based more on individual calculations
. These tender slips are then deposited in a sealed box. He feels he cannot be cheated due to the open method of price fixation (bidding). he has to inform the market secretary within a predecided and stipulated time limit.
8. And there is a certainty of completing the sale of all the lots by the stipulated hour irrespective of the numbers involved. The objective of using a priority register is that incase of tie-bid. The buyers too have the opportunity of putting forward repeat bids to reach a maximum paying capacity for striking a deal. In this system the physical system involved is the least for all parties concerned. This is possible as a pre-auction inspection of the graded lots is allowed and disputes regarding the quality are eliminated. The auction has to be done by lots and this results in a large number of traders in the beginning but the number thins out as the day progresses. The farmer who views the open auction process gets a kind of a physiological satisfaction. The maximum price quoted is announced on the public address system for the benefit of the sellers and buyers. Higher bids are few and far between as the buyers are relevant to pay a high price for the produce. Sale by Tender system Under this system the produce (preferably a graded one) is arranged lot wise and is open for inspection by the intending buyers.quantity and quality variations. The demerits of this system are: 1. the buyer also signs a priority register. the slip deposited first. The time is stipulated (fixed) for submission of tenders. The intending buyer after examining the lost records the bids in their tender slip supplied by the market committee. The process is very time consuming and requisites an extensively developed system of commercial grading. If the seller is not willing to sell at the quoted price. They feel that if a product has come up for auction. Usually the tender box is opened and the market superintendent or secretary compares the slips. as indicated by the register is deemed as the highest. While depositing the bid-slip. The highest quotation for the lot is recorded in the bid-declaration slip. it is somewhat inferior. 2. It is further observed that the differences in price offered by the highest bidder and the nearest competitor in many cases is just a few rupees.
especially the medium size holders also sell the produce directly to the village beoparies or town dealers visiting the village markets. Tola or Weigh men also to some extent function as intermediaries. Local landlords and cultivators. But it is more than often seen that these tola also arrange the sale of the producer by carrying samples to dealers in towns. They obliviously charge a commission for this and also ‘Tolai’. Arhatiyas or Brokers: They usually occupy a very important position
. Beoparies generally purchase when prices are low and sell it when they are high. He purchases at cheaper rates owing to the lack of competition from other beoparies. He usually collects the produce from the villages and hats and brings it to the wholesale markets and from there it reaches the consumers. The tender system of sale has one definite advantage over the open auction system. the heaps of grain of different quantities are sold at a flat price.
9. Technically speaking they are supposed to only weigh the produce and charge a commission for certifying its weight. 2. 4. collects the produce and takes it to the nearest market. A very large number of intermediaries have come to exist between producer and consumers of these the major ones are: 1.
Chapter 7: Marketing Agencies
The Next important aspect relates to the functionaries operating in the Indian agricultural markets.of profit margins rather than by simply working out the parity price based on terminal prices. who deals in his individual capacity. Dara Sales In this system. The advantage claimed by the system is that within a short time a large number of sales can be affected. as it is time saving. Village Beopari is by far the most usual purchaser of the produce. Itinerant Beopari wanders from village to village. 3. 5.
Indian consumers are more in number hence they do not leave any surplus and Indian products that are surplus are non marketable in nature. However it is not the largest exporter in even a single segment. This is because of 2 basic reasons viz. The former indicates the residential quantity left with the producer after meeting his requirements for family consumption. retailers. 1. Kutcha arhatiya mainly concentrates on the work of collecting and assembling the produce.among all the intermediaries. in turn depends upon the production on one hand and the growers household and farm requirements on the other.
Chapter 8: Marketable Surplus and Marketed Surplus
India is the world’s largest producer in approx. The surplus may be marketable surplus and marketed surplus. availability of storage facilities etc. b. wholesalers. 2. and payments-in-kind to casual and
. Pucca arhatiya on the other hand arranges for the sale and distribution of the produce. farm needs. The actual amount of crop sold is dependant on a large number of factors. They are of 2 types: a. Although the seller is free to sell his produce in the market directly to the buyer. Unlike the case of manufactured products where the entire produce is set aside for the market. co-operatives and the governments. 70% of the produce is handled by the producers themselves and the balance is handled by trade comprising commission agents. he in actual practice does it through a commission agent. The marketable surplus. The intricacies involved in the market transactions have compelled him to adopt this costly agency. 9 different agricultural commodities. price trends. They also advance loans to the village merchants and traders on the condition that the produce will be sold to them or through them. Both work together in tandem as master and apprentice.
Indian agricultural marketers have the tough task of making non-marketable Indian offers attractive. Broadly speaking. in agriculture all produce is not sold. One of the major factors in this case is “Marketable Surplus” the other factors being need for cash. In agricultural marketing is involved the putting up of the surplus in the market through a definite channel.
when a farmer holds some of his surplus produce on the farm or consumes more than normal amounts of it. payment of wages in kind. There is always the fear of double counting. the amount of crop to be marketed is also determined by the nature and size of crops. Thus. social conditions prevailing in the region with regard to payment of wages. the proportion of food grains in the total farm production and the amount of hired labour. economic conditions of farmers particularly with regard to indebtedness etc. Large farmers market little when prices are low and hold stocks in anticipation or future higher prices. farmers and traders have always the tendency to under-estimate the quantity of the crop sold or stored.
.” Objectively it is the arrivals. the quantity retained for use in each farm depends on a variety of factors. This means the “theoretical surplus available for disposal with the producer. feed. marketable surplus is not a free variant but a forced surplus. But it can be higher or lower than the level of marketed surplus during a period depending on the extent of hoarding from the current production or dehoarding of the accumulated stock by the producers.permanent labour. average size of holdings. seed and wastage have been met. It is very difficult to calculate marketable surplus of agricultural crops because production year varies from crop to crop. less or equal to his marketable surplus. direct from the producing areas. such as the size of the farm and the family. of the new crop. A farmer's marketed surplus can be either more. This usually happens when cash is needed immediately after the harvest to meet certain urgent needs. Even if one takes into account population changes. average yield per acre in the area. market facilities and the price at the time of sales. and may thus vary considerably from one year to another. Therefore. Further. It is less. Marketable surplus will always be less than the actual production. The size of the marketed surplus thus depends upon the relative share of small and large cultivators in the marketing. artisans and seed and stock to cover the future exigencies including wastage. Besides. such as acreage under cultivation. The latter term refers to the quantity of produce that is actually sold in the market by the producer irrespective of his home consumption and other requirements. Nor is the absolute quantity retained for home use constant from one year to another. in calculating marketable surplus usually subjective methods are employed. It is worth noting that marketed surplus of small subsistence farmer’s increases with a price fall because more quantity has to be sold to meet the minimum cash needs. Old crops cannot be easily demarcated from the new crop. which affect rural food requirements. year-to-year changes in the crop size affect marketed surplus in a complex manner. out. left after his genuine requirements of family consumption. the landlord. the surplus is more. If the farmer retains less of the produce than is needed for the consumption at home.
The produced moreover is small per farmer.Chapter 9: Defects of Agricultural Marketing
1. Also almost all small farmers are neck deep in debt and need cash reasonable fast due to the unusual structure of agriculturism in India. they have usually no other alternative but to market the produce immediately in order to meet their urgent liabilities. Ø The second important factor. Lack of organization among producers: Lack of organization among producers is one of the basic and fundamental problems in the Indian Agricultural Marketing scenario.
2. Even when they know fully well that by holding up the crop for a few months they would be able to secure a better net return. Ø The element of time is an important factor and this for double reason. requires cash at double speed and has no storage facilities at the local level. which is responsible for the high percentage of village sales. The farmers of India are small and scattered all across the country. Causes of Heavy Sales in the Villages The following are chief causes leading to heavy sales in the villages: Ø The most important cause for the high percentage of produce sold in the village is without doubt the indebtedness of' the producer. An organizational attempt at the grass root level usually fails. nature of communication with the nearest market. Most of the cultivators are hard-pressed for cash to meet the claims of their creditors and to pay off rent and other charges. The forced sale phenomenon is one of the major reasons responsible for the pathetic condition of the rural farmer. The marketing possibilities of perishable commodities depend very largely on the rapidity with which they can be transported to the marketplace. The producers have little or no place to store.
. Cooperative movement in India seems to have failed and thus the small farmers lack organization.
In a scenario wherein the farmer producer is disorganized. he is forced to sell at a lower price. is the unsatisfactory. Many a times the endrocities of the moneylenders are almost hedging on the farmers to sell their produce at lower than reasonable rates.
cooperative commission agents and wholesale merchants and the retailers. as these village markets are small and distant. They function at various stages in the process of assembling and distribution of the produce. itinerant merchant or beopari. as much as 21. On a sale of produce worth Rs. nor are based on any service consideration and are recovered either in cash or in kind. in case of linseed it is 62Paise.5% of the income of the producer goes to meet the various expenses:
. They dominate every activity in the markets. kutcha and pucca arhatiya. These necessarily have to be done by the respective functionaries. Sometimes there is only one buyer. In the course of transacting sale. there are very few buyers for agricultural produce. dalai. market charges are collected from growers or buyers at prescribed rates. They ignore the interest of the farmer-producers who are the sellers. The Middlemen intervention is uncalled for. One of the main problems is “The multiplicity of market charges and their heavy incidence on the producer-seller. and often both. It will thus be noted that there exist as many as 10 to 12 intermediaries comprising of the village bania. They are always introduced in favor of the traders and the functionaries. Moreover he further exploits (resorts to monopoly) by selling consumer goods and agricultural inputs to the farmers at a very high price. in case potato 50Paise and in case of groundnuts 45Paise. Infact due to inadequate new facilities most of the time farmers don’t even know the prevailing prices/rates in the market. Due to this the Indian farmer is not getting good returns. as they are the reason behind the malpractices in agricultural marketing in India. This buyer resorts to monsoly and buys at a very low rate.” In the absence of statutory regulations these charges are neither defined.3. In order to pay these functionaries. These charges have no sanctions except usage or customs prevailing. share of the consumer's price received by the actual cultivator. the share of producers in a rupee paid by the consumers ranges from 52Paise in the case of rice to 57Paise in case of wheat. many farmers prefer to sell these in the local village market. Due to the sales methods adopted by the middlemen the farmer seldom know what price they are to receive for their sale. 4. The existence of a long chain of middlemen reduces the. or a purchase a number of operations involved which cannot be attended to by sellers or the buyers. Superfluous Middlemen: Traders are the main functionaries in a market. Due to the various barriers in taking the produce to the urban market. According to the findings of the Marketing Surveys.100. Multiplicity of Market Charges: Market charges are “Those charges that are incurred by the seller or the buyer or both from the time a commodity enters the market for sale till the time the title of ownership of the goods is transferred from the seller to the buyer”.
Karad (Deductions in kind for the quality difference) 10. and even beggars. therefore. Even within the same market the kachcha arhatiyas may charge lower rates to the village beoparis who visit the market often and have regular trade connections than to the farmer who visits market only occasionally and has. etc. preparing the produce. a number of other charges have to be incurred. and dalta for possible loss of weight and dana given to sweepers. The objectionable feature about the market charges is that they are not only high but are also not clearly defined and specified. pathshalas. dispensary. Borioto (charges for holding the gunny bags while filling) 7. As the Report on the Marketing of Wheat in India points out. the seller has also to submit to deduction known as garda for impurities in the produce. Charity 9. the sweeper. Dhalta/Jhukta (leaving the balance in favor of the buyer)
. gaushalas. the chaukidar. but the munim (arhatiya's clerk). Hamali (Handling Charges) 4. Chalani (Sewing) 6. Tulai has to be paid for the weighing of the produce. To make things worse many of the market charges are taken in kind and in taking their shares the persons concerned are liable to be generous to themselves. The charges vary from market to market and there is also no uniform practice as to charges that are borne by the seller and those that are borne by the buyer. only small volume of business to offer to the arhatiya. During the measurement and in almost all the markets deductions are made from the amount due to the seller for dharmada or charity.In the market the cultivator has to arrange with a kachcha arhatiya for the sale of his produce and in the larger markets he has to employ a broker or Dalal to get into contact with the kachcha arhatiya. the waterman. watermen. the arhatiya's cook and a horde of beggars of every description all regard themselves as entitled to a share of his produce. palledari to cover the cost of the labourers who help in unloading the cart. Dhanak (charges for pushing the grain in the gunny bag on to a scale pan) 8. For their services he has to pay some commission. Arhat (Commission) 2. filling the scale-pans.” Some of these charges and deductions existing in the markets are: 1. holding the bag open where the produce is being measured. In addition to the arhat paid to the arhatiya and the dalal. Dallali (Brokerage) 3. Tulai/Dharwari (Weighment) 5. “not only the arhatiya and dalal.
Patti (cost of sale slip) 16. Bardana (rent for gunny bags supplied) 17. Similarly payments to the muneem or the apprentice of the Arhatya are uncalled for. Again there is
. Valta/Wata (refraction allowance) 15. Munim (clerks allowance) 14. Among these are Arhat or Commission Hamali Tulai Charges for sewing Any deductions in the name of charity in any kind are unwarranted. which he would be otherwise not inclined to pay for. Rent for cart park 18. Baisari (charges for supervision of weighment to be paid in kind) 13. Only some of these charges are justifiable. Rent for storage in godowns
Charities Muthi (to be paid in kind for temples in the market yard) Darwada (cowsheds or Balaji’s fund) Pathshala (funds for schools in the area) Doodh Khawa (fund to pay for milk for the buyers children)
Some of these charges are highly outlandish like the farmer has to pay for various charities. Namuna (sample)(is shared by the commission agent and the buyers) 12.11. Especially when the principle arhatya gets full commission for the services performed by him. Also charges such as ‘Shagirdi’ where the seller is supposed to pay fro the Arhatiya’s sweepers and water carriers are uncalled for.
j. They have bent the rules in such a way that it is possible for them to cheat and get away. Differential prices for the same grade of produce Levying unfair charges for basic services Restrictive trade practices Arbitrary deductions on account of alleged adulteration and inferior quality
5. When disputes arise the cultivator has no means of safeguarding his interest. c.no case for claming allowances for quality and weight where the produce is subject to thorough examination by the buyer before it is offered for sale. Moreover the unorganized producers and the market machinery are no match to the powerful trader legally. This practice is rendered easier by the fact that there are no standardised weights and measures nor any provision for regular inspection. Malpractices of Middlemen Due to improper market structure traders or middlemen have become all powerful. e. the same works for both parties. The broker whom the cultivator employs is more likely to favour the purchaser with whom he comes into contact almost daily than the seller whom he only sees very occasionally. There are all kinds of arbitrary deductions for religious and charitable purposes and for other objects. f. it is suggested that markets be regulated. Hence in the light of numerous unwanted deduction and high market charges. The burden falls entirely on the seller and he has no effective means of protest against such practice. b. This tendency becomes all the more pronounced when. h. Bargains between the agent who acts for the seller and the one who negotiates on behalf of the buyers are made secretly under a cloth so that the seller remains ignorant of what actually takes place. as it frequently happens. Scales and weights are manipulated against the seller. g. Large quantities are taken away from the produce of the cultivator as bangi or sample. d. Even in regulated government markets middlemen resort to malpractices. i. Some of the malpractices commonly resorted to by middlemen are as follows: a.
commercial grading. The losses due to inadequate storage have been estimated to range from 1.5% (The Prices Sub-Committee)
. In the absence of certain standard grades accepted by the whole trade as the basis for commercial transaction. is almost completely absent. Also if lots are to bulked through cheap and efficient warehousing and transport. which can be understood by the lay farmer. If sales of agricultural produce at a higher price are to be augmented without personal physical inspection of every lot by open auction in the regulated markets. In the upcountry markets produce is stored in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with mud and straw) and in a few centres in pakka khattis made of concrete. standardization and grading becomes imperative. In fact the present practice of dara sales.Some of the practices obtaining in the market amount to nothing less than common theft.e. attempt of individual producers merely secures the ordinary market rate. The reputation of Indian agricultural producers in the world’s market is low. But that there is a general inadequacy of good storage facilities both in rural and urban areas can hardly be denied.
7. kallis or thekkas. commercial standardization and grading are essential. The indigenous methods of storage adopted in the villages as well as in most of the upcountry markets do not adequately protect the produce from dampness.5% (Food grains Investigation Committee) to 2% to 2.
6. Inadequate storage facilities: In most of the villages ryots store their produce in pits or receptacles variously known as kudurus. The practice of selling un-graded products of mixed quality has naturally reduced the reputation of Indian agricultural produce in the world markets. Absence of grading and standardising agricultural produce is another defect. wherein heaps of both good and bad produce are sold together as one lot common in most markets.. There are no standard grades commonly accepted throughout India even for such important commodities as rice and wheat.
Absence of Grading and Standardization:
Although the agricultural produce (grading and marketing) act was passed in 1937 even today in most unregulated markets the practice of grading is unheard of. gives a premium to the inefficient producer as the good produce is made to carry along with it the poor stuff also. weevils and other vermin’s. Whatever limited grading is accomplished is technical in character i.
there are approximately 2400 million rats in India. (iv) In Bombay as many as 9.000 million every year in India. Baljeet Singh). They would execrate about 86 faecal pellets in 24 hours. the losses are substantially larger.000 bags of foodgrains are auctioned as they are unfit
. When wheat is harvested. The nature of damage studied by Dr. the total consumption by the rat population of 2. P. internal damage to grain becomes very great. 4. This in turn is due to moisture absorption. spices. jute. It is quite obvious that the food grains stocks held by co-operative societies. A recent estimate puts the loss at from 5 to 15% by weight of the production and it is due to defective stage. As much as 15 kgs. cotton. grain merchants and even by farmers are not kept in proper conditions. insects. it contains some moisture. pulses and maize. which would get mixed up with foodgrains. which evaporates in summer and is regained during the monsoon month. Deoras. and further contaminate grain by shedding thousands of hair from their bodies. In addition there are crops like jawar. Therefore. rodents and birds. 18.400 rnillions would amount to about 24 in. Calculating on this basis of a tonne of grain being consumed by 100 rats per year. J. In terms of money this would come to about Rs. The rats start damaging the grain right from the field to the time it is consumed. excessive heat. He has estimated that about 20 rats could consume the quantity of food sufficient for one person. With the change of temperature. which are infested by stored grain pests even before harvest. Deoras is as follows:(i) It has been noticed that apart from damaging crops and food grains in storage. The insects form inside the kernel and are visible until the threshed grains are put in storage. On a gross estimate this would mean that rats are spoiling at least one fifth of the grain produced. oilseeds. (iii) They void 1½ gallons of urine during the year. tobacco would come to over Rs. Dampness raises the moisture content of the grain thereby making it soft and therefore susceptible to insects. millets.000 million when calculated at the rate of Rs. tons. mites. By the time the infection is detected. Losses due to rodents are also very great. (ii) The rats damage 10 times the quantity of food material they eat. 750 per tonne. According to Dr. Even at 5% the loss of cereals. The damage is greater when the grain is stored in kachacha underground pits where the sub-soil water table ranges from 8 to 10 feet below the surface. of grain have been recovered while digging out nests from about 30 rats burrows.to 5% (as estimated by Dr. rats carry food grains to their nests in burrows. grains loose weight.
demand conditions. “Insects. Besides rats. Bad roads. 9. beetles and moths are prolific and each couple lay anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6 months. It has been estimated that weevilled grain in the case of wheat varies from 1 to 2% or more. Hence it is very much needed that an initiative be taken to improve transportation facilities. A smooth and efficient system of transport from the farmer’s village to the consumer door goes a long way in not only helping the agriculturalist to bring his produce to the market without much difficulty but also helping the consumer in securing his needs with a reasonable time and cost. This news service acquaints him with the ruling price and thereby strengthens his bargaining power and position. Carts both pulled by bullocks or tractors cannot provide these kinds of facilities. market arrivals. The price information if available grade wise helps him to know the approximate returns he is likely to get for his produce. The railways established by the British have not been developed further and hence are inadequate by today’s standards. the existing means of transport are woefully inadequate. Lack of Marketing Information: The importance of an efficient marketing new service particularly for the producer-seller in regulated markets hardly needs any emphasis. “Communications from the field to the village and from village to the mandi are often extremely poor and defective.” 8. but also lead to the multiplication of small dealers and intermediaries. Some of the agricultural produce needs special storage systems even while being transported.” Thus the rural transport network is very bad. It also induces him to produce better quality crops and thus raise the standard of farming. Underdeveloped Transport System: Transport plays a very important role in the marketing of the agricultural produce. They also restrict market by hindering cheap and rapid movement of agricultural produce. Bad roads lead to delay in supply and also due to the time lag the produce may be damaged.for human consumption because they are damaged by rats in yards and godowns. (v) The small mice in the paddy fields have been found to climb up to the paddy plant and eat every grain while the big field rat usually cuts the whole plant. Generally the producer-sellers have to depend upon oral information about market conditions. ruling prices
. peas one to 5% or more and arhar upto 2%. The bullock carts do most of the transport in rural areas. lanes and tracts connecting villages with the markets not only add to the loss of transportation and aggravate the strain on bullocks and other pack animals. In India with her vast distances.
This naturally leads to a rise in the cost of marketing with the ultimate result that the share of the price received by the producer is correspondingly reduced. Through various surveys it has been proved that though government has taken active measures to provide cheap institutional finance a large majority of farmers are dependent on private moneylenders and commission agents in obtaining credit. (ii) Variation in the amount of refractions allowed and the terms of standard contracts obtaining in different markets. Even in cases where information as to prices is available prices are not comparable on account of (i) the lack of standard grades acceptable to the whole country. (v) the considerable variations in weights and measures used in several markets in the absence of standardisation of weights and measures. It may be noted here that the activities of traders and commission agents through money lending curtail the freedom of the grower-seller to dispose off their produce profitability in market yards and make them permanently indebted.and market trends etc. that reach them through village sahukar or commission agent or their own neighbors. In the absence of warehouses and the lack of facilities for making advances against the security of warehouse receipts there cannot be any system of cheap finance against security of goods. Cost of Borrowing: The most important requirement of growers to facilitate their production activities is credit. There is at present no proper link between indigenous bankers or commercial bankers and The Reserve Bank of India.
. (iii) inaccuracy of information supplied by various agencies concerned. The official machinery has to realize the gravity of the situation and take effective steps to realize the poor and innocent agriculturist from the clutches of the oneylenders cum commission agents. (iv) variation in the price quotations give by the local and Central government. The cultivator is financed by the village sahukar-cum-trader who is in his own turn financed by arhatiya and the indigenous banker.
10. Absence of market intelligence as to prices is another defect. Though cooperative credit has been increasingly spreading its fold in the agricultural sector it is still far from occupying a pre-dominant position. The case for borrowing private finance and the flexibility in the repayment make it attractive despite many malpractices. The various marketing agents borrow funds at a high rate of interest. The villagers have practically no contact with the outside world nor are they in touch with the trend of market prices and they mostly depend on hearsay reports received from the village bane who is not at all interested in supplying them the correct information as to prices obtaining in the wholesale market.
Thirdly.11. which is by no means conducive to the interests of trade and commerce. Secondly. Naturally when this is the case the seller whether he be the middlemen or the farmer takes care to see that the produce is adulterated to the maximum limit allowed in the market. Multiplicity of Weights and Measures Till recently. The chaotic state of weights and measures in India has been more clearly brought out in all the reports published by the Central marketing staff. creates an element of uncertainty in trade and renders fraud on the part of retailers as easy as it is profitable. Adulteration Of Commercial Crops Various devices of adulteration are in vogue.” 12 Adulteration Adulteration is often resorted to while marketing crops and one of the most important reasons for such deliberate adulteration of agricultural produce is the high amount of refraction (khad) allowed in most markets and the non-mutual terms. “Deliberate malpractices. The multiplicity of weights and measures make supervision difficult and afford greater opportunities for cheating the producers. etc. the volume of agricultural production. i.. there had been an absurd multiplicity of weights and measures in India. This multiplicity of weights and measures employed in India has deplorable effects in several ways. Weights made of sticks. In most of the wholesale markets in the producing areas a fixed deduction is made for impurities (say 5%) and the terms are non-mutual. Such as: Damping of cotton is done by the middlemen on the contention that the kapas comes in
. Firstly. The report of the Marketing Sub-Committee has rightly observed that. it gives rise to needless complications in practice as between one market and another. ignorance and carelessness have all combined to make the consumer in India pay an unnecessarily high price for many goods of different quality. for the collection of data on price movements the relative level of prices in different regions. a producer offering. stones and bits of old iron are common feature in the markets and villages. it affords greater opportunities for cheating the ignorant cultivator and unscrupulous dealers readily avail themselves of such opportunities.e. cleaner produce which has only 1 % of impurities receives the same price as the producer offering produce containing 5% impurities. lack of standard weights and measures is bound to be a great handicap and seriously affects the accuracy of statistical calculation.
. Mr. In red chillies.. which may be reproduced here for the information of the readers. Poem A SPICY TALE
Said Dhania to Zeera : “Alas my friend.”
And Zeera said to Dhania ..... at once ! . Small chippings of white stone have been found in rice in some localities. H. Vinegar in some cases has been found to be acetic acid.” On these finds.. which grew too louder ! The helpless agonising cried
. And sell us in the market . “We should not let it pass ! Let us appeal to the Government.” While walking through Bazars I heard Loud cries. Chattopadhyaya has so wittily composed a Poem. And see to it that such marketeers Are brought to book. . “Most of the common salt contains large-quantities of white chalk. alas ! Men mix us now with grass.. while turmeric is adulterated with lead chromate which has a deep Yellow colour. . “Tomato sauce is often only a mashed pumpkin with a small percentage of tomato. many unscrupulous traders use lead oxide to brighten the colour and add weight. To cease to be a dunce.so very hot that if one puts one's hands into it they would grass while curry powder in several cases has been found to be heavily adulterated with horse dung.
Nine tenth of me are cleverly Composed of well Mashed. after a little pause: “I am not now what once I was. Complaining that she had been raped While yet so chaste and young By treacherous traders. I'm only ten per cent of me Left in the sauce that now you see And you can see. Tomato Sauce !” I said. The country's treacherous traders should Be forthwith clamped in jail !
“Good day.Of virgin Curry Powder. Who had now forced her fiery youth To yield to Horses dung. Pumpkin
. And said. if you are not A credulous country pumpkin. without ruth. She with a saucy smile Reflected for a while. Poor Curry Powder sobbed and wept Till she turned deadly pale.
are not ! Dishonest traders of our land Should straight away be shot !” Said Vinegar . flesh and bone. Are mixing chips of stone With me.. The Marketeers. Our Government should grow aware. she choked and said
“The nation. through gradual stealth
. humiliated.. Is being insulted everywhere. Continuing..“I am no more Tomato Sauce.”
While Rice. in order to inflate The normal quantity and weight... who hardly care. I am not vinegar. Since men.. as men.. With the result.. but now Almost Acetic Acid. said : I cannot but complain The way disgusting traders have Been going against my grain. “My sourness with Ascetic calm turns placid .
In holy wrath and punished those Whose eyes with machination bulge To ruin a whole nation.. is mixed with honest Turmeric. A hand that never more shall brook The presence of a single crook !”
... are running the land.... careless of its life. Crass criminal offenders... Say ! is our Government composed Or nincompoops and sillies ? If not it is high time they rose. “Or if Lead Chromate. indulge In rank adulteration .. Lead Oxide with Red Chillies. who. An Straightaway should be put down With a relentless hand. by some trick. It is the Government's fault ! If Chalk is mixed with me and sold to men !” said Common Salt. Who.Doom creeps into the nation's health !”
“No ! do not blame the marketers..
which represents a fair remuneration to the producer and is within the consumer’s ability to pay. It has been observed that well regulated markets create in the minds of cultivators a feeling of confidence. Further maximum share of the consumer’s routine can be had by the producer if the conditions of orderly marketing are created. In some cases like rice nearly 48% of the prices charged to the final consumer is siphoned away by the middlemen.
. the traders succeed in manipulating the market scenario and to take home a major proportion of the price paid by the consumer. An improved system of agricultural marketing. This may be done by creating a situation where the cultivation has greater confidence in being able to sell his produce in the market. If the agriculturalist in India is to receive a higher price for his produce. and if the large scale industries are to secure a steady and reliable supply of raw material of uniform quality. unless means could be found to move food from the producer to the consumer at a price. Thus a need is felt to tackle the emerging problems of agricultural marketing more resolutely and efficiently than ever before by regulating the markets. which will secure for the cultivator a larger proportion of consumer’s price is a ‘sin qua non’ for agricultural improvement in India. Any program of getting the farmer-producer out of this situation necessarily envolves the breaking up of the monopolistic powers of the trader. Similar considerations also apply to other agricultural products and to fish and forest products. A very small proportion of the consumers paid up price actually goes to the producer-seller. It is therefore necessary to remove the defects in the machinery for marketing of agricultural produce. obviously the defects in machinery for marketing of agricultured produce should be remedied as quickly as possible. It would be useless to increase the output of food. Measures to make the producers directly connected with the marketing of the produce are the need of the hour. The producers believe that they get a fare deal in these regulated markets. Such a scenario provide for a mood where the farmer is willing to accept new ideas and strives to increase his agricultural produce. The value of such regulated markets thus can be exaggerated but it is yet to catch on in India.Chapter 10: Lines of Improvement
Due to various defects in the agriculture market of India the traders (middlemen) occupy a unique position and due to such a unique position. if the needs and preferences of the consumer are to be conveyed to the producer with a minimum amount of delay and friction. For this it is important to protect the producer’s interest. it would be equally futile to setup optimum standards of nutrition.
middlemen and buyer. Added to this cooperative marketing has also made good progress in some developed countries. he is liable to be deceived by the commission agents or broker or traders.Establishment of Regulated Markets: What are Regulated Markets? Markets that have rules and regulations with respect to the price of the product sold. In India the situation is however different. Nearly 2/3rd of the marketable surplus of all agricultural commodities are disposed off (sold) in such markets. These regulated markets ensure a fair and level playing field for all viz. The process of regulation received wider acceptance in 1918 when the General Cotton Committee appointed by the government of India
. The common objective of the various acts for straight agricultural produce markets is to bring all the parties that is the producer. Karanja was the 1st regulated market in India. the method and the produce in which the transactions take place are other similar market operations are said to be regulated markets. Indian producers find it most convenient and least troublesome to sell agricultural produce in the unregulated primary village market. Establishment and Regulation of Markets in India The most effective and direct measures to improve the conditions of the markets as taken by the government through regulating the markets and the market practices by legislation. in non-regulated markets. commissions. This is done by eliminating the malpractices at the grass root level. In developed countries besides government legislation semi-independent commodities. Sale through the cooperative society has not been possible because of the failure of the cooperative movement in India. These boards. the commission agent and the buyer to the same level of advantage by eliminating malpractices and rationalizing market charges. Regulated markets in India The first attempt to regulate the Indian agricultural market was made as early as 1886. corporations function to regulate and develop marketing. If the farmer comes to the assembling center for sale. At the same time the marketing methods followed in advance countries like the establishment of producer controlled marketing boards are not possible in our country as it is difficult to organize such boards on account of small and scattered producers thus the only option left is the regulation market practices in existing unregulated wholesale and retail markets. commissions or corporations or producer-controlled boards are set up under various acts. The regulated markets provide a unique system of marketing that is only beneficial to developing countries like India. It was situated in the then Hydrebad residency. the producer.
which by observed that “these can only be removed by the establishment of regulated markets”. This enables the producer-seller to dispose off their entire marketable surplus in one and the same market. the producer. should be included amongst the notified commodities for the markets. be advantageous to the producer-seller if all the commodities are grown in the market are brought within the orbit of regulation. It would. which deal in simple commodity. livestocks and these products and forest produce. by and large. It is. it was the first law in the country which attempted the regulations of markets with a view of evolving sound market practices which are fare to the producer as well as the trader Since then further act have extended the scope of agricultural legislation to the commodities other than cotton. adulteration of produce and the absence of machinery to settle disputes between the seller and buyers were recognized as the main hindrances in agricultural marketing as early as 1928 by the Royal Commission on agriculture on a national scale. however. The poor standard of primary and secondary commodity markets where producers convert their produce into cash. Most of the regulated markets now functioning are. Several committees have also recommended this from time to time. Today market legislation in India covers almost all agricultural as well as horticultural produce. Although legislation provides for the regulation of all types of products in actual practice only some important commodities have been so far brought within the preview of enact. These regulated markets ensure a fair and level playing field for all viz. However since the regulation of markets is a state subject. the then government of Bombay was the first to enact the Bombay Cotton markets act in 1927.recommended ‘regulation of market’ as a solution to agricultural marketing problems. the methods or the procedure in which the transactions take place and other similar market operations are said to be regulated markets. these are some variations in the state legislations. middlemen and the buyer. like tobacco. which are commonly grown in notified areas and for which there is a fare marketable surplus. the prevalence of various malpractices such as short weights. A regulated market is a market that has rules and regulations with respect to the price of the product sold. Infact. therefore highly desirable that all agricultural commodities. In pursuance of this recommendation.
. There is however some markets. unauthorized deductions and allowances made by commission agents. multi commodity markets. vegetables or livestock. This is done by eliminating the malpractices at the grass root level. excessive market charges.
c. standardizing weight and measures. The progress of regulation was very slow due to the 122 markets were regulated till the end of the war. On the lines of this bill several states drafted and passed their own bills. At the central level financial assistance is being provided to select regulated markets for establishment of grading facility for some important items at the producers level. In 1938 a model bill was prepared by the central agricultural department (now known as Directorate of marketing information). Due to this the number of regulated markets grew rapidly after independence. Socially it profits the producer as he is now directly involved in the management of the market communities. After independence the planning commission in its 1st and subsequent 5 years plan emphasis the vital role played by regulated markets.Progress of regulation in India Regulation of markets in India is today a state subject. Benefits or advantages of regulated markets: Regulated markets have many advantages over unregulated ones. Strengthening the arrangement of enforcement and inspection to ensure a regulated system of open auction. Some schemes are also assisting the development of infrastructure facilities in selected regulated markets both primary and wholesale levels. A number of steps have been taken in the last 50 years to regulate markets. trading practices and margins of intermediaries. This provides him with a platform where he can discuss matters concerning his interest and
. developing certain infrastructure facilities in assembling markets and introducing quality standards AGMARK certificate. But despite this the progress is not very satisfactory. A further expansion of the regulated market system in terms of both market and commodities to be brought within the scope of regulation. The number of the markets increased from 432 in 1950 to 3631 in 1976. The directorate of marketing and inspection at the central level render advice in farming market legislation and its enforcement. Though the legal framework has been provided in those state the progress is uneven hence it’s suggested time and again that: a. Economically the producers gains by way of reduction of unwarranted multiple market charges and unauthorized market deductions. Development of rural markets and shandies and establishment of rural markets in areas where such facilities are not available. These are aimed at regulating marketing practices. Quite a sizeable size of markets remains unregulated even in this day and time. b.
Proper market yards with full facilities like sheds for the sale of produce. the producers themselves took less than 40% of the produce to the markets. 9. safeguard the interest of the seller and smoothens business by creating good relation between sellers and buyers. Besides there has been a reduction in the market charges which varies between 28&69 % inn various markets. 10. Excessive charges are reduced and unwarranted ones are prohibited 4. Only correct and stamped beam scales and weights are allowed to be used in the market. Market practices are regulated and the undesirable activities of the market functionaries are brought under control so that a fair dealing is assured 5. It works out to be 15-25lakhs on rupees in respect of markets with an annual turnover of 5crores of rupees.give bent to his grievances. There has been an increase in the number of sellers bringing their produce to these markets. the producer-seller is benefited to the time of 3-5Rs for every hundred Rupees worth of produce marketed by him in the regulated markets. weighment and deduction prevent litigation. Reliable and up to date market news are available to the sellers. cart parking place. 7. A machinery for the settlement of disputes between traders and sellers is setup this machinery provides suitable arrangements for the settlement of disputes regarding quality. The average percentage has now gone up to 70%. In these markets suitable quality standards and standard terms for buying and selling are conveniently enforced. Until 1944. Open auction methods are strictly followed and unjustified trade deductions like karda. Markets charges are clearly defined and specified. Market the social and economic benefits accruing to the cultivators. 3. Psychologically the producer occupies a dominant position in the market community and faces the trader with greater confidence. 2. This is no small benefit to the tiller of the soil. 6. As a result of the rationalization of market charges alone. dalta. as a result of the regulation of markets may be briefly enumerated as below: 1. Correct weighment is ensured by periodical inspection and verifications of scales and weights. 8. batta namuna etc are eliminated.
. better grading and warehousing facilities for accommodation of agricultural produce are duly provided by the market committees.
rest houses. rationalized market charges. space for parking carts. Normally a market yard acquired amenities and facilities such as auction halls or platforms. post offices. lighting facilities. helped to eradicate undesirable malpractices. The market yard is the nerve center for the performance of the activities of a regulated market. standardized weights and measures. sanitary arrangements. Steps have to be taken in the future not only to bring the remaining assembling and terminal markets but also the primary markets under regulations. Besides reliable statistics of arrivals. Besides. protected cultivators from authorized deductions and unduly low quotations but has also developed a machinery for serving impartial settlements of disputes between the practices. The market yard. The average percentage has now gone to 70%. 2. A well laid out market yard includes the provisions of certain basic amenities and facilities. amenities and facilities: A market yard is “A statutory declared area situated within the market proper where all sellers of the notified commodities are supposed to bring them and affect transaction with licensed traders directly through the other license intermediaries under the supervision of the employees of the committee. Until 1944 less than 40% of the produce was taken to the markets by the producers themselves. drinking water.
Most of the defects and malpractices to the disadvantage of Producer-seller can be removed by the exercise of proper control over markets and this could be done by the establishment of Regulated Markets in the country. internal pucca roads. there has been the reduction in the market charges varying from 28% to 69% in various markets.11. canteen. Thus regulation of markets has been a boon to the agriculturalists. market office. etc. regulated markets have produced a wholesome effect on marketing structure and have generally raised the efficiency of marketing at the primary level. It has not only introduced a system of competitive buying. As a result of the rationalisation of market charges alone. banking facilities. stock and prices are easily available. There has also been an increase in the number of sellers bringing their produce to these markets. Markets may be regulated either by local bodies or under State legislation. However no market yard can actually claim to have provided all amenities and facilities laid in the standards for regulated markets formulated by the Indian Standard
. godowns. Taking the overall picture. cattle shed. the producer-seller is benefited to the tune of 3 to 5 rupees for every 100 rupees worth of produce marketed by him in these markets.
They also resort to very unethical practice of free taking away of excess left in the lot after weighing. Then there is a problem of conventional and marginally over weighment. The traders take full advantage of the situation and cheat the ignorant cultivator on every available or possible occasion.
3. sometimes if a seller has a high amount of produce to be weighed he engages the service of more than one weighmen. the number of licensed weighmen. Depending upon the nature of the commodity the procedure of weighing differs. The produce is weighed by different licensed weighmen simultaneously at different spots in the yard. The system adopted however depends on the availability of sufficient number of weighmen. It influences the actual earnings of producer-seller and also their perception of the transaction fairness. Further the multiplicity of weights and measures makes supervision difficult. Some of the traders resort to using unauthorized and faulty weights and scales. There are many malpractices connected with weighing and weighment. Mostly it is done lot by lot by the same weighmen. It creates an element of uncertainty in trade and renders scope for fraud. the scale of the commodity arrivals and the possibility of earning sufficient daily income by way of charges collected. The multiplicity of weights and measures has deplorable effect on the market scenario. Many times it so happens that though the sale transaction are over in the morning the growers have to wait for getting their produce weighed till late in the evening and may be
. Use of Standard weights and measures: The weighing of agriculture produce is an important aspect in the working of a regulated market. The buyers demand access weight allowances and insist on arbitrary deduction for counter balance. There is also a complete absence of uniform weighing charges or weighment. It is however observed that in many regulated markets across the country the number of licensed weighmen was small. All such malpractices rampantly co-exist due to the absence of an impartial and independent agency for weighing.Institute (ISI). Mostly weighing of agricultural produce in most regulated markets is done wholly within the premises of the market yard. in turn it is determined by the size of the market. the frequency. The lack of any fixed procedure of supervisors over the actual weighing process is also responsible for the situation.
even overnight. Also this inspection staff (agricultural supervisors) are in the habit of taking bribes from the commission agents and traders for conniving at improper weighing. It has been observed that the “surprise inspection” weapon provided to the market committees with respect to weighing provisions is a failure. Further it is suggested that the weighing work among the licensed weighmen should be given on a rotation basis. It is also suggested that the market committees should themselves provide weighing and measuring equipment as against the present practice of traders using their own equipment. The use of standard weights and measures safeguards the interest of parties against cheating by false or under-weight. Also the employees appointed as inspection staff by the government are far too inadequate in number. It is even now more urgently needed in rural areas in regard to transactions in which the farmer is concerned. This will minimize the collusionary group affiliations and thus reduce the malpractices in weighing agricultural produce. Thus here again it is suggested that market committees take the punitive actions against offenders and check these malpractices. and its use would save time and labour in calculations. According to a survey it is estimated that 80% of the transactions were deemed to be proper and fair as 20% is not a small figure. Many suggestions to the improvement in the scenario have been given by various national level committees. It is suggested that the market committees should expedite the process of issuing license to weighmen in the interest of the producer-seller. Besides the check from the authorities the grower can also do a lot to
. Their logic is that if more weighmen are given licenses the earning of the existing set of weighmen would be adversely affected. The Planning Commission has recommended to adopt the metric weights and measures throughout the country because it is simple. This is because most market committee member is honorary and thus indifferent to pay such visits and invite trouble. The Standards of Weight and Measures Act has been passed in 1958 and enforced in all the states with a view to check fraudulent views of weights and measures. The surprise visits made by the market securities are rendered ineffective as a result of before hand knowledge of the visit to the supervisors and licensed weighmen. This 20% of malpractices can be eradicated if there is an efficient supervision by authorities of the market at time of weighing. easier to learn and remember. This shortage of weighmen in all the markets is due to the fact that the market committees are averse to issue more and more licenses to weighmen.
These losses in temperature can be reduced by making provision for efficient ventilation in the godowns and by closing them during the monsoons and keeping them open during the dry season. before they are sold is an important part of marketing. This point was realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry Committee. preserving them safely and then distributing them in times of scarcity is necessarily a part of production and equal in importance and dignity. The grower should be diligent and meticulous with respect to the procedure of the weighing laid down by the authorities. losses in storage are due partly to the change in temperature. This point was fully realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry Committee and later on by the Agricultural Finance Subcommittee. Grains in bags can also be protected by damage. Storing goods. dampness and partly to insects etc. 4. It is observed that the grower seldom do this and thus the loss on this account is sizeable. It is necessary that sufficient space be kept between the bags while preparing a stack-plan." Storing is. The grower should also take the trouble of weighing the produce at their own end before bringing it to the markets. As mentioned in the previous section. a very important part of marketing. Storage of farm produce is one of the essential elements of
. the Rural Banking Enquiry Committee and by the Rural Credit Survey Committee.eliminate weighing related malpractices. they check the rise and bring about some stability in market prices which benefits the consumer immensely. All these bodies recommended that storage and warehousing facilities should be made available at all nuclear points of trade in agricultural produce. therefore. Increased Provision of Storage and Warehousing facilities: It has been well said that the business of accumulating and storing perishable as well as non-perishable products in times of flush production. By holding back a part of the surplus at harvest time the middlemen prevent a sharp fall in prices of commodities so that the producer's share in the benefit is increased and by letting out produce from the store in seasons when prices are normally likely to rise sharply.
the food corporation of India and the CWC created storage facilities at centers of all India importance. They also help the grading and
. A 3 tier storage system was suggested by various committees viz. The private warehousing storage receipts are transferable and thus the ownership of the goods can be transferred without the actual movement of produce. the government subsequently passed the warehousing corporations act in 1962. the central warehousing corporation (CWC) and the SWC in each state came into existence. Accordingly the national co-operative development corporation. The National Level State and District level Village and Rural level In accordance with these suggestions. value and the retaining capacity of the commodities to be store.orderly agricultural marketing. The scientific storage eliminates lose from spoilage. Realising the need for good storage and warehousing facilities the Indian parliament in acted the agricultural produce (development and warehousing) Corporations act in June 1956 in order to accelerate the efforts of building warehousing. Over and above all this villages / Rural storage needs are been looked after by the co-operatives. Further the government of various states has issued private operators licenses to build and run scientifically designed warehousing and other storage facilities. The method of storage at the primary market level depends upon the prevailing traditions. The licensed warehousing offers other distinctive benefits. Due to the lack of storage facilities that are adequately and efficient the losses are great. The private warehousing also provide for insurance cover against fire. the availability of facilities for storage and the waiting capacity of the producerseller. It is necessary at various levels to varying degrees. These efforts have had a mixed impact but definitely the storage capacity over all has gone up considerably. The state government and the SWC made warehousing and provided for storage facilities at centers of state or district level of importance. flood and theft.
thus arranging for the transportation. Improvement of transportation facilities: Right means of transport at the right time is essential for the smooth functioning of any market. It is the fact that most farmers due to regulated markets would like to sell their product directly at secondary markets but not at village assemblies centers. This kind of a facility at reasonable rates will influence substantially the working of market mechanisms. c. The fact is that the produce of just one farmer may not be enough to fill in an entire truck.
5. Hence the market committees should help coordinate 2-3 farmers to pool their producer together so that an entire truckload is completed. The market committees are under no statutory obligation to provide for transportation but the nature of the problem is such that it is suggested that they step in. trader and the consumer are affected by the shortage of transport facilities. As mentioned earlier the cost of coordinating and transporting can be deducted from the sales proceed.e. Similarly to assess the traders in having adequate transport facilities. The individual grower-seller may record their transport requirements with the market committee. The committee after receiving such requisition pools them and contract lorry supply offices.. All involved in agricultural marketing i. b. the committee officials may contact transporters as well as railway authorities in
. The method suggested above can be executed as follows: a. The cost of such facilities provided could be recovered from the sale of the produce.standardization of various commodities. Here is where it is suggested that the market committees take upon them some responsibility. It has been observed that the cost of transport directly affects the price of the agricultural produce. They should organize some trucks or lorries for the transport of the produce of small farmers from village assembly centers to urban secondary markets. the farmer. However due to bad transportation facilities the farmers are not willing to take the risk of transportation.
This would reduce substantially the transport bottlenecks thus benefiting both the farmers as well as the traders. The markets will also function continuously without the need for closure for want of transport.
6.obtaining the required number of lorries or wagons. Provision of marketing news:
Thus the objective of an efficient market news service should be to aid towards more intelligent production with the ultimate object of achieving effective distribution and fair pricing of farm produce both for the producers and the consumers. They have no waiting capacity to store the harvest produce for a favourable selling time. The government of India in collaboration with the various state government help.The Agricultural Commission had recommended that steps should be taken for a better dissemination of the marketing news. The traders take advantage of this situation. the closing of agricultural commodities and gives information regarding prices. However in India the farmers are very poor and small. This mainly benefited the farmers. When they bring the produce to the market their immediate goal is to sell and obtain cash. In 1957. Prices do not move in harmony even in markets. Collection and compilation
b. This scheme covered two aspects viz. a. The mode of actual payment of sales proceed differ from region to region. Hence the farmer world over stock their produce in anticipation of a price rise. as initially almost all the news relayed from these centers was agricultural in nature and market oriented. which are not far from each other. Now having realized the need for a good agricultural marketing news service. the integrated scheme for the improvement of market intelligence was launched in Bombay. The penetration level of the radio set is almost 90% hence the broadcasts are very useful. Information dissemination Since then the government has given a lot of importance to improving the quality of agricultural marketing news services.
7. the government of India through its 5 year plans has allocated some budget for this activity. market to
. All India radiobroadcasts daily.” The problem of lack of marketing information was discussed earlier. We often find a market glutted with a produce which is scarce in another perhaps only a few miles off. setup of an all India market news service in the 2nd 5year plan. The marketing surveys conducted under the direction of the Central marketing staff have shown that “there is at present a surprising lack of co-ordination as between different markets. The main objective of this was to give upto–date information to the producers with regards to the wholesale prices of agricultural commodities ruling in various markets. Standardization of contracts and payments of sales proceed: Business practices worldwide show that the best time to sell ones produce is when the prices are high.
storage and weighment are pushed on manipulatively to the seller. Almost all marketing charges of transport. This
. payment by installments is forced on the seller. forward training of agricultural commodities is regulated under the forward contract regulation act 1952 for enforcing the act the forward market commission was set up in 1953. Some of these methods are: Instead of prompt payment of the total value of the produce purchased. It is expected that at least this will make direct sales in the markets free and fair. But the problem is of implementation. The market legislations have clearly provided for insuring prompt payments. This happens usually after the delivery of the entire purchase lot. If they cannot convince the seller for a credit transaction they deduct exorbitant amount for cash payment. Further it is seen that the commission agents in most of the markets follow the practice of calling on to get their payments. This is particularly so in the case of certain commodities like cotton and groundnuts. It may be noted that due to this practice of deferred payments the commission agents demand a higher rate of commission from the producer-seller for prompt payments or result to a system of deferred payments to the farmer. If is recommended that market committees play an active role in implementing such legislations. The commission agent may not necessarily recover the amount from the buyer immediately on delivery of goods. There may be a time lag between the delivery of goods and the payment by the buyer. Thus the seller is forced to follow such rules of thumb. which make payments at their own premises. The buyers of these commodities are generally the processing factories. However in the case of indirect sale the system of payment by the buyer to the commission agents is more governed by trade convictions.market and within the same market from transaction to transaction. In cases where the moneylenders are the buyer it is seen that they make direct adjustments in the debt accounts of the sellers who have earlier borrowed funds from them. The farmers being uneducated. Most traders insist that all transactions should be on credit and make the seller agree to this. Most of these modes are exploitative. The buyer behaves as if these are traditional practices and if changed will result in some thing un toward happening. which generally varies. ignorant and illiterate seldom understand such adjustments. With the setting up of regulated markets all such irregularities can be eliminated to a large extend. In order to stop unhealthy speculation. Due to the cash crunch in Indian markets such deferred payments or forward training cannot be avoided.
the lender should supply a copy of the agreement to the borrower and 2. Firstly it protects the consumers and the producers through the establishment of standards of quality. under his signature. As far as the operations of moneylenders are concerned they are governed by the Bombay Agricultural Produce Market Rules of 1941. “If an agreement was entered into between the moneylender and the borrower. This is done in order to ensure good quality both for export as well as the domestic market. The lender should keep an account book. entering therein every load transaction and its recovery” However the committees have practically no direct control over the credit activities of the traders. black pepper and other oil seeds. to the borrower. Secondly it serves as a mean of describing the quality of commodities to be purchased or sold by buyers and sellers all over the country. Thereby making the price reporting mechanism more meaningful. Improvement in Grading and Standardization: Grading of commodities has 3 main purposes. As co-ordination between the working of the market committees and the administration of the moneylenders act should be attempted.commission identified forward markets in raw cotton. The agricultural produce is graded under the trademark ‘AGMARK’. Thirdly it provides a basis for the payment of premium on the quality of commodities. The rules state that licensed general commission agents or brokers could give advances either in cash or in kind to the agriculturalist on the condition that 1. recording all advances made by him to an agriculturalist and repayments affected in the manner specified by the committee in its byelaws and should supply a copy of an account book. which indicate the quality of
. Further trading on the basis of accepted quality standards makes pricing more precise and equitable. coconut oil. The act provided for the fixation of grade designations. standards and appropriate trademarks have been developed under the agricultural produce (grading and marketing) act 1937. As a policy measures the commission has sort to eradicate monopoly of any kind. general commission agents and the brokers. groundnut oil. 8. In India grades.
scheduled commodities of agricultural produce. The grading for other commodities is voluntary. The grading practices of produce at the farmers level need to be emphasized and widely canvassed. This will (it is hope) fetch a competitive price to the grower in the markets compared to the ungraded produce. 9. Remunerative Prices for Farmers: It has been increasingly realised that mere increased production could be of little avail so long as the excess production failed to reflect itself in the shape of some extra income to the producer. How to ensure an economic and remunerative return to the producer; how to establish a relationship between the price return and the quality of a produce; how to provide a self-propelling incentive for the maintenance of a standard which will bring the maximum return: how to prepare the produce for the market, how to grade and differentiate – how to pack and transport; what security and what facilities the producer should get in the market; how to keep him informed of market trends and prices; how to keep him abreast of consumer preferences – these have been some of the questions which demanded close attention of those concerned with the agricultural marketing.
10. Development of Co-operative Marketing: With the commercialisation of agricultural products efficient marketing is as necessary as scientific agricultural operation and so side by side with the progress in cultivation methods of suitable machinery for the efficient sale of farm produce should also be made. The income of the farmer depends to a great extent on the ability with which he is able to market his produce for a fair price. Even if the production side is strengthened and cultivation improved, the cultivator would not gain much, if there is no proper arrangement for the marketing of his produce as the benefits of better farming would probably be reaped by middlemen intervening between them and the ultimate consumer. It has, therefore been recognised that defects of agricultural marketing may be removed by organising the work through co-operative societies. Conclusion In a country like India where, agriculture contributes nearly 49% of the national income and provides purchasing power for over 70% of the population engaged in the production of crops, the marketing of farm produce, which involves all the processes in the movement of goods from the farm to the consumer, has obviously a significant influence on production activities and is patently as vital as the latter. The conditions under which the farmers dispose of their marketable surplus in the villages and nearby mandis will,
therefore, have a significant influence on the national production programme as low farm incomes discourage the use of fertilizers and improved seeds and push marginal lands out of cultivation and thus mar the very incentive to produce more. It is, therefore, advocated that the primary consideration for the development of agricultural marketing is to reorganise the existing system so as to secure for the farmer, his due share of the price paid by the consumer to sub-serve the need of planned development. This progress in the country as a whole has been rather slow and it needs acceleration.
Agricultural Marketing Finance in India
INTRODUCTION Finance in agriculture is as important as development of technologies. Technical inputs can be purchased and used by farmer only if he has money (funds). But his own money is always inadequate and he needs outside finance or credit. Professional moneylenders were the only source of credit to agriculture till 1935. They use to charge unduly high rates of interest and follow serious practices while giving loans and recovering them. As a result, farmers were heavily burdened with debts and many of them perpetuated debts. There were widespread discontents among farmers against these practices and there were instances of riots also. Although the co-operative banks started financing agriculture with their establishments in 1930’s real impetons was received only after Independence when suitable legislation were passed and policies were formulated. There after, bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits. Since independence India has made substantial progress in respect of agricultural finance. Reports of all India rural credit survey committee and all India rural credit review that farmers were fully dependent of various sources of credit. Agricultural credit in early years was characterised by the growth of cooperative credit and there was decline in the share of moneylenders. Moneylenders were the main sources of credit during 1951-52. However occasional moneylenders like landlords and traders have come up as a important suppliers of rural credit. Moneylender was the most convenient and easiest source of credit. Moneylender did not make difference between production and consumption credit. His credit was available at the time needed by, the farmer. His administration was simple and quite flexible. He could asses credit worthiness of not only borrower but his entire family. The most important advantage to money lender was the absence of any worthwhile formal source of credit and illiteracy and ignorance of rural community as whole. The social thinkers in India were
confined to freedom movement and other religious evils and had little time for assessing the damage done by moneylenders who were essentially Indians during two centuries proceeding independence. Charging exorbitant interest rates, cheating the illiterate borrowers by inserting larger amounts than borrowed, non-issue of receipts for repayments were the main reasons of malpractice for moneylenders decline. All these activities aimed at grabbing the farmers land, the only productive asset of that poor man. The development of agricultural sector called forth medium and long-term credit large scale. This need was associated with green revolution. The moneylenders depending upon their own fund could not entertain term lending. The factors accounting for decline of moneylenders apart from malpractice could be their inability to provide term loans. There are certain important positive factors for this. Most important positive factor on the part of authorities was the realisation of needs for institutional credit in agriculture. This let to official patronage for co-operative credit societies by way of extending and liberalising refinance facilities. Further the short lived social control of commercial banks and their subsequent nationalisation, the establishment of low cost regional rural banks and restructuring of apex, have helped in a major way to institutionalise agricultural credit. Growth of literacy education and communication network has also helped to reduce the importance of indigenous moneylenders in a big way. It should be kept in mind that the informal sources haven’t totally disappeared, but have only declined in relative terms. AGRICULTURAL CREDIT Needs and types: Finance had a very limited role in traditional settings as the transactions were undertaken within the limits of village. Farmer’s dependence on others for input requirement was marginal. Inputs such as cowdungs composts, etc. were supplied by the households. Cash was only needed to pay land revenue or to purchase consumption goods. The need for finance grew with modernisation. Frequent crop failures were another reason for growth of cash transactions. Crop failure forced farmers to borrow from moneylenders for meeting consumptions requirements. Due to this the self-sufficient communities were exposed to credit gap. A gap of over one year implies a perpetual time and over a time spreads to the entire village community. Agricultural Credit is classified into two:
Crop loans have two components One for meeting current cash outlays and Another. etc. insecticides. are other things for which short term loans can be needed. Short term loans are granted to purchase seed. improved seeds. Capital intensity has increased the land productivity upto come extent. land. Part of cash loans can be used for consumption purpose. which can be distributed in kind. Kind component: Financial agencies may make necessary arrangements with co-operative marketing societies to supply needed inputs by the farmers instead of giving cash loans which are ultimately meant for purchasing various inputs. It is possible to grant loans in the form of chemical fertilizers. pesticides. pesticides and other input requirements.I. The important form of short-term credit is the crop loan. They should be restricted upto marginal requirements only. medium term loans are granted. electricity charges. land revenue and other taxes. a. Crop loans help the farmers to enable the productivity function with the use of modern inputs. As the assets are available for many years. like capital. etc. hire charges of agricultural machinery and tools. Credit repayable within a period of 15 to 18 months is short term credit. fertilisers. Some factors are owned by him but for other factors he has to depend on respective markets. Medium term loans: Productivity can be improved by improving quality of assets or by creating new assets. fuel. labourer for production purpose. cost is spread over those years. Short term: The producer requires various factors of production. These loans are granted to meet the daily working capital requirements of farmers.
. If the producer has adequate owned funds he does not have to bother about credit. Cash component: It is made to meet the cash requirements by the farmers during the time of production. It cannot be a repaid fully with one or two cropping seasons. 1. Need for crop loan comes from considerable increase in current cost of production. For production purpose.
1. Payment of wages. Availability of working capital only cannot make much significance on productivity. The other factors either have to be purchased or hired if they are durable. The advantage of short-term credit loan is that it minimises the possibility of misuse of loans by the farmers. b. insecticides. But if he does not have adequate funds he has to depend upon others for credit.
etc. electric motors. also consume a lot of funds. etc. Both the loans have same importance. Therefore he is forced to borrow both in cash and kind for his consumption requirements. rites. Crop failures reduce the necessary goods for selfconsumption and also reduce the prospective returns. agricultural machinery and equipment such as diesel engine. Festivals. They may also be used for purchasing livestock. It is the one.Medium term loans defined by survey committee is one. After the establishment of NABARD medium term period is increased between 18months to 7 years. Local moneylenders never made any distinction between production and consumption loans therefore they were successful in their lending. marriages. Long term loans: Long-term loan is granted basically for permanent improvement or for acquiring new assets. A farmer uses his marketed surplus to pay off previous loans and very little to meet family consumption. etc. They could be considered as production loans. are the purposes for which medium term loans are granted. poultry. activities during the first 2
. Mechanisation is another important factor determining long-term finance. The remaining loan is carried forward and can be paid over the period of 7 years. It is difficult to differentiate between production and consumption loans. In the same way construction of farmhouses. Consumption loans:
Industrial credit is wholly meant for production but a part of it goes for meeting consumption requirements of farm families. are some of the important items for which farmer requires cheaper term loans. structure is relative and is determined by the repaying capacity of the borrower. Farmers have to borrow for survival. Variety of machinery is needed by the farmer. which is repayable over a period of 15months to 5 years. which is repayable between the period of 5 or 7 years to 20 or 25 years. Loan is also required due to crop failures. 2. Only a part of medium term loan is expected to return in current production. religious. piggery. In India agriculture is dependent upon nature. II. storage facilities. Farmer has to wait for next harvest for receipts because there is no continuous daily. Good rainfall leads to good crop failure of monsoon damages the crop. Long term finance is needed by farmers for intensifying the agricultural operations on existing holding by making permanent improvements on land. development of activities like dairy. green revolution is associated with intensive use of capital. weekly or monthly receipts. Land fencing also needs long term finance. Indian agriculture continues to be a gamble in monsoon. Consumption loan is basically for survival of farm families. etc. Medium term loans are required mainly for creating capital assets. In the same way deepening and repairing of wells for improving irrigation.
However land mortgage is still insisted upon medium and long term loans. To bring about greater co-ordination between credit institutions under the multi agency approach. There is no dispute about the need for security. Land mortgage conditions come in the way of tenants who have no right on land. Now lending has been made more objective in priority areas. 2. consumption credit is provided on personal security. Even now for many reasons lending agencies insist on security. third party guarantees or gold ornaments. Production oriented credit is extended against anticipated crops (crop loans). Similarly it is also a fact that a large variety of small/marginal farmers are unable to furnish the necessary as security for loans. Responsibility and accountability make them adopt security minded approach. To improve the recovery of loans to ensure continues recycling of credit and 5. SECURITY: Safe lending is widely accepted principle. To reduce the regional imbalance in availability of credit. Lending agencies are responsible to the depositors on one hand and being public institutions are expected to be responsible to the society. Loans meant for purchasing equipments machinery are issued on the basis of hypothecation of relevant machinery. In case of non-repayment the whole loss is borne by the local lending agency. commercial banks. regional rural banks. but its. problem is regarding the size and nature of security and whether small and marginal farmers have anything to do with it. etc. MAJOR OBJECTIVES OF INSTITUTIONAL CREDIT IN INDIA: 1. There are different agencies in India extending short term credit such as primary credit societies. Some times. To direct a larger share of credit to weaker sections of society. etc.decades after independence. are accepted as security. 4. It is more important due to high risk and uncertainty of agriculture in India. Security is now been replaced by purpose. To secure an increase in the total volume of institutional credit for agricultural and rural development. SOURCES OF AGRICULTURAL CREDIT:
. 3. It is necessary to spread risk for liberalising security conditions by introducing credit guarantee schemes and refinancing.
Non-institutional sources were of great importance during 1950's and 1960’s. One engaged in short and medium term. Farmers in reed of long term credit have to approach the primary land development bank or the branches of central land development banks. They also keep and lend the funds to central co-operative banks. obtain funds by the way of share capital reserves. It is seen that primary societies dependence is extensive on central co-operative banks. They provide short and medium term loans to farmers through central and primary societies. At the top of the co-operative credit stricture are state cooperative banks. the fund flow is mostly one way and no banking system can survive for long with over dues despite the best refinance facilities.Sources of agricultural credit are divided into institutional and non-institutional. the government has encouraged the growth of land development banks. Land development bank. In other words. Usually land development banks do not accept farmers valuation of land. For meeting such requirements. Most crucial problem faced by land development bank is the increasing rate of over dues. Primary credit societies. Primary societies are located in villages and their activities are co-ordinated with central co-operative banks. on co-operative lines. Each loan is limited to 50% value of land offered for mortgage. The loans are granted to meet the specified long term requirements for a period of 5 to 20years. (ii) Co-operative land development banks: Farmers also require medium term and long term finance. They have their own values. All loans are issued against mortgaging of land. Just as the central co-operative banks control the primary societies. now due to the growth in institutional sources their importance is declining. deposits and debentures and bonds issued and refinance now from NABARD. (i) Primary co-operative credit: Primary co-operative credit cater to short term and land development banks cater to medium and long term credit. LIMITATIONS: 1. which is about 55%. the state co-operative banks control the central co-operative banks. The different sources of agriculture are as follows: (A) CO-OPERATIVE CREDIT: Co-operative credit consists of two parts. which cater to short-term credit requirements lie at the bottom of co-operative institutional structure. Limited geographic coverage: The spread of credit societies has been limited
Andhra Pradesh.only upto certain states like Himachal Pradesh. (B) RESERVE BANK OF INDIA AND RURAL CREDTI: RBI has taken initiative to appoint the all India rural credit survey committee to solve the problem of rural credit by suggesting ways and means to improve the existing structure. Lastly certain degree of politicalisation of co-operative movement. West Bengal. Huge overdues: Banking activity is a two way process. In absence of such surplus they cannot repay loans. 5. Madhya Pradesh. These farmers invariably cultivate for self consumption leaving very little marketable surplus. 3. They need finance. growth of commercial and regional banks in rural areas are also responsible for the retarded growth of co-operative credit in India. That stops tenant cultivators from the purview of co-operative credit. Linked with ownership landholding: The co-operative credit societies appear to be linked with ownership holding of land. Whereas cooperative societies are forced to depend on central and state co-operative banks and ultimately on government apex body like RBI and NABARD for financial requirements. The national agricultural credit (long term operations) fund. The RBI has set up two funds on the recommendations of AIRCSC. But actually in India credit societies are overburdened with huge over dues.
. Small and marginal farmers: Majority of farmers in India are small and marginal. 4. Punjab and Maharashtra. Similarly small and marginal farmers also would not get adequate credit. 2. Inconvenience in borrowing: Large farmers find it convenient to borrow from commercial banks and other institutions for such institutions do no face any shortage of' funds and have certain targets to be fulfilled. lack of training and professional attitude of staff. Societies will be able to lend only when loan and advances are regularly repaid. The liability to repay loans may be due to poor crops or non and unproductive use of credit. Tamil Nadu. They are: I. Hence the societies go around the large and medium farmers. In other states like U. This stops continuous activities. for their needs but they are unable to obtain it and even societies find it difficult to lend them. Bihar. Karnataka. Thus the basic purpose of self credit is defeated.P. Gujarat have not made any head way.
Remittances provided to central and state banks are in a liberal way besides granting them with short term loan facilities against government securities at a low rate of interest.
The national agricultural credit (stabilisation fund)
RBI also keeps an eye on the policies and working of other financial institutions providing agricultural finance. Special Activities: Special and innovative schemes are adopted by SBI. SBI came into existence in 1951. SBI has been providing financial assistance to marketing and processing co-operative societies as well as for co-operative sugar factories. SBI assists land development banks also by subscribing their debentures. It popularises their debentures by giving advances on security of debentures. After the nationalisation of imperial bank of India. SBI has taken broader view through co-operatives in leading the
.e.400 villages come under the "village adoption scheme".II. Recovery and default: Banks should develop habits of punctual and thrift payments on part of farmers. Nearly 19. SBI has opened branches in small towns and mandis to generate banking habits in farmers. which leads to rural development. The bank has to check whether the kind component is lifted by farmers. etc. II. Margins and security: Production oriented loans are given against the hypothecation of title documents of land owned. land development banks. after harvest time. RBI has issued the following guidelines: I. industrial cooperatives. Credit norms finance: In ratio 30:70 the short term loans are divided into cash and kind components. SBI provides credit to all potentially viable farmers. Schedule of recovery should coincide with cash realisation i. The whole group of SBI has a network of branches and sub offices. ASSISTANCE GIVEN BY SBI TO CO-OPERATIVE SECTOR: SBI is providing assistance to co-operative sector also. guarantee of one or two solvent parties crops. III. (C) STATE BANK OF INDIA AND RURAL CREDIT: As a solution to the Problems of cooperative finance in India the all India rural credit survey committee recommended the integrated scheme of rural credit. etc. besides helping the co-operative sector and taking lead in the establishment of financial institutions to help the agriculturist.
5. Commercial banks are extending support.3%. 3. average cost of deposits and borrowings is increasing. Profitability affected: Rise in establishment expenses.4 and 0. and increase in non performing.6%. eastern and western regions was just 11. For e. These banks also finance for the operation of Food Corporation of India. Direct finance is granted for agricultural operations for short and medium periods. Failure in filling the geographical gap: Availability of' credit is not covered geographically by the co-operatives. Indirect finance is granted by providing advances for distribution of fertilisers and other inputs. inadequate business potential. 4. It caters to the needs of large scale organised industries and its activities are concentrated on urban areas. but their operations have got some criticisms. which results in unhealthy competition between 2 or more commercial banks. in 1994-95 the disbursement of total credit in southern regions stood 51. ACRC has also found out that there is lack of adequate staff in rural branches of commercial banks.development of rural India.5 % respectively during the same period. There
. 2. Critical review of operations of commercial banks: In the case of rural credit commercial banks have made achievements. They are as follows: 1. advances affect the profitability of banks. Lack of co-ordination: There is lack of co-ordination not only between two commercial banks but also between banks and government departments. (D) COMMERCIAL BANKS AND RURAL FINANCE: For the development of trade and commerce in India banking system is been developed. The yield on advances his been decreasing. 6. One of the problems of deterioration is quality under the anti-poverty programme. reducing the margins available to banks. while in northern. State Government and their agencies for food procurement. In the absence of proper geographical spread of bank branches it is found that more than on bank operates in same area. Regional Imbalances: The banks have disbursed regional imbalances in the credit. Neglected supervision: There is lack of supervision in rural branches because of which the banks have found sanctioning and monitoring a time consuming and of high cost. Rapid expansion and diversification: Due to rapid expansion and diversification the quality of scheme has been deteriorated. to agriculture in direct as well as indirect way. 6.g.
Difficulty in verifying actual utilisation of loans: There is often misuse of funds in case of medium term loans. etc. Mechanisation of seasonal operations and for laying out orchards or for traditional plantation of crops. 3. co-operatives came in existence. Absence of proper records: It becomes difficult to ascertain the total indebtness of some farmers because of the absence of proper records of land rights.is lead bank in every district but in many cases number of branches belonging to commercial banks. IV. (E) AGRICULTURAL REFINANCE DEVELOPMENT CORPORATION:
Indian farmers take long term loans for following purposes: I. For e. levelling or dressing his land. 2. III.g. Lack of sufficient supervision: There is no sufficient supervisory staff in the bank as a result there is misuse of loans. in case of pump sets the dealer would sell an old set instead of new one for which bank would sanction him the loan. which creates problem of over financing or problem of recovery. Difficulty in judging the creditworthiness: Due to lack of intimate knowledge of the character of the borrower it is difficult to judge their creditworthiness.term needs. PROBLEMS FACED BY COMMERCIAL BANKS: 1. Land development banks. This alarming situation calls for a corrective action. Farmer would get additional cash to serve his short. This creates difficulty in verifying the actual utilisation of funds.
In the past. Mechanisation of water lifter. V. Subsequently. Installing weirs on small streams. Problem of recovery: The recovery position of commercial banks create a problem. Terracing hilly and undulating land. 4. VI. which plugs in loopholes. 7. wells or deep tube-wells or sinking shallows. Digging.
II. improvements in lands were financed by moneylenders and by government. These banks operated statewise with assistance provided by the state
c. But their financial position was weak enough to provide finance for agricultural development schemes. With the adoption of new strategy of agricultural development. Apart from the primarily being a refinancing agency the corporation has certain promotional and developmental functions. Emphasising on economic upliftment of weaker section of community. long term financial assistance became significant. Increasing share of farm mechanism. It has laid more emphasis for economic upliftment of weaker sections. So.government. Reduction in the regional imbalances of agricultural development by focussing more attention on less developed regions. d.
II. Decreasing trends have been noticed in rest of the purposes. Reduction in regional disparities within states: ARDC has taken special care in reducing regional disparities within states by allocating schemes and resources to larger parts of the states. Economic upliftment of weaker sections: ARDC has provided 100% refinance. Diversifying the lending by identification of new activities. III.
PERFORMANCE OF CORPORATION: a. b. They are as follows: I. Helping in reduction of regional imbalances: The agricultural refinance and development corporation has been helping in reducing the regional imbalances in the agricultural development.
(F) REGIONAL RURAL BANKS: The establishment of regional rural banks (RRB) was recommended by the working group on rural banks to provide a helping Land in the effort of
. by It has also disbursed loans to IDA and IBRD for projects selected them for financial assistance. it was recognised that India needed a refinancing body with adequate resources of money and an expert coordinator to guide and assist the long term finance lending institution. Purpose wise disbursement of refinance: There is highest mean of growth rate in favour of farm mechanism followed by dairy development and fisheries. The parliament established the agricultural refinance and development corporation in 1963 with view of above objectives. dairy development and fisheries are favourable development.
Besides there is lack of monitoring by the sponsoring banks. There is unplanned and unwieldy growth of these banks and branches are opened tinder the pressure of state government.
. The process of recruitment and training of RRB staff does not received adequate attention. They provide productive credit and their interest rate changed is also low. The staff of RRB's is recruited from neighbouring areas because they have better understandings of local problems. Therefore there is multi-agency control over it. 2. These banks are to be sponsored by any national commercial bank. Share capital ratio is 50:15:35 from which 50% is raised by government. This brings lack of uniformity in their functioning. Problem in organisation: Government contributes 50% capital to RRB. PROBLEMS OF RRB'S: I. RRB operates in a restricted area. They are: a. which the co-operatives possessed and the degree of business organisation and modernised outlook. Increasing losses: A number of factors are responsible for the increasing losses. They cater to the needs of tribal and backward areas. Within the institution of RRB there has been lack of proper system and procedure.commercial banks and co-operatives in extending credit to small and marginal farmers. RRB's are confined only to lend to weaker sections where interest earned on loans is very low in the banking system. which commercial banks had. Their working procedures are understood by the local people. 15% is it own deposits and 35% from sponsoring commercial banks. these banks were started combining the local feel and familiarity with rural problems. 3. which lead to non-viability. Cater the need of backward areas: The areas where cooperative and commercial banks have not been established. FEATURES: 1. II. They supplement the cooperative credit societies. Authorised capital structure: RRB's authorised capital is 1 crore and paid up capital 25lakhs. Rural based: Primarily the RRB's are rural based. local peoples needs and their constraints. landless labourers artisans and other rural residents. With a view to reach the rural people more extensively. RRB's are established there.
Meetings of Board of directors are not held regularly. Opening branches of RRB's year after year has added to the overhead costs without proportionate increase in income. forceful direction and pointed focus. weak supervising and monitoring. Function of NABARD: a. IV. c. d. There are low margins with high cost of servicing. Economic environment of RRB's is not satisfactory. It provides medium term credit (18 months to 7 years) to state cooperatives and RRB's for approved agricultural purposes. e. A number of problems come up due to multi agency control of RRB's (G) NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD): NABARD is a specialised financial institution in the field of agriculture and rural development. lack of legal and administrative support from state government. RRB's do not have any scope of cross subsidization in the absence of loans yielding higher returns. Internal factors include defective loaning policy. failure in recovery. It maintains research and development fund to be used of promote research
. It works as an apex body which looks after the financial needs of agriculture and rural development. It has enough financial resources to support agricultural and rural development programmes. wilful default. The external factors include political interference. It provides short term loans (upto 18 months) to state co-operatives for seasonal agricultural operations. b. d. droughts and floods. Problems in management: RRB's staff finds it difficult to take independent decisions in new environment because the sponsor banks have been deputing middle management staff to run them. c. Recovery problem: The high incidence of overdues is due of number of internal and external factors.b.
III. Half of NABARD's capital was contributed by RBI and other half by the government. to the credit problems of rural sector. It has been designed specifically as an organisational device for providing undivided attention.
g. It provides long term assistance in form of loans to state government not exceeding 20 years for contribution to share capital of co-operative credit institutions. District Central Cooperative Banks. It provides long term and medium term credit (not exceeding 25 years) for investment in agriculture to state co-operative banks. h. NABARD and Rural Credit: Types of Refinance Facilities Agency Commerical Banks Credit facilities Long term credit for investment purposes Financing the working capital requirements of Weavers’ Cooperative Societies(WCS) & State Handloom Development Corporations Short term (crop and other loans) Medium term (conversion) loans Term loans for investment purposes Financing WCS for production and marketing purposes Financing State Handloom Development Corpoartions for working capital by State Cooperative Banks Long term Cooperative Structure (State Cooperative Agriculture and Rural Development Banks. e. It is entrusted with the responsibility of inspecting central and state cooperative banks and RRB'S. f.in agriculture and rural development. Primary Agricultural Credit Societies)
. It has authority to oversee the functioning of co-operative sector through agricultural credit development. Primary Term loans for investment purposes
Short term Cooperative Structure(State Cooperative Banks. RRB's and commercial banks.
Period of Credit: Up to 12 months: Rate of Interest (as at December 1998): (1) Seasonal Agricultural Operations
For SCBs at 4% to 6. At 4% per annum for financing tribals and Cooperative in North Eastern Region.
. Agricultural production operation and marketing of crops by farmers. b. c. handicrafts. Production and marketing activities of village and cottage industries. small-scale and tiny industries and other rural non-farm enterprises.Cooperative Agriculture and Rural Development Banks) Short term (crop and other loans) Regional Rural Banks (RRBs) State Governments Term loans for investment purposes Long term loans for equity participation in cooperatives Rural Infrastructue Development Fund (RIDF) loans for infrastructure projects Non-governmental Organisations (NGOs) – Informal Credit Delivery System Revolving Fund Assistance for various micro-credit delivery innovations and promotional projects under Credit and Financial Service Fund (CFSF) and Rural Promotion Corpus Fund (RPCF) respectively
PRODUCTION CREDIT (SHORT-TERM) REFINANCE: Eligible Institutions: (a) State Co-operative Banks(SCBs) (b) Regional Rural Banks (RRBS) Eligible Purposes: a. farmer co-operatives etc. artisans. Marketing and distribution of iilptlts like fertilisers.5% per annum depending on the SCBs' own involvement in the total eligible loans disbursed. industries. handlooms. seeds. handicraft. pesticide etc.
The nature of security usually for these loans was immovable property and the rate of interest charged were relatively low. Starting as "Distress loans".5% per annum Other Facilities: The short term credit for 12 months can be converted to medium term credit for 3 to 7 years subject to certain conditions when farm productions are affected by natural calamities. The former is concerned with long-term loans and the latter with the short-term loans. (H) COVEIZNMEN-I'FINANCE FOR AGRICUL'I'URE: Takkavi is the ancient and traditional form of government assistance to the agriculturist. After independence. The Government had therefore to disburse large amount by way of loans and advance to agriculturists. The state revenues department after the disbursement and recovery of the loans.5% per annum (2) Weavers' Finance by Co-operatives
8. Takkavi loans had to be distributed in substantial years. The land improvement loans act of 1883 and the agriculturist loans act of 1884 were the two legislative measures passed to put the Takkavi operations on regular basis. It was observed that the average amount per cultivator was very small in respect of small cultivators. rehabilitation of a large number of refugees from Pakistan was to be carried out on a war footing. Further the medium and
. grow more food campaign and similar other schemes were undertaken. It has been essentially distributed to relieve distress cost by droughts.5% per annum (3) Short-term finance to RRBs for other than Seasonal Agriciiltural Operations 7. the need for increase in agricultural production in general and food grains in particulars became urgent. floods and other natural calamities and to assist the farmers to over come emergencies and restart his agricultural operations in the following years. Besides. For RRBs at 5. these loans became regular loans for productive purposes. CRITICAL EXAMINATION: A critical examination of the working of the takkavi finance was made by Rural Credit Survey Committee. Therefore.
Disposal of assets like tractors. II.
. Due to overlapping of functions. as they were unable to furnish the security as required under the rules. With lack of supervision there was considerable misutilisation of loans resulting in mounting over dues. The officials concern were burdened with many responsibilities and were not well equipped to deal either with the task of assessment of credit requirements. Defective credit policies and procedures are responsible for the creation of overdues. The Rural Credit Survey Committee characterised Takkavi. Thus the system suffered from defects. and recommended that the Government finance should be strictly limited. The small landholders and tenants could not avail of takkavi loans. III. Changing cropping pattern. which resulted in inadequacy of amount. inadequate supervision and lack of coordination between different departments there was too much disbursement of loans. IV. there was over financing for the same group of influential agriculturists. Lack of proper marketing facilities. But they have no operational or administrative control over external factors. With the coming in of co-operative credit societies and land mortgage banks. CAUSES OF OVERDUES: There are certain internal as well as external factors responsible in the growth of overdues. 1 Some of the external factors are is follows: I. Increased cost of living due to inflation. Internal factors are those on which lending institutions have some control. or supervising the use of credit when granted. The main reason was the condition laid down that land had to be provided as a security.
V.big farmers were able to secure a large share of the available takkavi finance. keeping the needy farmers high and dry. Infructious investments. power tillers purchased with the help of credit. "To be little else then the ill-performed disbursement of inadequate moneys by an ill-suited agency". inequality of distribution and inappropriateness of the basis of security.
Very old dues may be written off. Credit and marketing of agricultural produce should be linked. sugar and processing factories etc. Political and governmental interference.VI. Inability of financial institution to provide credit to defaulting units to bail them out from old debts. Misutilisation of credit. voluntary agencies etc.
II. Inadequate or over financing. XII. XIV. Lending agencies should take strict action by speeding the arbitration references to execution of awards.
XI. Alienation of land through sales gift or mortgage. Uneconomic holdings. VII. Non-wilful defaulters should be extended rehabilitation credit after careful study of each case. Unforeseen social and religious expenses. Failure in projects like societies. X.
Delay in getting phones connection to weak points. SUGGESTIONS: All the committees and sub groups have made certain suggestions some of which are listed below: I. III. Legal actions should be resorted to. IV.
These were some of the factors on which the lending agencies have very little control. Natural calamities. XV. IX. VIII. This can be done by associating non-officials. Death of principal borrower and consequent disputes among heirs.
. V. XVI. XIII. It is possible to improve the situation by educating the borrowers.
VII. The importance of money lenders is declining but they are still preferred by some of the farmers who do not have approach to institutional finance and whose requirement of credit is urgent and mostly for meeting the consumption need. drawn in the favour of borrowers and payable at bank branches. Loans may be issued by way of non transferable cheques. Chronic overdue areas may be identified and remedial measures takes. of cash. VIII. The agriculturist money lenders combine farming with money lending. They obtain bonds and promissory notes on false pretences from their
. Publicity campaign may be undertaken to impress the need for recycling of funds. XV. X. XI. Malpractices of Money Lenders: II. When repayment problem is genuine. XII. There should be more closer and effective supervision of credit. Prosecute rich wilful defaulters. XIV. loans should be rescheduled and overdues postponed. The agriculturist money lenders and the village shopkeepers. Stabilisation fund should be given importance. Besides. Money Lenders: There are two types of money lenders in the rural areas. there are professional moneylenders whose only occupation is money lending. Loan policies and procedures should be reoriented. The mortgaged property should be sold to reveal the intentions of the bank. Primarily they may be interested in farming but they carry on money lending as a side business. PRIVATE SOURCES OF AGRICULTURAL FINANCE: I. XIII. IX. XVI. The cultivators depend upon the money lender for their requirements. The lending agencies should set up their own recovery cells. There should be full coordination with government.VI.
(3) Landlords: Landlords are the important source of finance for farmers. specially the tenant farmers. A. They charge high rate of interest often 24% and above. They give no receipts for repayment and often they deny such repayments.
. These conditions are also very soft. No procedural delays are involved in granting loans to the farmers by the money lenders. B. The money lenders have been responsible for many of the ills of Indian agriculture because their main interest has been to exploit the farmers to their benefits and grab their lands. They deduct exorbitant premiums. III. The farmer is compelled by trader and commission agents to sell his produce at a low price.debtors and enter in them amounts larger than actually lent. These loans from landlords are taken by farmers for consumption purposes. II. IMPORTANCE OF NON-INSTITUTIONAL SERVICES: The following factors account for the continued significance of non-institutional agencies in agricultural marketing finance: I. (4) Relatives: For tiding over temporary difficulties farmers borrow from their relatives. Relatives provide finance in smaller amounts. Commission Agents and Traders: Finance provided by commission agents and traders is a sort of production finance. Farmers need not enter into very many formalities while borrowing from the money lenders. This amount is given to meet the emergency needs of farmers. C. which takes the form of advance payment of a part of purchase price. thus depriving them of profits. This source of finance is not very desirable as it leaves scope for deprivation of weaker farmers by powerful interests. Moneylenders do not press the borrowers for repayment of the principal if they keep on paying the interest regularly.
Non-institutional agencies provide credit both for productive and consumption purposes. Non-institutional agencies can provide fresh loans even when no security is offered by the borrowers. VI. II. the interest. IV. DEFECTS OF NON-INSTITUTIONAL AGENCIES: The various defects of non-institutional sources of agricultural marketing finance are as under: I. They do not distinguish between short-term and long-term finance and also between the purposes of finances. They combine banking with trading and commission business and thus have introduced trade risks in the banking business.III. They are unorganised and do not have any contact with that sections of the banking world. They follow vernacular method of keeping accounts and do not give receipts in most cases. Non-institutional agencies can provide fresh loans even when no security is offered by the borrower. Lead role means taking initiative for catering banking needs in its area. IV. LEAD BANK SCHEME: It is the scheme under which a particular commercial bank is entrusted to play a leading role in a particular district rehiring to rural development. The lead bank of a particular districts makes an assessment of credit needs of the area. The RBI has made several attempts to bring the indigenous banker under its control. The government has tried to regulate the activities of non-institutional agencies like money lenders and established more institutional agencies for agricultural credit with a view to stop malpractices followed by them. coordinates banking activities of various banks including cooperative banks and then makes provision of sanction and disbursement of the loan. which they charge is out of proportion to the rates of interest charged by the other banking institutions in the country. A village money lender is always easily accessible to the borrowers. III. Commercial banks and cooperative societies are generally reluctant to lend for consumption needs. Besides. V.
The National Credit Council Study Group (NCCSG) under the chairmanship of Prof. cottage industries of the area and identify among those. After nationalisation many commercial banks were opened in the rural areas. To examine facilities for small-scale and cottage industry production. known as committee of bankers or Nariman committee appointed by the Reserve Bank of India also expressed its support to the idea of ‘area approach’ and christened it as ‘lead bank scheme’. But after nationalisation of 14 major commercial banks in 1969 government took necessary steps to expand banking services in the rural areas. seeds. and assess specially the facilities for storing inputs such as fertilisers. In the same year i. Encourage such units to open their accounts in banks. To examine inability of primary lending agencies and in case they are potentially viable. Kolkata. commercial banks just had a marginal role in the process of rural development.GENESIS OF INCEPTION OF THE SCHEME: Before the nationalisation. Chandigarh and metropolitan cities of Mumbai. 1969. To survey the number of small-scale. The group strongly recommended for ‘area approach’. To ensure coordination of banking activities with government and semigovernment agencies. Goa. III. which have no link with banking sector. Gadgil stated this idea. VII.R.e. look after and plan out branch expansion. IV. In essence lead banks were required to perform following functions: I. Another committee. coordinated and rapid development of banking activities in the rural areas. then to encourage and strengthen them. make available the banking facilities in non-banking area and other function aiming at providing better and coordinated banking facilities all over its jurisdiction. II. RBI accepted the idea of lead bank scheme and resolved to implement this scheme in all the 380 districts across the country leaving just a few totally urbanised areas such as union territory of Delhi. insecticides etc. Hence many economists criticised such unruly expansion and put forward an idea of ‘area’ or ‘micro approach’ for smooth. and Chennai.
. Lead bank were entrusted to perform a leading role in their respective area before surveying the needs of farmers. But this expansion was neither planned nor coordinated. D. To survey the facilities for stocking and warehousing.
NCDC has been playing special attention to weaker sections co-operatives in various part of the country. Co-operative Marketing Society When producers of agricultural commodities or any other product form a society with an objective of carrying out marketing of their produce. A co-operative marketing society can eliminate some or all of the intermediaries and can reach to the consumers and establish direct trade relations with them. There exists a chain of intermediaries between the producer and the final consumer.Co-operative Marketing
The Co-operative Development Corporation The National Co-operative Development Corporation has been promoting and financing a wide range of economic activities in rural areas through cooperatives. delay in payment of amounts due to farmers. commission agent. This will make commodities cheaper to the consumers and also ensure good quality of produce to them because much of the handling is avoided. pre-harvest contractor and retailer. They include village merchant. they render.
. wholesaler. For example. arbitrary deductions from the produce. Those are 1. They take their own margins for the services. collusion between the broker and the buyer while fixing the prices. Several malpractices prevail in the marketing of agricultural produce.moneylender. manipulation of weights and measures and cheating the farmers. The need for co-operative marketing arose due to many defects observed and experienced in the private and open marketing system. In such circumstances co-operative marketing society can largely help the farmers reduce the malpractices and offer honest and correct services. 2. making the commodities costly for the consumers and reducing the producer's share in the consumer's price. such society is called as co-operative marketing society. But these margins are generally exorbitant. etc. itinerant trader. There is no other institution in the country which is exclusively for meeting the requirement of co-operatives. The promotional and development role of NCDC had lead to continuous diversification and expansion of co-operative programs under its preview. The Co-operative is a unique institution in the country catering to the development of the rural economy and agriculture sector through co-operative. The result is the farmers are indebted to trader .
The area of operation of marketing society is usually fixed with reference to local conditions . grading. storage. banana. A co-operative marketing society provides market finance to farmers and ensures better returns to their produce.moneylenders at very high rates of interest and with the condition that they will sell their produce through them. Grants or subsides from the Govt.area based or commodity based. oranges. Share capital 2.
. Reserve funds. Organization: Under the system of co-operative marketing whole responsibility of marketing is taken up by the farmers themselves. At present. A co-operative marketing society performs these services efficiently and at cheaper rates. etc. 5. There are some services such as transport. for godowns. most of the financial needs of the farmers are fulfilled by trader . organized on co-operative basis. if there is cooperative marketing society. 4. Membership : Membership of a co-operative marketing society is open to individual farmer who produces the crop for which the society is formed. This can be avoided. etc.3. loading/unloading which are carried out by some private functionaries who charge high rates for these services. 3. financing. The commodity-based societies related to grapes. There are societies at the producer's level and they federate at state or national level to deal with bigger markets including foreign markets for export of their produce. Resources: The sources of fund of the society are as under: 1. Other co-operative societies in the area can also become institutional members. pomegranate. Deposits. have wider jurisdiction covering the major areas growing each crop. 4. Loans from higher financial institutions including NABARD. packing. Besides marketing society can act as an agent of credit co-operative society and help to recover loans advanced by credit societies.
To protect members from all types of malpractices eliminates the middleman in the chain of marketing. construction of building for godown. and supply of good quality material to consumers. It teaches business methods to farmers and serves them as agency for supply market information. Medium. Marketing societies are also encouraged to undertake export trade so that they can give better prices to their members. There are only about 1000 marketing societies as against 20. to keep watch on demand supply position to ensure good prices to members are all matters need for good marketing. desired number of co-operative
. 2. arranging storage to avoid losses. etc. packing. Their marketing is more difficult involving many technical and commercial aspects. To arrange for the sale of members produce to the best possible advantage. Short-term capital is needed for financial advances to members for production. etc. Arranging quick transport. 8.The marketing societies require short-term. The society is able to stabilize prices over a long period by adjusting the supply with the demand. etc. many advantages are envisaged in the co-operative marketing the structure has remained relatively weak as compared to credit co-operatives. To undertake activities in connection with grading. pooling and procurement of produce of the members. 7. Marketing : Although. 6. 5. Co-operative marketing society ensures grading. Long-term loan is required for installation of machinery. transport.000 credit societies in Maharashtra. For want of these managerial aspects. storage. Marketing of perishable is still more different. Weak Co-op.term capital is required for purchasing motor trucks. To provide storage facilitates to their members by renting or owning the godowns and thereby facilitate to grant advances against pledge of produce. 2. 4. medium-term and long-term capital 1. Functions : 1. to meet contingent expenses. 3. etc. 3.
A. 1. there are few examples of good success. Several marketing surveys/studies at farmer's levels have revealed that among several marketing channels. farmer . 4. Co-operatives marketing pomegranate.C. 2.This was particularly reported in the cases of marketing of perishables. Secretariat defines state trading as “Direct participation by the government (or its agent) in foreign trade including those trading activities in which the government (or its agent) holds title to export before transactions and acquires titles to import.co-operative federation marketing grapes in Maharashtra. co-operative channel has offered greater share of consumer's prices to the producers. 6. Maha-grape . it includes purchases from abroad for governmental use and disposal of surplus stores originally purchased for governmental use. 5.F. milk. Few Successes: Inspite of the difficulties encountered in the marketing of perishables like fruits.
State trading in its narrow sense means import and export transactions of a stateowned or state controlled agency involving purchase of goods on commercial sale. In a broader sense. A Report prepared by the E. Co-operative cotton marketing societies. Co-operatives marketing banana in Jalgaon district. 3.producers have expressed that marketing co-operative societies should be formed. Whichever.”
. Vegetables co-operatives in Thane District. etc. marketing is unorganized.E. vegetables. Milk co-operatives in Maharashtra and Gujarat.marketing societies have not come up and those which were started could not succeed.
with its vast initial investment. by removing malpractices of the private exporters. it can be used to take advantage of monopoly power in respect of commodities for which the country holds a world monopoly.buying and so lowers the cost of imports. dispenses with the services of middlemen and thereby eliminates their commissions. and to provide protection to domestic industries. Firstly. it helps in building reputation of the country's exports. Thirdly. it undertakes bulk. It can charge maximum price. which the consumers abroad are ready to pay for such commodities. Fifthly. it tries to develop new markets for exports and new sources of supply of imports and also promotes exports of nontraditional items. thus. Secondly. Seventhly. viz. it can be directed to patronize national banking. to restrict imports of non-essential goods. Benefits of State Trading State trading has various advantages as compared with private trading. safeguard against exploitations. state trading helps the state in honouring its bilateral agreements. To effect exports and imports at more favourable prices through increased
. are confronted with monopolistic trading agency.. which a large number of private importers and exporters competing with each other. it is an important instrument in regulating exports and imports for various reasons. State trading enables the private trading countries to negotiate with equal bargaining power and. Objectives of State Trading State trading has the following objectives: To ensure adequate and regular supplies at reasonable and stable prices of essential commodities to meet local demand. it is an important instrument of export promotion. and to assist the government in solving difficulties and problems for which private trading channels are found to be inadequate.The main objective of state trading is to facilitate development of trade with countries where trade is in government hand. Sixthly. to rectify disequilibrium in balance of payments. Fourthly. shipping and insurance for encouraging the development of these services.
sale and transport of and the general trade in such goods and commodities in India or anywhere else in the world. “to organise and effect exports from and imports in to India of all such goods and commodities as may be determined by the Company from time to time.
State Trading Corporation Of India
The S. To facilitate the implementation of trade agreements and barter deals. and To facilitate sanitary and public health controls. To obtain advantage of bulk transactions. As per its Memorandum of Association the objectives of the S. To direct trade in accordance with development policies. To stimulate production of essential agricultural and industrial commodities by means of price and other incentives. It normally has 10 Directors. T. are. To facilitate trade with centrally planned economics. has been constituted as a limited liability company under the Indian Company's Act. To stabilize the domestic prices of specified products by controlling their production and marketing. and to undertake the purchase. To explore export markets for products and to dispose of exportable surpluses of commodities. To raise revenue for the treasury. C.bargaining power. C. To transfer trade from the control of non-nationals. T. 1956.” Functions:
. To facilitate the import of goods financed under foreign aid programmes. To influence changes in the distribution of income derived from foreign trade transactions.
b. and deal in all kinds of articles and things. To ensure implementation of trade plans with East European countries. To develop new lines of exports. sodium. 3. cement etc.
. the role and activities of the Corporation have widened. To manufacture. pledge. To explore new markets for traditional items of export and develop new items with a view to diversifying and expanding the export trade. Besides. e. and/or distribution of particular commodities as the Union government may specify in the public interest. To hold or assist in holding exhibitions in India and elsewhere of the products and articles in which the company is interested. c. import. d. To help local producers by procuring reasonable prices and to hold stocks to maintain ultimate production at optimum level of commodities with high export potential. other important objectives are: 1. To organise product to meet export demands and to help product units in overcoming difficulties of procuring raw materials and other essential requirements. To facilitate and organise exports of difficult-to-sell items (such as manure. meal. treat. which may be required for the purpose of any business of the company. commodities and articles of all kinds and to carry on any kind of commercial and/or financial business as the company may determine from time to time. 7. To undertake import and/or internal distribution of commodities in short supply with a view to stabilizing prices and rationalising distribution. dichromate. To promote export of traditional items. The Committee on Public Undertakings has classified the above functions of the S T C under the following six main heads:' 1. deoiled linseed cake. Exports a. prepare and deal in merchandise. to introduce non traditional items in the world markets and to find out new markets for Indian exports. exchange. store. To generally implement such arrangements for import.
f.) by linking essential imports with additional exports and under special trade promotion agreements. 6. manipulate. To barter. 5. the above objective.With the passage of time. 4. export. 2. To promote long-term export operations and "difficult to-sell" items. export trade.
4. to stabilize internal production and sustain foreign demand. To import capital goods.
d. Trade Promotion Agreements To arrange for essential imports against additional exports of traditional and nontraditional items which are specified in special agreements. which is in short supply in the country. To import items which are canalised by the Government through this Corporation so as to ensure that adequate supplies at the right time and at the economical prices are made and are distributed to the industries and other users in a co-ordinated manner. e. Internal Trade a. To import commodities. To import speculative and high profit margin items with a view. c. g. To participate in fairs and exhibition abroad so as to create atmosphere for expansion of exports and for introducing new products in foreign markets. g.
2. To undertake price support and buffer stock operations with a view to ensure fair prices to the growers of certain agricultural commodities.
. b. avoiding dislocation in production. To undertake import of commodities where bulk purchase would give better terms. To undertake imports from state trading countries or from where monopolies are involved.thus. maintaining adequate availability for export and ensuring a fair price to local producers.
b. Imports a. To undertake internal trade in certain commodities like imported cars. to stabilise the prices and to do distribution of such commodities in an organised manner at fair prices. To ensure the implementation of trade plans with the East European countries and other special agreements. industrial raw materials and certain scarce commodities required for the economic development of the country.
Export Aid to Small Industries To assist the small-scale manufacturers in exporting their products by giving wide publicity to their products abroad and by arranging attractive packing. Besides these. About 45% of soaps. the rural markets are growing in importance for both marketers and their agencies.
For companies such as Unilever. A survey by India’s National Centre for Applied Economics and Research revealed double-digit rural growth rates in a cross section of products ranging from scooters to confectionery between 1995 and 1999. Participation in Export-Oriented Corporation To lend increasing support in the form of financial and organisational assistance to specialised export agencies like the Handi-crafts and Handloom Export Corporation.C. Lucky Goldstar rural consumers are a huge market opportunity. mopped up by the S. (roughly 670 million) of India’s teeming masses live in rural areas. without access to TV.. radio. Glaxo. providing credit facilities. Of these. Now that penetration for many consumer products in urban areas is high. helping them in matters of shipping and exploring possibilities of exporting their products in various countries. Growers were assured of remunerative prices and surplus quantities. were exported.
6. Nestle. 40% of teas and 60% of watches sold in rural India. some 260 million live in almost complete media darkness.
Yet the villagers are increasingly important as consumers.5. and beyond the reach of newspapers and magazines.
Living in Media Darkness There’s no surprise in learning that over 70%. Widespread illiteracy allied with the multitude of languages and dialects puts the most of these people beyond the reach of conventional media planning.T.
. S T C had also undertaken price support operations (at the instance of the Central Government) for natural rubber in 1970 and tobacco in 1972.
New avenues include games (with the product being given as a prize).000 supervisors plus another 5. Currently ResultMcCann. Consumer Insight which will helps understand rural consumers from their own perspective and Experiential marketing.000 people who work on a project basis
According to D. given the language and cultural diversity of rural India. folk dances. numbers. and part of China and may yet prove the pathway that extends the franchise of many brands to Asia’s rural billions beyond the reach of television and the internet. selling in rural India is no longer restricted to using mobile vans with television sets screening Hindi film songs interspersed with messages about a product.
Tapping the rural market calls for new insights into what helps consumers remember and understand brand messages.
McCann Erickson are also developing rural initiatives in India.
A Table for understanding the media penetration in India
. which is McCann India's integrated Communications Company. Their strategy for the rural market is built on two key planks. K. Ogilvy Outreach’s president. Today it has a team of 1.
The knowledge gained from rural marketing in India is already being applied in Bangladesh. and putting up scarecrows. 555.Ogilvy Outreach. started with one employee supported by the head of the media division in 1994. wall paintings. plus occasionally painting the horns of cows. emotive and impactful tool. and Monkey brand tooth powder. putting tiles in village wells. Research carried out by Ogilvy Outreach discovered that the rural audience identifies more with colours. Africa. These findings appear supported by the high recall levels enjoyed by brands like Lifebuoy (popularly known as the lal sabun). Bose. door-to-door sales. Cambodia. is working for TERI (Tata Energy Research Institute) on a World Bank funded project for Farmer education on Farm Forestry in the rural areas. which executives say will be the most relevant. and even putting up shoe racks in temples. O&M’s rural arm. and visuals of animals all woven together in loud colorful messages.
0 Rural'95 21 3 1.A Comparison Media Penetration (%) Radio Satellite English Publications Hindi Publications Local Language Publications Any Publication Source: IRS-95 and 99 Did U SAY Couch potato …. The focus of the companies.5 23.7 7.1 20. literacy.. The regional language is becoming an important medium of communication for the booming rural market. radio. apart from increasing the geographical width of their product distribution is to capture the television-savvy rural consumer. Marketing companies had initially turned to rural India on a look out for newer markets.6 31. Developing the right Marketing strategy …….5 26 5 1. The seriousness of the efforts is Urban'95 25 19 14. Also gone are the days when advertisements could be conceived in English and then dubbed in regional languages.4 12.4 26. Introduce their brands and develop marketing strategies specific to the rural consumers. Clearly. shampoo lathering consumers has galvanised the industry. The trends in media penetration show that the penetration of print media (barring regional publications).9 58.eh ??? There is a wide gap between urban and rural segments in terms of purchasing power. The purchasing power of the rural consumer has been increasing in the recent years with the rise in income levels due to agricultural prosperity.4 Urban'99 Rural'99 50 35 16.9 8.Table 1: Macro Indicators .4 29. and readership habits and media exposure.homping.2
.7 55.6 14. and cinema is on the decline in both urban and rural areas. The existence of the divide between the urban and rural consumer triggered these.5 23. the possibility of converting approximately 700 million innocents into voracious Cadbury. the only media that is growing is Television through Satellite Channels.
Ø Britannia launched Tiger Biscuits especially for rural markets thus increasing its share of the Glucose market from 7% to 15% Ø HLL A1 tea became a INR 1000 million brand in less than a year after it was introduced in the rural market Ø BPL sells B & W TVs under Ajit brand name. Ø DCW Home products are test–marketing Captain Cook Super White Salt for non – urban areas. consumption patterns.000 villages. pressure
. including lifestyles in the area.evident from an in-house study conducted by ORG-MARG that revealed that 75% of both Indian and the multinational companies are taking the help of the rural marketing organisations to establish distribution links across the length and breadth of the country. Ø The rural thrust was a part of HLL’s “Operations Bharat”. types of communication facilities and above all the size of the rural market need to be considered in formulating an appropriate marketing strategy. washing cakes and blades. digestive. motorcycles. The key to the gateway of the rural segment emerged as expansion in distribution and growing media penetration leading to increased usage. They peddled 15-rupee packs containing soap. tooth powder. But. Arvind Mills did not think so. toothpaste and a fairness cream in 20. 50% of the toilet soaps. Ø Hindustan Motor signs joint venture with OKA Motors of Australia to launch special rural transport vehicle. The key to the success of most of these products was that these products were designed keeping the rural consumer in mind and recognising the fact that the two consumer sets are different. Approximately. antiseptic cream. salt. The consumption baskets of the rural and urban markets also show a similar constitution.25 million kits. Factors like cultural diversity. half of the market for black & white TVs. 40% of the washing powder. which resulted in an incredible 30% conversion. HLL perhaps conducted the most extensive exercise of its kind. literacy levels. standard of living. Last year. with the products not very different. Some of the recent success stories are: An Indian farmer working in jeans sounds improbable. tea. In the first two months the demand for its Ruf & Tuf kits crossed a million pieces as against a production capacity of 0. Several surveys on rural marketing have pointed out that segmenting urban and rural consumers on the basis of income alone will not help in formulating a correct rural marketing strategy. to create demand for its products in the rural market.
Cinema has a high penetration in the southern states of India. Print media has the lowest reach in Assam with 11 per cent. The objective of this paper is to answer whether a divide exists between the two markets and to measure the magnitude and the flavour of the divide in terms of key marketing parameters like Distribution.
.45 percent in other southern states. In urban Kerala the reach of cinema is 61 per cent.cookers. Given the high literacy levels it is natural that print media has the highest penetration in Kerala. But in the rural parts of the state it has a penetration of a mere 4 per cent. The rural market's potential for growth is the cynosure of marketers' eyes. For example terrestrial TV has the highest penetration among all types of media with 78 per cent penetration in urban India and 36 per cent in rural India. MEDIA REACH "The medium is the message" acquires critical importance for advertisers and marketers in India as different media have varying penetration levels. etc. In contrast satellite TV reaches only 13 per cent of India. It's reach is the highest in the 14 to 19 age group with 62 per cent. It varies from 40 . Products and Markets The sources of data for this paper include the ORG–MARG’s Retail Store Audit. cassette recorders. The medium's highest penetration of 52 per cent is in urban Maharashtra.25 across the country. NCAER. Indian Readership Survey and other secondary sources like reports of CMIE. Cinema reaches more than 30 per cent of the population in the age group of 15. Similarly in Assam and Orissa satellite TV reaches only 4 per cent of the population. The emergence of new media options like Ø DTH & Internet more relevant for the upper SEC class of the population. It reaches 76 per cent in urban Kerala and 65 per cent in rural parts of the state. Rural Consumer Panel. fans. and blades are purchased by the rural market This paper will analyse the urban and rural markets in the above context. Identifying where the divide exists and how to capitalise on it is the need of the day for FMCGs and consumer durables as the urban market is showing signs of saturation. It has an astonishing 91 per cent penetration in urban Himachal Pradesh. Ø This segment is very difficult to catch and hence innovative media solutions are the order of the day.
entertainment encompasses a wide plethora of options.
Be it classical or the folk or the modern Indian pop-bhangra. the musician has complete freedom to exercise full imagination and creativity. having no predetermined beginning or end.
In tribal societies. Music in India is a means for spiritual exploration. The classical music is not pre-conceived but pre-written. in addition to deriving aesthetic entertainment. but flowing uninterrupted through the composer-performer.
Music in India is as rich as can be.
. palaces and temples to beautiful deserts. which offers such a dazzling array of Entertainment choices as India does!
In India. a path of realisation. within the framework of the rules governing the raaga.
The basic tenets of classical music have been laid down by numerous ancient texts. to make one aware of the infinite within one. Scenic hillstations (mountain resorts) still remain popular Indian travel hot spots. Indian music reflects Indian life. songs. from birth to death. dances and musical instruments are used to mark every occasion. Travel in India constitutes a major component of Indian leisure and entertainment industry. discipline one's body. Right from cinema (the largest of its kind in the world) to television (amongst the fastest growing in the world) to soothing music (the most diverse in the world) to awesome festivals (richest in culture) and richest-possible food and finally its fanatical devotion to sports like cricket. India offers mind-boggling variety for travel from highest mountain ranges of the world to serene beaches to historical forts. The purpose of Indian music is to refine one's soul. The origins of classical music are also traced back to tribal tunes and songs. While the underlying notes are prewritten. to unite one's breath with that of space and one's vibrations with that of the cosmos.Brand building is the order of the day as it is important to synergise media with brand objectives Definition of Rural Marketing : No other country exists on earth. Exotic forests and national parks in India are un-comparable in the world.
From time immortal it has been the most popular form and well-appreciated form of entertainment available to the village people.
Few of the available options in the traditional media are Puppetry. but even touch. and Amar Singh Rathore
. At one extreme. and. Posters. interpersonal and unreliable in contrast with the familiar performance of traditional artist whom the villager could not only see and hear. String puppets or Kathputlis of Rajasthan – Contents . Their desire to innovate with new product is restricted.
Traditional media can be used to reach these people in the marketing of new concept. at the other.The music of India is a mosaic of different genres and levels of sophistication. reflecting the diversity of its peoples. Agricultural Games. Besides this villagers are more conservative buyers then their urban counterparts.
Types of Puppet theatre in India: 1. Besides this when the advertisement is couched in entertainment it goes down easily with the villager. The high rate of illiteracy added to the inadequacy of mass media impedes reach almost to 80% of India's population who reside in village. values and social messages. many kinds of functional rural music accompanies life cycle and agricultural rites.
Puppetry Puppetry is the indigenous theatre of India. classes. Mass media is too glamorous. Wall Painting.Heroic deeds of Vikramaditya. Prithviraj Chouhan. It is an inexpensive activity. Folk Theater & Song. and Post Cards etc. classical music is performed in the urban concert halls for purely artistic reasons. powerful input and personalized communication system will help in realizing the goal. The traditional media with its effective reach. The manipulator uses the puppets as a medium to express and communicate ideas. creeds and tribes. their life-styles. In between are many other musical genres of different regions of the country. and their languages
The Indian society is a complex social system with different castes. Demonstration.
Contents -Mahabharat. The field staff of the corporation also reported a definite impact on the business. exploitation and oppression. Kuchupudi. Shadow puppets of (a) Orissa (b) Kerala (c) Andhra (d) Karnataka: . Rod puppets from Bengal: .Delhi made a study of comparative impact of puppetry and documentary films.
Life Insurance Corporation of India used puppets to educate rural masses about Life Insurance. enlisting the help of the literacy house in Luck now. avenue for entertainment and creative expression which is ritually sacred and meaningful as a means of social communication and vehicle of social transformation. String puppets of Orissa – Contents . 6.
Folk Theater Folk theaters are mainly short and rhythmic in form. People in both the villages responded more favorably to the puppet shows then the films. have also used puppets in support of individual schemes. Manas.Contents Ramayana.
Indian Institute of mass communication. Bihar.
Song and Drama Division of the Government Of India make wide use of puppets in its campaigns to promote various government projects. String and Rod puppets of the south (Tanjavur. & MP.Radha-Krishna 3. Thus in rural India puppetry is a source of livelihood. The number of inquires at local Life Insurance Companies during the period immediately following the performance was compared with normal frequency and found to be considerable higher. The simple tunes help in informing and educating the people in informal and interesting manner. government. semi-government and private. These plays were shown to the audience in villages in UP. in two villages near Delhi. Burratatha
. Madras and Andhra): -Contents Kathakali 5.2. Several other organizations. Radha-Krishna 4. Folk Theater / Songs Forms In India Andhra Pradesh: Veethi Natakam. It has been used as an effective medium for social protest against injustice. N.
Jhamtara Tamilnadu: Therukuttu. Mangal Ras. Veethi Natakam. Nautanki. Sowang. Ojapali Bihar: Bidesia. Kerala: Kodiyattam. Daskathia. Bhagat. Both were well received by farmers. Mudiattam. Radhna. Jat-Jatni Bidpada. Harnatra Haran or Harin. Therayattam. Sanata. Kirtania Natak. Naqqual Goa. Ramkhelia Gujarat: Bhavai Haryana: Swang. Kavadi Chindu Uttar Pradesh: Ram Leela. Punjab Agricultural University produced Two Audio Cassettes. Turra Kilangi. fertilizer etc. Swang Rajasthan: Khyal. Nacha Maharashtra: Tamasha. Rasdhari. Pagal Vasham.Wheat Cultivation. Folk songs have been effectively used during revolts of Telangana and Naxalbari and now a days it's best exploiters are Political Parties. Chhau Mayurbhanj. Serikela Chhau. Ras. Gauri. Kathakali Madhya Pradesh: Maanch. Gondha. Vetal Dhamali Karnataka: Yakshagan. Naqqal Himachal Pradesh: Kariyala. Jhanki.Assam: Ankiya Nat. Bhagwat Mela Natakam. A) Balliye Kanak Biye . Nautanki. Kurvaanji. Ras Leela.
. Tiyatra. Government has used this media for popularizing improved variety of seeds. Chakiyar Kooth. Naqaal. Jammu & Kashmir: Bhand Pathar or Bhand Jashna. Bhagat. agricultural implements. Punjab: Nautanki. Rammat. Dasarata. Lalit Bharud. Tala Maddle or Prasang.Cotton Cultivation. Chavittu Natakam. Daman & Diu : Dashavatar. Dashavatar Orissa: Pala Jatra. Sang-Swang. B) Khiran Kepah Narme . Doddata-Bayalata.
Haats & Melas The countries oldest tradition holds the key to solving these problems. In result demonstration. Facts & Figures: Over 47. Asian Paints launched Utsav range by painting Mukhiya's house or Post office to demonstrate that paint does not peel off.
. The mobile supermarkets of rural India. Such contact helps in arousing the villager's interest in their own problem and motivating them towards self-development. i. Simple Demonstration ii. help of audio -visual media can add value. i.000 melas are held annually. Composite Demonstration The five steps to make any demonstration effective are below: Information about people Objectives to be accomplished Demonstration plan & Execution of the plan Evaluation of the demonstration Reconsideration after evaluation. Method demonstration ii.
Demonstration: "Direct Contact" is a face-to-face relationship with people individually and with groups such as the Panchayats and other village groups.BBLIL used Magician quite effectively for launch of Kadak Chhap Tea in Etawah. Result demonstration B. Demonstration may be A.000 haats and 25.
Since it makes the shop look cleaner and better. for their wall to be painted with product messages. More than 10.
A good wall painting must meet some criteria to generate awareness and remind consumer about the brand.A speech or film comes to an end.000 melas draw visitors from all over India.3. walls.
Retailer normally welcomes paintings of their shops. Melas are organized after harvest season. To get one's wall painted with the product messages is seemed as a status symbol.500 crore. The images used have a strong emotional association with the surrounding. which he will be ready to spend. Demonstration at Haat is essential to convert customers at haats since their atitude is far more utilitarian than that of visitors to a fair. Besides rural households shopkeepers and panchayats do not except any payment.2. which must use general image to cater to greatest number of viewers. Over half the shoppers at haats have shopping lists. a feet impossible for even a moving visual medium like television.
. The most frequented shops can be painted from inside also one feet above the ground level. They are silent unlike traditional theatre .25 Lacs Annual sales at melas amount to Rs. but wall painting stays as long as the weather allows it to. so the villager has enough money.
Wall Paintings Wall Paintings are an effective and economical medium for advertising in rural areas. Their shops look alluring and stand out among other outlets. and name boards. Haats is a better opportunity for promotion after brand building has been done at Mela. The greatest advantage of the medium is the power of the picture completed with its local touch. Nearly half the outlets at melas are for manufactured goods.The average daily sale at a Haat is about Rs.
Vicks cough drops in single tablets. Paintings must be taken after rainfall. The advantage is that the price is low and the rural consumer can easily afford it. one gets the owner morally committed to taking care of wall painting.
.The permission is normally given. To derive maximum mileage their usage needs to be planned meticulously. For the rural market. A definite way of arresting is to use bright colors and these do not fade away easily. sand and rainstorms for about three years.
A) Product Strategies The following are the product strategies for the rural market and rural consumers: 1. Small packings stand a good chance of acceptance in rural markets.
It should be peaked up during the festival and post harvest season. tooth paste.It is courteous to take the verbal permission of owner . However by taking the permission of the rural retailers or house owners.
The message should be simple. Small unit packing: This method has been tested by products life shampoos.`
Rural Marketing Strategies Creation Is A Tradition And Technology A Way Of Life
An appropriate segmentation of highly heterogeneous rural market and identification of the needs and wants of different segments will form the very basis for rural marketing strategies. direct and clear. etc. biscuits. pickles. strategies for the 4P’s of the marketing mix would be an ideal one. A good paint will survive the ravages of dust.
V. Brand name: For identification. Sturdy products: Sturdiness of a product is an important factor for rural consumers. Many a times rural consumers ask for peeli tikki in case of conventional and detergent washing soap. Developed and introduced a low cost medium wave receiver named BAHADUR during the early seventies. On investigation it was found that the rural consumer bought radios not only for information and news but also for entertainment. Sturdiness of a product either or appearance is an important for the rural consumers. The price of P. 4.Also the Red Label Rs. PVC shoes and chappals can be considered sited ideally for rural consumers due to the adverse working conditions. New product designs: Keeping in view the rural life style the manufacturer and the marketing men can think in terms of new product designs. 3. The fertilizers companies normally use a logo on the fertilizer bags though fertilizers have to be sold only on generic names. Initially the sales were good but declined subsequently. The experience of torch light dry battery cell manufacturers support this because the rural consumers preferred dry battery cells which are headier than the lighter ones. B) Pricing Strategies Pricing strategies are linked to the product strategies. heavier weight meant that it has more over and durability. For them. A brand name or a logo is very important for a rural consumer for it can be easily remembered. 2. Utility oriented products: The rural consumers are more concerned with utility of the product and its appearance Philips India Ltd. Nirma made a peeli tikki specially for those peeli tikki users who might have experienced better cleanliness with the yellow colored bar as compared to the blue one although the actual difference is only of the color. This is because it is very affordable for the lower income group with the deepest market reach making easy access to the end user satisfying him. For e. Some of the pricing strategies are discussed below:
. The small unit packings will definitely attract a large number of rural consumers.00 pack has more sales as compared to the large pack. the rural consumers do give their own brand name on the name of an item. 5.g. The product packaging and presentation also keeps the price low to suit the rural consumer. 3.C items is also low and affordable.
etc. 3. edible oils and others to the consumers at a reasonable price. Soya protein is being used instead of milk protein.1. C) Distribution Strategies While it is necessary to formulate specific strategies for distribution in rural areas. Such state level federation can be motivated to procure and distribute consumables items and low value durable items to the members to the society for serving to the rural consumers. kerosene. Milk protein is expensive while Soya protein is cheaper. Similarly the packages of edible oil. Pet jars free with the Hasmukhrai and Co Tea. 1. co-operatives as well as private entrepreneurs. sugar. Application of value engineering: in food industry. coffee. The following strategies formulated for the rural category. Coverage of villages with 2000 and above population: Ideally. 3. Many of the societies extend credit to the members for purchases. Refill packs / Reusable packaging: in urban areas most of the health drinks are available. With improved communication facilities it is possible to reach distribution vas to these villages. ghee etc can be reused. The shops that distribute these commodities are called fair price shops. the life of the product and other factors have to kept in mind. Utilization of public distributory system: The PDS in the country is fairly well organised. These cooperatives have an arrangement for centralized procurement and distribution through their respective state level federation. Such measures can a significant impact in the rural market. vicks 5 grams tin. Use of co-operative societies: There are over 3 lacks co-operative societies operating in rural areas for different purposes like marketing cooperatives. Low cost/ cheap products: the price can be kept low by low unit packings like paisa pack of tea. The containers can be put to multipurpose uses. but the nutrition content of both is the same.
. By doing so the percentage of villages covered comes to only 10% of all the rural population covered will b substantial. The purpose of PDS is to make available essential commodities like food grains. tea. For example. farmers service cooperatives and other multipurpose cooperatives. the characteristic of the product – whether it is consumable or durable. coverage of villages with up to 2000 and above population could be the break-even point for a distribution setup. so that a larger segment can afford it. expanding the market. The basic aim is to reduce the value of the product. These shops are run by the state civil Supplies Corporation. shampoo sachets. Ariel Super Compact. 2. 2. The revamped PDS places more emphasis on reaching remote rural areas like the hills and tribals. the rural people can efficiently reuse the plastic bottle of hair oil. thus. this is a common strategy widely adopted by many manufacturing and marketing concerns.
both in cooperative & private sector. hardware. It is estimated that there are about 450 such outlets in operation in the country. 7. In addition to petrol/diesel. lubricants. Such places attract large number of itinerant merchants. The supermarket in Varana Nagar caters exclusively to rural consumers. ‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu. The rural consumer who have tractors. There are 50 such big rural fairs held in various parts of country. Jathras and melas are held once or twice a year for longer durations. Only temporary shops come up selling goods of all kinds. Biggest fair ‘Pushkar Mela’ is estimated to attract over 10 million people. For convincing the manufacturing and marketing man with regard to the importance of these places from rural marketing point of view a visit to such places is necessary. From the feeder markets and mandi towns the stockist or wholesaler can arrange for distribution to the village shops in the interior places.000 fairs are held in the country and the estimated attendance is about 100 million rural consumers. pesticides and seeds. camelbacks etc.N) arranges free transit of rural consumers to the supermarket of their purchases. Similarly a co-operative supermarket called ‘Chintamani’ in Coimbatore (T. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of 4-5 km from their residence. depending upon the township. 5. D) Promotional Strategies
. It is estimated that over 5. 4. which attract urbanite also like ‘Mankanavillaku’ in Malappara in Kerela. While shandies/heaths are held a particular day every week. radios. The rural customers visit these towns at regular intervals not only for selling the agricultural produce but also for purchasing cloth. Promotion can be taken. oil-engine pump sets and mopeds frequent these outlets for their requirement. This is why there are about 2 lakh fertilizer dealers in the country.P. They are normally timed with religious festivals. these outlets also stock consumables agricultural inputs like fertilizers. cycles.Here again there is an arrangement for centralised procurement and distribution. Distribution upto feeder markets/mandi towns: Keeping in view the hierarchy of markets for the rural consumers. Kumbh Mela at Hardwar in U. It can be beneficial for companies to organize sales of their product at such places. torch cells and other durables and consumer products. Example of Varana Nagar in Maharashtra proved an eye opener in this regard where the sugar and milk co-operatives have totally changed the life style of people. The manufacturing and marketing men should explore effective utilisation of PDS. Shandies/Haaths/Jathras/Melas: These are places where the rural consumers congregate as a rule. as per the essential commodities act. This distribution can be done by mopeds. as there will be ready captive audience. jewelry. bullockcarts. Utilisation of multipurpose distribution centres by petroleum/oil companies: In order to cater to the rural areas the petroleum/oil companies have evolved a concept of multipurpose distribution centres in rural areas. the feeder markets and mandi towns offer excellent scope for distribution. These outlets can be profitably utilised for selling consumables and durable items also. 6.
music and caparisoned elephants to promote their brand of tea. stickers. The opinion leaders may be big landlords or politicians or progressive farmers. 3. posters. its features. etc. Mass media: In the present world mass media is a powerful medium of communication. the way a rural buyer would understand it. banners. An opinion leader in rural areas can be defined as a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. Brooks Bond carries out marches in rural areas with band. Philips felt the need to improve its market share in upcountry markets. Rural consumers need to be seen as ‘different’ and ‘not inferior’.Swaminathan. Special campaigns: During crop harvest and marketing seasons it is beneficial to take up special promotion campaigns in rural areas.”says V. but somewhere down the line. Cinema Radio Print media: Handbills and Booklets. It decided to launch a special project in Tamil Nadu and Andra Pradesh at a total cost of Rs. There are other attributes in the promotion strategy which are explained as under: 1. the rural focus was gone. It is with this belief that Philips approached rural buyers in Tamil Nadu and Andra Pradesh.The promotion measure should be cost effective due to the low literacy rate of the rural population. In fact the word of mouth information holds lot validity in rural areas even today. However. This can be achieved only by personal selling by highly motivated sales person. Word of mouth is an important message carrier in the rural areas and “opinion leader” play a significant role in influencing the prospective rural consumers about accepting or rejecting a product or a brand. “the idea was to present Philips in a relevant manner to the rural consumer. Philips general manager (distribution & rural marketing) at its consumer electronics
. 2. in the mid-1998. This is the reason why opinion leaders and word of mouth are thriving among rural consumers. Tractor owners (tonee) conducted by MRF Limited is one such example.
Super Star Show
Philips India was among the first consumer durables companies to hit the rural market with its Bahadur brand of Transistors in the 1950s. 5 Crore. position it as a truly International brand. uses and benefits. Personal selling and opinion leaders: In personal selling it is required that the potential users are identified and awareness is created among them about the product. The following are the mass media generally used: Television.
So Philips held road shows. a Philips TV is brought home and lovingly covered could easily relate to the story. Philips is extending the exercise to Uttar Pradesh and Maharashtra. Even cine idol Rajnikant is popularly known as a “Superstar”.2 for B&W (Black &White) TV and 1 each of C (Colour) TV and audio systems. Predictably. theatres and through video vans (68% of people in Tamil Nadu watch films and 81% in Andhra).were created in Tamil and Telugu. Of course he does not bring the C TV and explains that Philips makes world-class TVs in India. Philips painted 1 lakh square ft of wall area in Tamil Nadu and Andhra Pradesh. In Andra Pradesh.
Essence or need for middlemen
Middlemen are considered as an unnecessary link in the chain of intermediaries and it is felt that these middlemen/commission agents must be eliminated. They were also asked to copy the brands “Lets Make Things Better” line English so that Philips name is recognised irrespective of language. Back in Tamil Nadu. Together they created a special campaign “Enga veettu superstar” (the super star of our house) for the Tamil Nadu market. In a karaoke contest villagers had to sing along with the catchy Philips jingles and win prizes. promotions revolving around the word “super” were kicked off. The word “Super” is an integral part of the Tamil. Popular cine actor Chiranjeevi is referred to as the “megastar” in the state. It is observed that the commission agents in the markets are functioning not so much to the advantages of the sellers as to those commission agents that the payments to the sellers on behalf of the
. Interactive sessions such as “sit and draw” contests for children to create brand recognition were held. The ad showed star complementing his son for buying a world-class Philips TV. The Chennai-based Anugrah-Mandison was roped in to help. The results of the entire exercise: sales rose by between 25% and 30% in these states in the last 6 months. the campaign was redrafted in Telgu as “Maa inti megastar”. in villages with populations of about 5000. Exhibitions of Philips products titled “Supershows” were organized. These were executed in cinemas. Girls in small towns and villages often embroided the cloth which covers the television sets in the house. Now. The storyboard was created keeping in mind the way of life. The participants were asked to copy the Philips logo. The campaign became a major hit. During the exercise.department division. In the ad film for Andhra Pradesh. The electronic media ads were slickly used. 4 ad campaigns. Philips used popular singer S P Balasubramanyam. The ad shows one such girl spreading the embroidered cloth waiting for her in Dubai to return with a C TV. Philips did not compromise on the production values. van promotions. merchandising etc.
buyers are done on the very same day or atleast promptly. It is pointed out that the commission agents pay the sales proceeds to producer sellers out of their pocket at first and realize the amt at a later date from the buyers. Hence it can be concluded that till such time as this function of prompt payment is taken over by another institution, it is not advisable to eliminate the services of the commission agent in the regulated markets.
Marketing according to a leading management theorists Peter Druker can be put in this way " There will be always, one can assume, need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sell itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available." Through this we feel that the gist of marketing in rural & urban is the same. It is nothing but teasing the minds of people, their desires, needs, expectations & playing with their physiology. But the market for a product may vary in rural & urban area and the marketing strategies to market the product is also different in urban and rural area. In rural area we find more of a stereotype because of similar socio-economic background. But in an urban area it is a multitude of people & personalities & variance in income, background & lifestyle. It was found that the movies, which were hit in cities, were doing as well in the rural areas. (E.g. Lagaan, Gadar) But movies, which are hit in urban areas (metros), may not be successful in rural areas. (E.g. Dil Chahta Hai) It is also found that people in cities spend more on entertainment than people in rural areas. We can see that the purchasing power of the people in a city like Mumbai is more than a semi rural area like Ambernath and willingness of the people in the rural area to spend towards movies or any other mode of entertainment is quite less than that of the people residing in urban area.
Vth Semester November 2001 – Rural Marketing 2 Hours) (1) Both the Sections are compulsory. (2) Section I: All questions are compulsory. (3) Section II: Attempt any three out of five questions. (4) Marks indicated against the questions. Section I 1. Give brief account on the following: (a) Primary vs. secondary wholesale market. (b) Relationship between marketable and marketed surplus. (c) Private Negotiation vs. Quotation on samples. (d) Regulated Markets. (e) Under cover/Hatha system. 2. Case Study: Sai House-holds Ltd. (SHL) is a very well established company in the field of manufacturing and selling of consumer durables like TV, washing machine and water filter, since 1990. The company has achieved remarkable success in marketing of their products through direct selling method in urban areas. The Co. started with a team of 100 direct selling salesmen. They have a separate salesforce Training and Development cell now, as there are more than 1500 well-trained salesmen. SHL conducts carefully structured training program and prepares salesmen for different kinds of situations they might encounter. 'The team is trained mainly to attract the housewife as the products deal with household items. The salesmen first develop a casual conversation ad- they enter a house and then move to a practiced sales pitch on the products to demonstrate how the product will make life better for the housewife. SHL also keeps salesmen's enthusiasm alive with seminars and discussions. it is ensured that they stay highly motivated. Achievers are also rewarded by SHL. [Total marks 60]
Now, SHL decided to go to semi-urban and rural markets instead of confining to urban markets only. SHL wants to encash in rural areas also through direct sales. So, it diverted some of its salesmen to nearby town centers and each team was given 10-15 villages of population less than 500 each. The salesmen first contacted the village heads and then made an entry into the area. As per the earlier experience, salesmen here also tried to start with casual conversation and target the house wives. Over a period of 15 days to one month the salesmen came back to parent department with no success in sales and many had very bad experiences also to share with. The CEO of SHL fired the salesforce Training and Development cell incharge and asked his Marketing Department to develop a new strategy to focus on the semi-urban and rural areas. Questions: (a) Was CEO right in firing the salesforce Training and Development cell incharqe? If so, why? (b) When SHL was doing so well in urban market, why did not the same strategy work in rural areas? (c) If you were the Marketing manager, what is the new strategy you would develop to focus in Rural Markets? Note; Relevant facts and assumptions carries due weightage. Section II 3. 3/4th of Indian consumer live in rural areas, but still marketer’s focus more on urban consumers. Why? 4. A firm planning to venture into rural areas face lack of infrastructural facilities? What are these problems and how can a firm cope up with 5. As you are aware of defects in agricultural marketing; what in your opinion can be the remedial measure for them? 6. 7. Moneylenders were the major source of credit to farmers, which are the alternate source available now? How does co-operative marketing act as a remedial measure to overcome the imperfections in rural marketing?
a) List out the sources of finance for the Rural Consumer. b) What is the basic difference between an urban area and rural area? c) Who is an Arhatya and what are his functions? d) What is India’s equivalent to America's "Look East"? Why? e) List out the intermediaries in an Agricultural Market. Both were employed with Home Personal Product (HPP).Prelims 2001 – Rural Marketing (2 Hours) [Total marks 60]
(1) Question numbers 1 and 2 in Section I are compulsory (2) From question numbers 3 to 7 in Section II answer any three." This product had a printed textual label with a diagram
. Read the following case study and answer the questions given below it. The first was a transparent 250ml coconut oil in a plastic bottle branded. This product was promoted.” On its sticker label was a picture of a dish antenna. “Satellite Coconut Oil. Home Personal Products Karim and Vijay were discussing the dismal performance of their company’s prime products in Indian Rural Markets. 2. (3) Answers to the two sections to be tied together (4) Figures to the right indicate full marks Section I 1. Two of the products of HPP were not doing well across all rural segments. across all segments. toothpaste etc. Answer the following in 5-6 lines only. a company that produced and marketed FMCG’s like hair oils. shampoos. The other product was a burgundy colored 200 ml Shampoo in a plastic fiber bottle branded as "Vitality Hair Wash. Karim was the product manager and Vijay was the head of the Rural Sales Department. with the help of a 15% price discount on the combined purchase of two bottles.
7. State and explain the advantages and disadvantages of the various sources of finance available to the Indian Rural Agriculturist. problem lay in the branding. Questions: (i) Who do you think is right. Keeping the profile of the rural consumer in mind explain the changing pattern of rural demand in India. What are the factors affecting Marketed and Marketable Surplus? 6. Vijay thought that the products were doing in urban markets because they were developed by keeping the urban consumer in mind. What is Rural Marketing? Explain its scope and importance. 5. Moreover. Packaging and Labeling of the two products" Section II 3. Vijay felt that the. packaging and labeling. The promotion campaign of the "Vitality scratch card sweepstakes that gave away music CD’s Like all other HPP products both these products were also advertised on TV and Radio in 10 to 30 second slots using beautiful models and a female voice over.showing improved hair growth due to the usage of the product. even Karim confessed that a large percentage of the urban market share was attributed to the chain of industrial buyers. Karim or Vijay? (ii) If you were Karim. Write short notes on any three of the following a) Sales Force management in Rural India b) Middle Men c) Multiplicity of Market Charges in Agricultural Markets in India d) Rural Communication
. While Karim thought that the problem lay in the media methods and promotion campaigns. what would be your media plan and promotion campaign'? (iii) What changes do you think Vijay has in mind with regard to Branding. 4.