QUESTION 1

Profile of Indian Economy

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Agriculture

Overview

Agriculture is a very dominant sector of the Indian economy

and accounts for 22 percent (as on September 2005) of GDP. Agriculture derives its importance
from the fact that it has vital supply and demand links with the manufacturing sector. During the
past five years agriculture sector has witnessed spectacular advances in the production and
productivity of food grains, oilseeds, commercial crops, fruits, vegetables, food grains, poultry
and dairy. India has emerged as the second largest producer of fruits and vegetables in the
world in addition to being the largest overseas exporter of cashews and spices. Further, India is
the highest producer of milk in the world.

Prospects of agricultural production in 2005-2006 are considered to be bright with near normal
rainfall. The emerging areas in agriculture like horticulture, floriculture, organic farming, genetic
and engineering, food processing, branding and packaging and future trading have high
potential of growth.

Horticulture, floriculture, fishery, poultry and animal husbandry, which account for 30 percent of
production agriculture and allied sectors, are expected to achieve a growth rate of 6 percent.
Further, production of commercial crops like jute, tea, coffee, oilseeds and sugarcane are also
expected to increase. Consequently the overall value added in the primary sector is expected to
increase by 3 percent in 2005-2006.

On the research front, the National Agriculture Research system has taken a number of new
initiatives to face the challenges of agriculture sector. The National Agricultural Innovation
project launched in association with the World Bank assistance with an envisaged investment of
1150 crores aims at increasing farmers income, employment, livelihood security. An Indo -US
knowledge initiative in agriculture has been launched in agriculture to reorient the current
research system and bring about a second green revolution in India.

Agriculture has been the centre stage for India's discussion in the WTO negotiations. In the
recent WTO talks, India has shown a tough stand on agriculture and has demanded a level
playing field.
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Agricultural Production and Growth in 2005-06

Prospects of agricultural production in 2005-06 are considered to be bright with near normal
rainfall. The delayed monsoon and its somewhat uneven distribution over time and space had
some limited adverse impact on the kharif crops (sown in June-July and grown mainly under
unirrigated conditions). Coarse grains, pulses, oilseeds, cotton and plantation were affected the
most, while the impact was less on the production of rice and sugarcane, where access to
irrigation is the greatest. However, loss of Kharif crop is expected to be more than compensated
by the Rabi output. Total food grains production is estimated to increase marginally in 2005-06.

Horticulture, floriculture fishery, poultry, and animal husbandry, which account for 30 percent of
production in agriculture and allied sectors, are expected to achieve a growth rate of 6 percent.
Production of commercial crops like jute, tea, coffee, oilseeds and sugarcane are also expected
to increase although by a lower rate. Consequently, overall value added in the primary sector is
expected to increase by 3 percent in 2005-06.

Total foodgrains production declined from 213.5 MT in 2003-04 to 204.6 MT in 2004-05. Output
of jute and mesta and sugarcane was also lower in 2004-05 than in 2003-04. However, there
was better performance in oilseeds and cotton production in 2004-05 relative to 2003-04.

The first advanced estimates of foodgrains production for 2005-06 released by Ministry of
Agriculture on September 19, 2005 put kharif production at 105.3 MT, up by 2 MT from the
previous year's level. Production of rabi foodgrains would be around last year's level of 101.3 MT
provided the weather remains favourable.

Kharif oilseeds production for 2005-06 is estimated at 14.6 MT as per the first advance
estimates. The rabi oilseeds production may reach the target level of 10.4 MT with favourable
weather. The first advance estimates with for 2005-06 put sugarcane output at 257.7 MT
against 232.3 MT in 2004-05.
Foodgrains Production

(Million Tonnes)

2000- 2001- 2002- 2003- 2004- 2005-

Crop/ year
01 02 03 04 05* 06**

Rice 85.0 93.3 71.8 88.3 85.3 73.8

Wheat 69.7 72.8 65.8 72.1 72.0 -

Coarse
31.1 33.4 26.1 38.1 33.9 26.4
Cereals

Pulses 11.1 13.4 11.1 14.9 13.4 5.0

Foodgrains

(I) Kharif 102. 1 112.1 87.2 116.9 103.3 105.3

(II) Rabi 94.7 100.8 87.6 96.6 101.3 -

Total (I+II) 196.8 212.9 174.8 213.5 204.6 -

*4th advance estimates

**1st advance estimates (Kharif only)
Source: Ministry of Agriculture

Commercial Crops Production

(Million Tonnes)

2000- 2001- 2002- 2003- 2004- 2005-

Crop/year
01 02 03 04 05@ 2006**

Groundnut 6.4 7.0 4.1 8.2 7.0 5.9

Rapeseed & Mustard 4.2 5.1 3.9 6.2 8.4 -

Soybean 5.3 6.0 4.7 7.9 7.5 6.6

Other Oilseeds 2.5 2.6 2.1 3.0 3.2 2.1

Total nine oilseeds 18.4 20.7 14.8 25.3 26.1 14.6

Cotton* 9.5 10.0 8.6 13.9 17.0 15.9

Jute and Mesta** 10.6 11.7 11.3 11.2 10.5 10.1

Sugarcane 296.0 297.2 287.4 237.3 232.3 257.7

*Million bales of 170 kgs. Each

@ 4th Advance estimates
**1st Advance estimates (Kharif only)
Source: Ministry of Agriculture
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Horticulture

Acreage under horticulture-which includes fruits, vegetables, spices, floriculture and coconut -
increased to 17.8 million hectares or about 10 per cent of gross cropped area of the country in
2004-05 from 16.3 million hectares in 2002- 03. With a production of 164 million tonnes in
2004-05, the sector contributed 28 per cent of GDP from agriculture. The targeted growth rate
during the tenth Plan for the sector is 8-9 per cent.

The importance of horticulture in improving the productivity of land, generating employment,

improving economic conditions of the farmers and entrepreneurs, enhancing exports and, above
all, providing nutritional security to the people, is widely acknowledged. With fruit and vegetable
production of 49 MT and 85 MT, respectively in 2003-04, India was the second largest producer
of both fruits and vegetables in the world. For example, India occupies first position in the
production of cauliflower, second in onion and third in cabbage. The National Horticulture
Mission (NHM) was launched in May 2005 as a major initiative to bring about diversification in
agriculture and augment income of farmers through cultivation of high value horticultural crops.
The programme which seeks to double horticultural production by 2011 has a target, in the 10th
Plan, of bringing an additional area of 5.4 lakh hectare under horticulture, besides taking up
programmes of rejuvenation, quality planting materials, high-tech cultivation, post harvest
management, processing and marketing. Total outlay is Rs. 2,300 crore for the Tenth Plan and
Rs. 630 crore for the financial year 2005-06.

Area and Production of Major Horticulture Crops

Crops 2002-03 2003-04 2004-05* 2005-06*

Area Production Area Production Area Production Area Production

Fruits 3.8 45.2 4.8 49.2 5.0 53.1 5.2 57.6

Vegetables 6.1 84. 8 5.9 84.8 6.1 91.6 6.3 99.4

Spices 2.4 2.9 2.4 3.8 2.5 4.1 2.6 4.4

Plantation
3.0 9.7 3.1 13.1 3.2 14.1 3.3 15.3
Crops
Flowers 0.1 0.2 0.1 0.2 0.1 0.2 0.1 0.2

Others 1.0 1.6 0.9 0.9 0.9 1.0 1.0 1.1

Total 16.3 144.4 17.2 152.8 17.8 164.1 18.6 178.1

Source: National Horticulture Board

* Estimated

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Agri-Trade

Agri-Exports

Vishesh Krishi Upaj Yojna (Special Agricultural Produce Sheme)

The objective of the scheme is to promote export of fruits, vegetables, flowers, minor forest
produce, dairy, poultry and their value added products produced and processed domestically, by
incentivising exporters of such products. Exporters of such products shall be entitled for duty
credit scrip equivalent to 5 percent of the FOB value of exports for each licensing year
commencing from 1st April2005. The scrip and the items imported against it would be
transferable. Under the scheme, export of all items as given in Appendix -37-A of handbook of
procedure (Vol.1) of foreign trade policy shall qualify for export benefits under VKUY scheme.
Items that are restricted or prohibited for export under schedule-II of the export policy in the
ITC (HS) classification of export and import items shall not be eligible for any benefits under the
scheme.

The proportion of agri-exports to total exports came down from 11.9 percent in 2003-04 to 10.2
percent in 2004-05. Major exports during April-October 2005 included marine products (US$
773.6 million), meat and meat products (US$ 291.5 million), fruits and vegetables (US$ 207.1
million) and processed food (US$ 224. 8 million).

Agri-Imports

The import of agricultural and allied products during 2004-05 was at US$ 3811 million as
compared to US$ 3708.2 during 2003-04. The proportion of agri imports to total imports came
down from 4.7 percent in 2003-04 to 3.5 percent in 2004-05. Major imports during April-
October 2005 included vegetable oils (US$ 1237.3 million), raw cashew nut (US$ 287.8 million),
pulses (US$ 281.8 million) and sugar (US$ 138.7 million). Vegetable oils and pulses are largely
imported to augment domestic supplies and raw cashew is imported for processing and re-
exports, as domestic production is not adequate to meet the demand of processing capacity
installed in the country.

Agricultural Marketing

Progress in the production of food grains, commercial crops and horticultural products depends
critically on the marketing infrastructure available to the farmers. The number of regulated
agricultural markets stood at 7,521 as on March 31, 2005. Besides, there were 27,294 rural
periodic markets, of which about 15 percent functions under the ambit of regulation. Ministry of
Agriculture had formulated a model law on agricultural marketing in consultation with State/UT
Governments to deal with emerging trends in agricultural marketing. This model legislation
enables establishment of private markets/ yards, direct purchase centres, consumers/ farmers
markets for direct sale, and promotion of public-private-partnership (PPP) in the management
and development of agricultural markets in the country. It also provides for exclusive markets
for onions, fruits, vegetables, and flowers. Regulation and promotion of contract farming
arrangement has also been a part of this legislation. A provision has also been made for
constitution of State Agricultural Produce Standards Bureau for promotion of grading,
standardization and quality certification of agricultural produce. Several state/UT governments
have initiated steps for amending the Agricultural Produce Marketing Committee (APMC) Act.

For development of marketing infrastructure, four Central Sector Schemes have been introduced
for: (i) developing a Marketing Research and Information Network (MRIN), (ii) a scheme with 25
per cent back-ended subsidy component for construction of rural godowns, (iii) strengthening of
agricultural marketing infrastructure, grading and standardization in those States that have
amended the APMC Act on the lines of Model Act, and (iv) Venture Capital Assistance scheme by
Small Farmers' Agri-Business Consortium (SFAC) to promote agri-business projects. Besides,
initiative has been taken by the National Institute of Agricultural Marketing (NIAM) to promote
PPP in establishment of state of the art terminal markets for fruits, vegetables and other
perishables in important urban centres.
Industry Overview
The Indian Agriculture Industry

The Indian Agriculture Industry is on the brink of a revolution that will modernize the
entire food chain, as the total food production in India is likely to double in the next
ten years.

As per recent studies the turnover of the total food market is approximately
Rs.250000 crores (US $ 69.4 billion) out of which value-added food products
comprise Rs.80000 crores (US $ 22.2 billion). The Government of India has also
approved proposals for joint ventures, foreign collaborations, industrial licenses and
100% export oriented units envisaging an investment of Rs.19100 crores (US $ 4.80
billion) out of which foreign investment is over Rs. 9100 crores (US $ 18.2 Billion).
The agricultural food industry also assumes significance owing to India's sizable
agrarian economy, which accounts for over 35% of GDP and employs around 65 per
cent of the population. Both in terms of foreign investment and number of joint-
ventures / foreign collaborations, the consumer food segment has the top priority.
The other attractive features of the indian agro industry that have the capacity to
lure foreigners with promising benefits are the deep sea fishing, aqua culture, milk
and milk products, meat and poultry segments.

Excellent export prospects, competitive pricing of agricultural products and standards

that are internationally comparable has created trade opportunities in the agro
industry. This further has enabled the Indian Agriculture Industry Portal to serve as a
means by which every exporter and importer of India and abroad, can fulfill their
requirements and avail the benefits of agro related buy sell trade leads and other
business opportunities.

This Indian agro industry revolution brings along the opportunities of profitable
investment and agriculture-industry-india.com provides you the B2B platform with
agro related catalogs, trade leads, exporters & importers directory etc. that help you
make your way to profit easy.

To lead yourself to the destination of profit through the Indian Agriculture Industry,
know maximum about the EXIM policy, programs & schemes, price policy, seed
policy and statistics at the Indian agro portal and harvest benefits from India, world's
second largest producer of food and a country with a billion people. From canned,
dairy, processed, frozen food to fisheries, meat, poultry, food grains, alcoholic
beverages & soft drinks, the Indian agro industry has dainty areas to choose for
business.
India Agricultural Trade

External Trade with India :

Agricultural exports from India were 44 percent of total exports in FY 1960; they
decreased to 32 percent in FY 1970, to 31 percent in FY 1980, to 18.5 percent in FY
1988, and to 15.3 percent in FY 1993. This drop in agriculture's share was somewhat
misleading because agricultural products, such as cotton and jute, that were exported in
the raw form in the 1950s, have been exported as cotton yarn, fabrics, ready-made
garments, coir yarn, and jute manufactures since the 1960s.

The composition of agricultural and allied products for export from India changed mainly
because of the continuing growth of demand in the domestic market. This demand cut
into the surplus available for export despite a continuing desire, on the part of
government, to shore up the constant foreign-exchange shortage (see Foreign-Exchange
System, ch. 6). In FY 1960, tea was the principal export by value. Oil cakes, tobacco,
cashew kernels, spices, and raw cotton were about equal in value but were only one-
eighth of the value of tea exports. By FY 1980, tea was still dominant, but coffee, rice,
fish, and fish products came close, followed by oil cakes, cashew kernels, and cotton. In
1992-93 fish and fish products became the primary agricultural export, followed by oil
meals, then cereals, and then tea. The share of fish products rose steadily from less than 2
percent of all agricultural exports in FY 1960, to 10 percent in FY 1980, to approximately
15 percent for the three-year period ending in FY 1990, and to 23 percent in FY 1992.
The share of tea in agricultural exports fell from 40 percent in FY 1960 to roughly 17
percent in the FY 1988-FY 1990 period, and to only 13 percent by FY 1992.

External Aid for India

Foreign aid--financial and technical--since the 1950s has made a significant contribution
to the agricultural progress in rural India. Aid has come from many sources: the United
States government, the Ford Foundation, the Rockefeller Foundation, the World Bank,
the Food and Agriculture Organization (FAO--see Glossary) of the United Nations (UN),
the European Economic Community, the former Soviet Union, Britain, and Japan, among
others .

Agricultural aid to India also has come in many forms. Between 1963 and 1972, for
example, under a program of the United States Agency for International Development,
some 400 American scientists and scholars served on the faculties of India's agricultural
universities, while more than 500 faculty members from Indian institutions received
advanced training in the United States and other countries. Several hundred agricultural
research projects, financed with funds generated from sales of American farm
commodities under the United States Public Law 480 program, fueled technological
breakthroughs in Indian agriculture.

Aid to the agricultural sector in India continued in the late 1980s and the early 1990s; the
FAO, the European Union, the World Bank, and the United Nations Development
Programme (UNDP) provided the bulk of the assistance. The FAO provided technical
assistance in a number of emerging areas; it provided quality control for exports; videos
for rural communication and training; and market studies for wool processing, mushroom
production, and egg and poultry marketing. Operation Flood--a dairy development
program--was jointly sponsored by the European Economic Community, the World Bank,
and India's National Dairy Development Board (see Livestock and Poultry, this ch.). The
UNDP provided technical assistance by sending foreign experts, consultants, and
equipment to India. The World Bank and its affiliates supported agricultural extension,
social (community-based) forestry, agricultural credit, dairy development, horticulture,
seed development, rain-fed fish farms, storage, marketing, and irrigation.

India has not only been a receiver of aid. Increasingly since independence, India has been
sharing its agricultural technology with other developing countries. Numerous foreign
scientists have received special and advanced training in India; hundreds of foreign
students have attended Indian state agricultural universities. Among other international
agricultural endeavors, India has contributed scientists, services, and funds to the work of
the International Rice Research Institute, headquartered in the Philippines. In the late
1980s and early 1990s, India provided short- and long-term training courses to hundreds
of foreign specialists each year under a variety of programs, including the Technical
Cooperation Scheme of the Colombo Plan for Cooperative Economic and Social
Development in Asia and the Pacific and the Technical Cooperation Scheme of the
Commonwealth of Nations Assistance Program .

Impact of Economic Reforms on Agriculture in India

The serious foreign-exchange crisis in 1990 led to a number of well-publicized economic

reforms in the early 1990s dealing with trade, industrial licensing, and privatization. The
reforms had an impact on the agricultural sector through the central government's effort
to withdraw the fertilizer subsidy and place greater emphasis on agricultural exports. The
cut in the fertilizer subsidy was a result of the government's commitment to reduce New
Delhi's fiscal deficit by removing grants and subsidies from the budget. The government
action led to a reduction in the use of chemical fertilizers and protests by farmers and
opposition political parties. The government was forced to continue the subsidies but at a
somewhat lower level.
New import and export policies aim at enhancing export capabilities of the agricultural
sector by increasing productivity and promoting modernization and competitiveness. The
measures to facilitate export growth include allowing the import of capital for the
agricultural sector, reducing the list of agricultural products that cannot be exported, and
removing the minimum export price from a number of products. Agricultural exports
increased by 30 percent in FY 1991 and 14 percent in FY 1992 in terms of rupee value,
but declined by 8 percent from FY 1990 to FY 1992 in United States dollar terms because
of the devaluation of the rupee in 1991.

In the mid-1990s, it was expected that agriculture would continue to be the most
important sector of the economy for the rest of the decade in terms of the proportion of
GDP. However, even when it is not the sector providing the largest share of GDP, the
importance of agriculture is not likely to diminish because of its critical role in providing
food, wage goods, employment, and raw materials to industries. Despite their
preoccupation with industrial development, India's planners and policy makers have had
to acknowledge the critical role of agriculture in the early 1990s by changing basic
policy. The gains in agricultural production should not lead to complacency, however.
Continuing increases in productivity, developing allied activities in rural areas, and
building infrastructure in rural areas are essential if India is to continue to be self-reliant
in food and agricultural products and provide a modest surplus for exports.

Agriculture – key growth driver

Sectoral overview

Agriculture

Two thirds of India’s population lives in rural areas. Agriculture and related activities
are the main source of livelihood for them. The performance of the agricultural sector
has continuously been improving (over many decades), helping the country achieve
a surplus in food grains production. This has been facilitated through new agricultural
techniques and tools acquired by Indian farmers, mechanisation, use of high yielding
varieties of seeds, increasing use of fertilizers and irrigation facilities, on-going
operational research in the country’s numerous agricultural universities and colleges,
etc. With liberalisation of trade in agricultural commodities, India enjoys a
competitive advantage in a number of agricultural and processed food products
exports.

While the share of agriculture in GDP (26.6 per cent in 2000-01) is declining because
of faster growth of the services sector, production in absolute terms has been
steadily rising. Agriculture accounts for 62 per cent of total employment. Some other
key highlights include:

• India had a buffer stock of foodgrains (wheat and rice) of nearly 50 million
tonnes (Dec. 02) as against the target of 20 million tonnes at any given point
in time. This has helped India enter the foodgrains export market in a
significant way.

• India is the largest producer and consumer of tea in the world and accounts
for 28 per cent of world production and 15 per cent of world trade.

• Agri-exports account for 13-18 per cent of total annual exports of the
country. Agri-exports amounted to over US$ 6 billion in 2000-01.

• The value of agricultural imports of inputs like fertilizers, etc. are

approximately one-fourth the value of exports

Agriculture
Main article: Agriculture in India

Given below is a chart of trend of output of cereals and major foodgrains as published[48]
by the Department of Food and Public Distribution with figures in tonnes.

Year Cereals Rice Wheat Coarsegrains Pulses

2001–02 199,480,000 93,340,000 72,770,000 33,370,000 13,370,000

2004–05 192,730,000 87,800,000 73,030,000 31,880,000 13,670,000

Composition of India's total production (million tonnes) of foodgrains and commercial
crops, in 2003-04.

India ranks second worldwide in farm output. Agriculture and allied sectors like forestry,
logging and fishing accounted for 18.6% of the GDP in 2005, employed 60% of the total
workforce[1] and despite a steady decline of its share in the GDP, is still the largest
economic sector and plays a significant role in the overall socio-economic development
of India. Yields per unit area of all crops have grown since 1950, due to the special
emphasis placed on agriculture in the five-year plans and steady improvements in
irrigation, technology, application of modern agricultural practices and provision of
agricultural credit and subsidies since the green revolution. However, international
comparisons reveal that the average yield in India is generally 30% to 50% of the highest
average yield in the world.[49]

The low productivity in India is a result of the following factors:

• Illiteracy, general socio-economic backwardness, slow progress in implementing

land reforms and inadequate or inefficient finance and marketing services for farm
produce.
• The average size of land holdings is very small (less than 20,000 m²) and are
subject to fragmentation, due to land ceiling acts and in some cases, family
disputes. Such small holdings are often over-manned, resulting in disguised
unemployment and low productivity of labour.
• Adoption of modern agricultural practices and use of technology is inadequate,
hampered by ignorance of such practices, high costs and impracticality in the case
of small land holdings.
• Irrigation facilities are inadequate, as revealed by the fact that only 53.6% of the
land was irrigated in 2000–01,[50] which result in farmers still being dependent on
rainfall, specifically the Monsoon season. A good monsoon results in a robust
growth for the economy as a whole, while a poor monsoon leads to a sluggish
growth.[51] Farm credit is regulated by NABARD, which is the statutory apex
agent for rural development in the subcontinent
Agriculture
In the new millennium, growing international trade and globalization
create unprecedented opportunities as well as several challenges for
our economy, including the small enterprises sector, which consists
of small scale, agro & rural industries and service/business entities.
As in many other countries, small enterprises constitute one of the
most vibrant sectors of our national economy and are also the
providers of large scale, widely dispersed, sustainable employment.
In the context of globalization, sustainable employment can be
generated by this sector, with necessary policy and other supports, to
enhance its competitiveness.

Agriculture and allied sectors provide nearly 57% of the total

employment and one-fourth of the national income (GDP). India is
the second largest producer of rice and wheat in the world, first in
pulses production and fourth in coarse grain.

In the National Common Minimum Programme (NCMP), it has been

declared that the United Progressive Alliance (UPA) Government
will revamp the functioning of the Khadi and Village Industries
Commission (KVIC) and launch new programmes for the
modernization of coir, handlooms, power looms, garments, rubber,
cashew, handicrafts, food processing, sericulture, wool development,
leather, pottery and other cottage industries.

The Prime Minister’s Rozgar Yojana was launched on 02 October

1993 in the entire country including in the States of North East
Region. During 1993-94, the scheme was in operation only in urban
areas of the country. Since 1994-95, the scheme is being
implemented in both urban as well as in the rural areas. Under the
scheme, eligible youth are provided assistance to set up tiny units in
all economically viable activities.

India has been exporting a number of agricultural products. The

major products exported are rice, wheat, oil meals, fruits, vegetables,
cashew, tea, coffee, sugar and molasses. The important agricultural
products imported are vegetable oils (edible), pulses, cashew nuts,
fruits, and nuts

QUESTION 3

The agricultural produce sector has been one of the most

important components of the Indian economy. The increasing trend of
agricultural production has brought, in its wake, new challenges in
terms of finding market for the marketed surplus. There is also a need
to respond to the challenges and opportunities, that the global markets
offer in the liberalised trade regime. To benefit the farming community
from the new global market access opportunities, the internal
agricultural marketing system in the country needs to be
integrated and strengthened. Government of India is striving to
prepare the Indian agricultural markets and marketing environment so
as to provide maximum benefit to the producers and in turn, compete
with the global markets. Agriculture and agricultural marketing need to
be re-oriented to respond to the market needs and consumer
preferences. Agricultural marketing reforms and creation of marketing
infrastructure has been initiated to achieve the above purpose

ALL ABOUT AGRICULTURAL MARKETING

BACKGROUND

Agriculture continues to be main stay of life for majority of the Indian

population. It contributes around 25% of the GDP and employs 65% of the
workforce in the country. Significant strides have been made in agriculture
production since independence. The agriculture production of food grains
increased from 51 million tones in 1950-51 i.e. before beginning of the 1st
Five Year Plan to 213 million tones in 2003-04. The output of oilseeds went
up to 23 million tones. Similarly, the production of fruit and vegetables also
increased to more than 134 million tones. The subject of agriculture and
agricultural marketing is dealt with both by the States as well as the Central
government in the country.

Starting from 1951, the different Five Year Plans laid stress on
development of physical markets, on farm and off farm storage structures,
facilities for standardization and grading, packaging, transportation etc..
Development of horticulture marketing attracted attention of policy makers
during the 3rd Five Year Plan. The year 1965 witnessed coming into
existence of Central Warehousing Corporation, Food Corporation of India,
Agricultural Prices Commission (later renamed as Commission for
Agricultural Costs and Prices) and several other organizations. Besides
number of organizations were set up in the form of commodity boards,
cooperative federations and export promotion councils for monitoring and
boosting the production, consumption, marketing and export of various
agricultural commodities. The prominent among them included Cotton
Corporation of India Limited (CCI), the Jute Corporation of India Ltd. (JCI),
the National Cooperative Development Corporation Ltd. (NCDC), the
National Agricultural Cooperative Marketing Federation Ltd. (NAFED), the
National Tobacco Growers Federation Ltd. (NTGF), the Tribal Cooperative
Marketing Development Federation Ltd. (TRIFED), the National Consumers
Cooperative Federation Ltd. (NCCF), etc for procurement and distribution of
commodities; and the Tea Board, Coffee Board, Coir Board, Rubber Board,
Tobacco Board, Spices Board, Coconut Board, Central Silk Board, the
National Dairy Development Board (NDDB), National Horticulture Board
(NHB), State Trading Corporation (STC), Agricultural & Processed Foods
Export Development Authority (APEDA), Marine Products Export
Development Authority (MPEDA), the Indian Silk Export Promotion
Council, the Cashewnuts Export Promotion Council of India (CEPC), etc.
for promotion of production and exports of specific commodities.

Most agricultural commodity markets generally operate under the

normal forces of demand and supply. However, with a view to protecting
farmers’ interest and to encourage them to increase production, the
Government also fixes minimum support/statutory prices for some crops and
makes arrangements for their purchase on state account whenever their price
falls below the support level. The role of Government normally is limited to
protecting the interests of producers and consumers, only in respect of wage
goods, mass consumption goods and essential goods. The role of
Government is promoting organized marketing of agricultural commodities
in the country through a network of regulated markets. To achieve an
efficient system of buying and selling of agricultural commodities, most of
the state Governments and Union Territories have enacted legislations
(APMC Act) to provide for regulation of agricultural produce markets. The
basic objective of setting up of network of physical markets has been to
ensure reasonable gain to the farmers by creating environment in markets for
fair play of supply and demand forces, regulate market practices and attain
transparency in transactions.

With a view to coping up with the need to handle increasing agricultural

production, the number of regulated markets have also been increasing in the
country. While by the end of 1950, there were 286 regulated markets in the
country, today the number stands at 7521 (31.3.2005). The Central
Government advised all the State Governments to enact Marketing
Legislation to promote competitive and transparent transactional methods to
protect the interests of the farmers. Barring a few, most of the States and
Union Territories embarked upon a massive programme of regulation of
markets after enacting the legislation. Most of these regulated markets are
wholesale markets. There are in all 7293 wholesale markets in the country.
Besides, the country has 27294 rural periodical markets, about 15% of
which function under the ambit of regulation. The advent of regulated
markets has helped in mitigating the market handicaps of producers/sellers
at the wholesale assembling level. But, the rural periodic markets in general,
and the tribal markets in particular, remained out of its developmental ambit.
The State-wise distribution of regulated markets and market yards is given
in Annexure-I.

The area served by each market across the States (Annexure-II)

reveals large variations. The area served per regulated market varies from
74 sq km in Punjab to 2257 sq km in Assam. On an average, a regulated
market serves 459 sq km area in the country which is quite high. Farmers
have to travel long distances with their produce to avail the facility of
regulated markets. The National Commission on Agriculture (1976) had
recommended that the facility of regulated market should be available to
the farmers with in a radius of 5 km and if this is considered a bench mark,
the command area of a market should not exceed 80 sq km. However, in
the existing scenario, except Delhi, Punjab, Chandigarh and Pondicherry, in
no State, the density of regulated markets is close to the norm.
 The infrastructural amenities available in the regulated markets of the
country are shown in Annexure -III. Auction platforms are needed in market
for settlement of price of the produce in a congenial atmosphere between
buyers and sellers. Both covered and open auction platforms exist in only
two-thirds of the regulated markets. Some commodities when brought for
sale contain higher moisture than desired level and hence there should be a
space for drying. Presently only one-fourth of the markets have common
drying yards. Trader modules viz. shop, godown and platform in front of
shop exist in 63% of the markets. Cold storage units are needed in the
markets where perishable commodities are brought for sale. They are
brought for sale only in a few markets. The cold storage units exist only in
9% of the markets and grading facilities exist in less than one-third of the
markets. The basic facilities viz. internal roads, boundary walls, electric
lights, loading and unloading facilities and weighing equipment are available
in more than 80% of the markets. Farmers’ rest houses exist in more than
half of the regulated markets. It is evident from the above that there is
considerable gap in the facilities available in the market yards.

CONSTRAINTS OF PRESENT
MARKETS
The purpose of regulation of agricultural markets was to
protect farmers from the exploitation of intermediaries and traders and
also to ensure better prices and timely payment for his produce. Over
a period of time these markets have, however, acquired the status of
restrictive and monoplistic markets, providing no help in direct and
free marketing, organized retailing, smooth raw material supplies to
agro – processing, competitive trading, information exchange and
adoption of innovative marketing systems and technologies. Farmer
cannot sell his produce directly in bulk except on retail basis to the
consumers. Farmers have to bring their produce to the Market yard.
Exporters, processors and retail chain operators can not get desired
quality and quantity of produce for their business due to restrictions
on direct marketing. The processor can not buy the produce at the
processing plant or at the warehouse. The produce is required to be
transported from the farm to the market yard and then only it can be
purchased and taken to the plant. There is thus an enormous increase
in the cost of marketing and the farmer end up getting a low price for
his produce.

NEED FOR REFORMS

Agriculture sector needs well functioning markets to drive
growth, employment and economic prosperity in rural areas of the
country. In order to provide dynamism and efficiency into the
marketing system, large investments are required for the development
of post harvest and cold chain infrastructure nearer to the farmers’
field. Projection of production and marketable surplus of various
farm products was recently assessed by an Task Force set up by the
Ministry of Agriculture which estimated that an investment of
Rs.12,230 crore in next 10th Plan would be necessary for infrastructure
development for agricultural marketing. A major portion of this
investment is expected from the private sector, for which an
appropriate regulatory and policy environment is necessary.
 Alongside, enabling policies need to be put in place to encourage
procurement of agricultural commodities directly from farmers’ field
and to establish effective linkage between the farm production and the
retail chain and food processing industries. Towards this end, the
Inter-Ministerial Task Force on Agricultural Marketing Reforms
constituted by this Ministry in its report of 28.06.2002 has made the
following important recommendations:

i. Promotion of competitive agricultural markets in private and

cooperative sectors, direct marketing and contract farming
programmes by amending the State Agricultural Produce Marketing
Regulation Acts and to provide central assistance for the development
of marketing infrastructure subject to such deregulation and reforms;
ii. Progressive dismantling of controls and regulations under the
Essential Commodities Act to remove all restrictions on production,
supply, storage and movement of, and trade and commerce in respect
of all agricultural commodities;
iii. Substantial step up in flow of institutional credit to farmers for
marketing of crops (pledge financing) to enhance their holding
capacity to obtain remunerative price for their produce;
iv. Expand availability of warehousing services in rural areas by
introducing negotiable warehousing receipt system for agricultural
commodities; and
v. Allow futures trading in all agricultural commodities to improve price
risk management and facilitate price discovery by amending the
Forward Contracts (Regulation) Act, 1952;
 The recommendations contained in these Reports were discussed with
the State Governments at a National Conference on 27th September, 2002
and later by a Standing committee of State Ministers on 29th January, 2003.
In the Conference as well as the Standing Committee, State governments
expressed the view that reforms in the agricultural marketing sector were
necessary to move away from a regime of controls to one of regulation and
competition. In view of liberalization of trade and emergence of global
markets, it was necessary to promote development of a competitive
marketing infrastructure in the country and to bring about professionalism in
the management of existing market yards and market fee structure. While
promoting the alternative marketing structure, however, Government needs
to put in place adequate safeguards to avoid any exploitation of farmers by
the private trade and industries. For this, there was a need to formulate a
model legislation on agricultural marketing.

The Ministry of Agriculture accordingly formulated a model law on

agricultural marketing in consultation with the States Governments.
The draft model legislation provides for establishment of Private
Markets/Yards, Direct Purchase Centres, Consumer/Farmers Markets
for direct sale and promotion of Public Private Partnership in the
management and development of agricultural markets in the country.
It also provides for separate constitution for Special Markets for
Commodities like Onions, Fruits, vegetables, Flowers etc. A separate
Chapter has been included in the legislation to regulate and promote
contract-farming arrangements in the country. It provides for
prohibition of commission agency in any transaction of agricultural
commodities with the producers. It redefines the role of present
 Agricultural Produce Market Committee to promote alternative
marketing system, contract farming, direct marketing and
farmers/consumers markets. It also redefines the role of State
Agricultural Marketing Boards to promote standardization, grading,
quality certification, market led extension and training of farmers and
market functionaries in marketing related areas. Provision has also
been made in the Act for constitution of State Agricultural Produce
Marketing Standards Bureau for promotion of Grading,
Standardization and Quality Certification of agricultural produce.
This would facilitate pledge financing, E-trading, direct purchasing,
export, forward/future trading and introduction of negotiable
warehousing receipt system in respect of agricultural commodities.

IMPLEMENTATION OF AGRICULTURAL
MARKETING REFORMS
A. Implementation of Model Act on Agricultural Marketing

The following steps have been taken to persuade the States to bring
changes in the APMC Act on the lines of the Model Act:

i) National level meetings were organized with the State

Governments at Delhi on 07.01.2004 and at Bangalore on
19.11.2004.
 ii) Follow up letter from Union Agriculture Minister sent to State
Ministers In-charge of Agricultural Marketing for amending the
APMC Act on 16th July, 2004 and again on February, 2005 and
to the Chief Ministers on 25-5-05.

iii) A new Central Sector Scheme to provide investment subsidy

on market infrastructure development projects implemented in
November, 2004. Central assistance under the scheme is to be
provided in those States that amend the APMC Act on the lines
of the Model Act. An amount of Rs.25 crore was also released
to NABARD/ NCDC to provide investment subsidy to eligible
projects through banks in March, 2005.

iv) Several States have initiated steps for amending the APMC
Act. A statement indicating the latest progress state-wise is at
Annexure IV. It is expected that with the initiatives already
undertaken and the subsequent follow up done by the
Department, most of the States may amend the APMC Act by
March, 2006.

B Contract Farming

Contract farming has been prevalent in various parts of the country for
commercial crops like sugarcane, cotton, tea, coffee, etc. The concept has,
however, gained importance in recent times in the wake of economic
liberalization. The main feature of contract farming is that farmers grow
selected crops under a buy back agreement with an agency engaged in
trading or processing.
 There are many success stories on contract farming such as potato,
tomato, groundnut and chilli in Punjab, Safflower in Madhya Pradesh, oil
palm in Andhra Pradesh, seed production contracts for hybrids seed
companies in Karnataka, cotton in Tamil Nadu and Maharashtra etc. which
helped the growers in realization of better returns for their produce.

In our country contract farming has considerable potential where

small and marginal farmers can no longer be competitive without access to
modern technologies and support. The contractual agreement with the
farmer provides access to production services and credit as well as
knowledge of new technology. Pricing arrangements can significantly
reduce the risk and uncertainty of market place.

Small-scale farmers are frequently reluctant to adopt new technologies

because of the possible risks and costs involved. In contract farming, private
agribusiness will usually offer improved methods and technologies because
it has a direct economic interest in improving farmers' production to meet its
needs. In many instances, the larger companies provide their own extension
support to contracting farmers to ensure that production is according to the
specification. Skills the farmer learns through contract farming may include
record keeping, improved methods of applying chemicals and fertilizers and
knowledge of the importance of quality and of the demands of export
markets.

In view of above, contract-farming arrangements need to be

encouraged widely. While doing so, Government needs to protect the interest
of both the farmers as well as the industry equitably. This would require
arrangement for registration of sponsoring companies and recording of
contract farming agreements, in order to check unreliable and spurious
companies. A dispute resolution mechanism need to be set up near to
farmers which can quickly settle issues, if any, arising between the farmers
and the company under a quasi-judicial manner. The farmers while raising
the contracted crops, run the risk of incurring debt and consequent
displacement from land in the event of crop failure. Farmers need to be
indemnified from such displacement by law.

Model law on marketing has been formulated keeping these

requirements in view. This law inter-alia provides for an institutional
arrangement for registration of sponsoring companies, recording of Contract
Farming Agreement, indemnity to farmers’ land and lays down a time bound
dispute resolution mechanism. The Model law has been discussed with the
State Governments and the representatives of Trade and Industries at the
National Conference of State Agriculture Ministers on 7th January, 2004 and
again on 19th November, 2004 and a consensus has been arrived at to give a
major thrust to this programme. Several State Governments have already
initiated legal amendments to APMC Act. Haryana and Gujarat are among
the first States to take steps in establishing an institutional set up for
supporting contract farming in these States. A statement indicating the status
of contract farming as reported by DMI is at Annexure V

INFRASTRUCTURE REQUIREMENT
Projections of production and marketed surplus of
various farm products show that the quantities, which the marketing
 system will be required to handle in future, are quite large. A
marketing system backed by strong, adequate infrastructure is at the
core of agricultural marketing. Market infrastructure is important not
only for the performance of various marketing functions and
expansion of the size of the market but also for transfer of appropriate
price signals leading to improved marketing efficiency. High
investment and entrepreneurial skills required for creation and
management of modern markets has to come from private sector. The
situation of control by the state has to be eased to facilitate greater
participation of the private sector, particularly to engender massive
investments required for the development of marketing infrastructure
and supporting services. Investment requirement for the development
of marketing, storage and cold storage infrastructure in the country
during 10th Plan has been estimated by a Task Force to be of the order
of Rs. 12,230 crores. The outlay required for the segments is at
( Annexure -VI ).

With a view to induce large investment in the development of

marketing infrastructure as envisaged above, the Ministry has formulated a
scheme for “Development/Strengthening of Agricultural Marketing
Infrastructure, Grading and Standardization”. Under this scheme investment
subsidy is provided on the capital cost of general or commodity specific
infrastructure for marketing of agricultural commodities and for
strengthening and modernization of existing agricultural markets, wholesale,
rural and periodic or in tribal areas. The scheme is reform linked, to be
implemented in those States/UTs that amend the APMC Act wherever
required to allow setting up of agricultural markets in private and
cooperative sectors. The States of Madhya Pradesh, Tamil Nadu, Kerala,
Manipur, Himachal Pradesh, Andhra Pradesh, Punjab, Sikkim, Nagaland and
Andaman & Nicobar Ilands (U.T.) have so far been notified for
implementation of the Central Sector Scheme, being the reforming States.
Under the scheme, back ended subsidy @ 25% of capital cost of the project
is provided in all States and @ 33.3% of capital cost in case of NE States,
hilly areas and SC/ST entrepreneurs.In respect of infrastructure projects of
State Agencies, there is no upper ceiling on subsidy to be provided under the
scheme. There is central allocation of Rs. 190.00 crore under the scheme 10th
Plan. An amount of Rs. 25 crore has been released under the scheme during
2004-05. Efforts are being made to make the people aware about the
scheme through newspaper advertisement, distribution of publicity material
and by arranging awareness programmes for officials of States and Banks.

Storage Infrastructure

Storage infrastructure is necessary for carrying over the agricultural

produce from production periods to rest of the year. Lack of adequate
scientific storage facilities cause heavy losses to farmers in terms of wastage
in quantity and quality of produce in general and of fruit and vegetables in
particular. It is well known that small farmers do not have the economic
strength to retain produce with themselves till the market prices are
favourable. There is a felt need in the country to provide the farming
community with facilities for scientific storage so that wastage and produce
deterioration are avoided and also to enable it to meet its credit requirement
without being compelled to sell the produce at a time when the prices are
low. Among the principal agencies engaged in warehousing and storage, FCI
constructs godowns for their own needs of procurement and public
distribution, the storage of CWC/ SWCs is by and large utilised by FCI,
traders and for stocking fertilizers. These principal agencies have, therefore,
by and large tended to bypass the requirement of farming community in the
rural areas. To consider various aspects of the problems relating to storage of
agricultural produce and to improve the country’s storage capacity and also
storage technology, the Govt. constituted a High level Expert Committee
which inter alia recommended that about 20 lakh tonne storage capacity may
be created in rural/semi-urban areas. Creation of storage facilities for
agricultural produce, particularly in the rural area has also been emphasized
in the National Agriculture Policy. An Inter-Ministerial Task Force
constituted by the Ministry of Agriculture has in its report inter alia
recommended in 2002 that in addition to 78.83 million tonne available
storage capacity in the country additional storage capacity of 130 lakh tonne
may be created during 10th plan period. Of this 90 lakh tonne capacity is to
be created in private and cooperative sector.

Marketing Research & Information Network

With a view to provide to electronic connectivity to all the

important wholesale markets in the country, this Department is
implementing a Marketing Information Network Scheme viz.
‘AGMARKNET’. The aim of the scheme is to collect and disseminate
(price and market related) information in respect of agricultural
commodities. The scheme was launched in the year 2000-01 and as
on date 1269 markets from all over the country have been linked to a
central portal. It is planned to connect 2700 important markets to the
AGMARKNET Portal by March 2007.
 Price related information: Information on price of agricultural
commodities is collected by Auction Officers in the mandi through the
process of auction that takes place from early in the morning and goes up to
lunchtime. The data is usually sent by e-mail from the mandi in the
afternoon indicating the day’s minimum price of the commodity, the
maximum price and the modal price, i.e. the price at which the maximum
sales have taken place. The quantity of arrivals is also reported. E-mail
from all the markets are compiled in the DMI/NIC Headquarter and after
verification uploaded on the portal. Information on the portal is in public
domain and can be accessed freely. As on date, price information in respect
of more than 300 commodities and 2000 varieties are reported on the Site.

Market related information: In addition to price, several other markets

related information is provided on the portal. These relate to accepted
standards of grades, labeling, sanitary and phyto-sanitary requirements,
physical infrastructure of storage and warehousing, marketing laws, fees
payable etc. Efforts are on to prepare a national atlas of agricultural markets
on a GIS Platform that would indicate the availability of entire marketing
infrastructure in the country including storages, cold storages, markets and
related infrastructure. Similarly commodity profiles indicating the post
harvest requirements of important commodities in terms of quality, packing,
standards etc. are being loaded on to the portal. Commodities already
covered include Rice, Bengal gram, Red gram and mustard rapeseed.

Links: The portal has links with several Ministries and Central
Institutions that are directly involved in implementing agriculture related
programmes. The portal is also linked online with commodity exchanges,
providing future prices in respect of cereals, oilseeds, etc. International price
trends of agricultural commodities available on FAO website can also be
acceded through the portal. The portal is constantly enriched by
dissemination of information in regional languages.

Users: Price and other data reflected on the portal is being made use of
by several agencies including Banks, Commodity Exchanges, Newspapers,
Market Committees, Farmers’ Organizations etc. Price information on the
portal has credibility since it is generated by the Government system and
acts as a reference point.

Technical Support: Technical support to the site is provided by a team of

senior officers at the NIC Headquarters at Delhi, State coordinator at the
NIC Regional Office and the NIC District Centers located in all districts of
the country. Coordination with the State Governments is achieved through
the State Marketing Boards under whose administrative control the State
regulated markets function.

Financial Outlay: This Department has incurred an expenditure of

about Rs.25 crores on the implementation of the Scheme. Outlay for the
scheme during 10th Plan is Rs.35 crores.

‘AGMARKNET’ is a unique live portal on agricultural commodities,

technically supported by a high capacity Central server and the
programming capabilities of the NIC and the data is fed into the system and
later disseminated to farmers in a decentralized mode through the voluntary
cooperation of mandi staff.

Renowned economists have mentioned that trade and exchange allow us to benefit from

specialization and obtain welfare gains. Trade and exchange require the existence of markets.
Agriculture markets are the hub of rural economy. Agricultural marketing today means more than

linking the producer with consumer, it includes creation of favorable economic environment for

farmers to enthuse him to grow more and get proceeds from transactions. Many alternative

forms, such as, cooperative marketing, group marketing, contract marketing, futures trading, direct

marketing and e-com-electronic commerce are in wake to enable the producers to maximize the

share in consumers rupee and delivering a quality produce at affordable price to consumer.

Agricultural produce markets are nerve centers from where marketing impulses are transmitted to

put all the marketing activity on track and safeguard the interest of both farmers and consumers.

The manual deals with basic marketing scenario so that all market functionaries and

farmers may be benefited and converse themselves with modern marketing practices.

Adoption of modern production technologies has resulted into massive marketable

surplus in the field of agriculture, which has genuinely created need for proper and adequate

infrastructural requirement for fostering the marketing of the farm produce efficiently.

Infrastructure is instrumental in effective marketing, pricing, reducing huge losses during post

harvest period and converting the produce into acceptable quality in the international market.

Specific infrastructural facility is crucial requirement of importers to stimulate farmers to produce

more to cope up with the increasing demand. Marketing infrastructure includes facilities and

amenities, which cater to the need of cost-effective movement of produce from farm to the

consumer either inside or outside the country.

In order to make the agricultural markets more user friendly at all the levels,

i.e., primary/rural or national market and most efficient, various infrastructural

facilities/amenities have been presented in this manual. This endeavourance will help

to establish agricultural markets well equipped with better infrastructural facilities

and amenities. Since creation of proper infrastructure requires huge investment,

Directorate of Marketing and Inspection has launched a scheme “CAPITAL

INVESTMENT SUBSIDY FOR DEVELOPMENT / STRENGTHENING OF

AGRICULTURAL MARKETING INFRASTRUCTURE, GRADING AND

STANDARDISATION” to meet the investment requirement of the entrepreneurs

through private and public funding.

Agricultural Marketing:
Marketing of the form produce begins with the planning of producing the commodity.
Agricultural commodities besides being seasonal and regional in nature are bulky and the
consumption of the same is spread throughout the year. Marketing is sum of all activities, which
link the producer and consumer.
Strategic Approach for Marketing: Marketing of farm produce needs a strategy, in order to
establish a bridge between producer and consumer efficiently and economically. Marketing
strategy comprises defined specific objective and action plan to have competitive edge over
other players in this area. Prudent producer will analyse the strategy thoroughly, to take up
farming to maximise his out put in respect of quantity and quality with cost effective approach
for a competitive marketing to drive a reasonable return over cost invested.
Since the last two decades, India has not only attained self- sufficiency in food grain
requirement, but has become an important player in the export market. Keeping in view the
domestic requirement, our farmers have been guided very often for producing meticulously
market-oriented production. Market oriented production will have to be taken up to match the
demand and supply equitably.
Marketing Environment: Soon after harvesting, farmer intends to shift the produce to market,
as early as possible. Farmer expects an environment to market the produce, where his decision
should not be effected by any other variable factor or forces and is assured of a competitive
price. This objective is enshrined in the creation of regulated market. In the management of
these markets, a farmer representative serves as a member and this gives him a sense of
belonging in the market, which makes the market environment more conducive for completing
the transactions. Marketing environment also includes, required infrastructure for efficient
handling of the commodity, such as covered auction platform, tested and trusted weighing
machines, cleaning, grading and storage / cold storage facility, loading and unloading facilities,
internal roads to decongest the vehicular movement, pledge finance availability, banking, postal
services, cattle-shade, farmer’s rest house and link road from farm to the market. Trained
manpower in these markets increases the conduciveness of the marketing environment.
Besides these requirements, big institutional support such as NAFED, CWC/SWC, DMI,

NHB, Directorate of Economics and Statistics, NABARD, APEDA, Commodity Boards, CACP,
Forward Market Commission and State Agricultural Marketing Boards – provide much needed
fillip to the marketing environment.
 Alternative Marketing: The traditional marketing system of farm produce has paved way for
other alternative marketing system, which is more need based and sometimes suits the individual
partners in the trade. The need of the alternative marketing of farm produce is to reduce the
distributive system. Another reason is to explore the possibility of bringing the buyer to the
production place, that is, bringing the market at farm. Some of such marketing systems are briefly
given below-

(a) Group Marketing: Group marketing includes, joint planning, funding, implementation, pricing,
sharing risk equally in the marketing and reaping the benefit of collective bargaining. This
indirectly results into more returns and economises the marketing cost.

Why group marketing?

♦ To develop entrepreneurial skill

♦ Improve bargaining power

♦ Reducing the risks involved due to price uncertainty

♦ To make available bulk supply

♦ To reduce the marketing cost

(b) Cooperative Marketing : This marketing system is pursued through cooperative societies
registered under Cooperative Societies Act. This system is pursued on the principle of “self help
by mutual help”. It reduces the marketing cost, enhances the bargaining power and there is
equitable distribution of the proceeds.presence of marketing cooperatives makes the market
more competitive and ensures better returns to the producer. This system is owned and
managed by the farmer themselves for their own economic betterment and enhancing marketing
efficiency. At the village level, a large network of multipurpose / commodity specific Primary
Agricultural cooperative Societies are supporting such marketing system in the country.

Why Cooperative Marketing ?

♦ To improve bargaining power of the farmer members

♦ To get quality input

♦ Presence makes the market more competitive

♦ To enhance the profit

♦ To have backward and forward linkage

♦ Make presence in remote areas and involve small and marginal farmers

♦ Collective ownership of marketing infrastructure such as cleaning,grading, storage, processing,

outlets etc.

♦ Collective distribution

♦ Credit accessibility

(c) Direct Marketing: Farmers come into direct contact with the consumers and receive the
payment directly from the consumers. This system is prevailing in many parts of the country viz.,

(i) Apni Mandi: In these mandies, farmer-producers bring the produce for sale directly to the
consumers ,as in Punjab and Rajasthan

(ii) Rythu Bazrs: In Andhra Pradesh, such markets have been established to provide direct link
between farmers and consumers in the marketing of fruit and vegetables and other essential
food items.

(iii) Uzhavar Santhaigal: Government of Tamil Nadu had established farmers markets called
Uzhavar Sandies in selected municipal and panchayat areas.In these markets, better
marketing infrastructure is provided to farmers free of cost. Farmer get other inputs and
quality seeds in these markets .(However it has been discontinued by the present State
Government)

(iv) Raithara Santhegalu : In Karnataka, marketing Board has established farmes market or
Raithara Santhe without any middle men and provide a place where farmers and consumers
directly interact.

Why Direct Marketing?

 ♦ Make the marketing channel shortest

♦ reduces marketing cost and maximises farmer’s share in consumer rupee

♦ Eliminate middle men

♦ Direct communication with consumer / buyer

♦ Requires minimum infrastructure

♦ Understanding of consumer requirement

♦ Availability of fresh and quality produce within the shortest reach of consumer

(d) Contract Farming: Contract farming, is a type of farming wherein the industry or perspective buyer
enters into a contract with the farmer and promises to buy the farmer’s produce at a pre-negotiated
price under pre-negotiated conditions. Besides, the buyer agrees to supply the required farm inputs at
the required time. In this process farmers are assured of an established market and a fixed price for
their produce. The buyers would be able to procure the produce of a specified quality at much cheaper
rate.
Normally contract farming involves the following basic elements
(a) Pre-agreed price
(b) Quality
(c) Quantity or acreage (minimum/ maximum)
(d) Time
 Farmer is contracted to plant the contractor’s crop on his land.
 Harvest and deliver to the contractor, a quantum of produce, based upon anticipated yield and
contracted acreage.
 This could be at pre-agreed price.
 Towards these ends, the contractor can supply the farmer with selected inputs
Thus, under the contract farming, contractor supplies all the inputs required for cultivation, while
the farmer supplies land and labour.
ADVANTAGES OF CONTRACT FARMING
To the farmers:
1) Assured market and support price.
2) Efficient timely technical guidance- almost free of cost. Crop monitoring on a regular basis.
3) Financial support in kind.
 4) Assured quality of seeds and pesticides.
5) Better price for produce- No Middlemen.
6) Gain of bulk supply instead of small lots.
7) Remunerative returns and timely payment.

To the buyers:
1) Backward market integration is possible with assured supply.
2) Ensured required quality- ensures residual toxicity level.
3) Uninterrupted and regular flow of quality raw material
4) Protections from fluctuation in market pricing.
5) Buyers can plan on long term basis.
6) Buyers select the products, which have international demand.
7) Selection of location- agroclimatic conditions matching with the commodity’s requirement and less
prone to natural calamities.

SUCCESS OF COTRACT FARMING LIES IN –

1) Buyer’s ability to implement the plan.
2) Monitoring the growth of the plants package of practices, pest management and sanitation
measures
3) On site procurement- processing, packing and forwarding.
Indian Experience in Contract farming:
In Punjab and Rajasthan—Tomato Pulp—Pepsi
In Maharashtra and AP—Exotic Vegetables—Trikaya foods/VST and small farmers.
In Bangalore—Gherkins—Exporter with farmer growers
In AP/Karnataka—Edible oil and Sunflower-ITC Agro –tech
Agri-Clinics and Agri-Business centers:
Providing testing facilities, diagnostic and control services and other consultancies on a fee for
service basis though nearly 5000 such clinics.The programme is implemented jintly through Small Farmers
Agribusiness Consortium (SAFC) and National Institute of Agricultural Extension management (MANAGE).
These services are provided by well trained graduates and financial support on subsidized manner is being
provided by NABARD to establish the needed infrastructure.
 FUTURES TRADING/FORWARD CONTRACTS.

1. Bombay Cotton Traders Assocation (1875), for regulation of cotton trade.

Futures Markets were established for oil seeds in Bombay ( 1900 ) for Wheat in Hapur (1913)
raw jute and jute goods in Calcutta (1912)
2. FORWARD CONTRACT (Regulation) ACT – 1952 – to check the unhealthy
Speculation – forward trading was regulated and prohibited in other areas.

3. FORWARD MARKET COMMISSION –Established in 1953. The Spices and

Oil seeds Exchange Ltd. Was established Sangli in–1953.
4. Central Government has powers to notify the commodities and jurisdiction in
Which forward contracts are regulated.
4. There is ban in about 100 commodities on forward trading.
5. Two broad categories of Operators are namely., Hedgers and Speculators.

RISKS IN AGRICULTURAL MARKETING:

a) qualitative and quantitative
b) institutional
c) price risk

PRICE RISK.- Speculation and hedging to overcome this risk.

SPECULATION – absolutely profit motive
HEDGING - executing opposite sales or purchases in futures market to offset the purchases
or sales of physical product made in the cash market.
FUTURE TRADING:- also known as Hedge Market.
K.N.Kabra Committee- 1993 - Reviewed the working of Forward Markets. Allowed futures
trading in 17 commodities, for example, cotton, jute, custard oil , pepper and 11 oil seeds, oils
and their cakes.
At present, in custard seed, turmeric, pepper, gur (jaggery), potato and hessian, future trading
is undertaken. Now future trading is permitted in more than 100 commodities.

TYPES OF CONTRACT -
1) Ready contracts – when delivery of goods and payment thereof, if completed 11 days from
the date of contract. Not covered under the Act.
2) Forward contracts – when delivery of goods that are not ready-delivery contract, and are
governed by the Act.Two types-(1) Specific Delivery Contracts (2) Non- Contracts
Specific delivery Contracts- are of two types on the basis of transferability of the rights or /
obligations, which is permitted in transferable specific contracts –TSD, and not permitted in
Transferable Specific Delivery Contracts-(NTSD)-(also called Futures Contract)
3) Option Contract- for price insurance for producers
These contracts are negotiated directly between the parties depending on availability,
requirement and negotiated contract terms, such as, quality, price, period of delivery, place of
delivery, payment terms etc., are incorporated in the contracts entered into These contracts are
entered under the auspices of EXCHANGE OR ASSOCIATION.
4. Option in Goods – agreement for purchase or sale of a right to buy or sell, or a right to
buy and sell goods in future and include a Teji, a Mandi, a Teji Mandi, a Galli, a Put, a
Call, or a Put and Call in goods.
Option in goods is totally prohibited under the Act. A Put – an option that gives the
option buyers the right to sell particular futures contract at a specific price. A Call -
option that gives the buyers the right to purchase a future contract at a specific price.
 CHARACTERISTICS OF FUTURE TRADING:
1. Futures Contact is highly standardized contract.
2. Organised through exchange/association.
3. Contract entered is for standard variety known as Basic Variety. With permission to
deliver other identified varieties known as Tenderable Varieties.
4. Units of price quotation and trading are fixed. Not alterable.
5. Delivery period specified.

6. Seller may deliver the gods at exchange or other pre-specified centres.

7. In Futures Market, actual delivery of goods takes place only in a few cases.
8. Mostly transactions are squared up before due date of maturity of contract and contracts
are settled by payment of differences without any physical delivery of goods.

ADVANTAGES;
1. Price discovery and price risk management with reference to the given commodity.
2. Producer can get an idea of price likely to prevail at a future point.
3. Consumer can also get an idea of the price at which commodity would be available.
4. Useful to exporters, as they get advance indication of the price likely to prevail and help
the exporter in quoting the realistic price. Hedging of risk in futures market.
5. Price stabilisation, leads to integrated price structure.
6. Facilitates production and manufacturing activities.
7. Maintains balance in supply and demand.
8. Encourages competition and acts as price barometer.
CHARCTERISTICS OF COMMODITIES FOR FUTURES TRADING:
1. Plentiful supply.
2. Must be storable – least perishable to undertake future delivery.
3. Homogeneous, gradable – future delivery without dispute in quality.
4. Large demand from large number of consumers.
5. A few large firms should not control supply of commodity.
ON LINE COMMODITY EXCHANGE OF INDIA LIMITED (OCEIL).In Ahmedabad, started functioning
on 26th Nov 2002, India’s first demutualized, on line multi- commodity exchange .Electronic trading
and demutualized system makes the exchange uique,ensures flawless trading , enhancing the
confidence of the trade participants. In demutualized setup, the ownership, management and trading
are in the hands of three different sets of people. This completely eliminates any conflict of interest
and helps in pursuing policies and practices.

Salient features of exchange -:

A) Convergence of all offers and bids emanating from all over the country in a single electronic order book of
the exchange.
B) Participation of importers, exporters, grower, brokers, traders etc. using an electronic trading system.
C) Fair trading practice through checks and balances built in the system.
D) Trading with the help of information technology and communication network.
E) Efficient guaranteed clearing and settlement system enabling book entry settlement.
F) Warehouse receipt system based delivery of underlying commodities.
G) Real time price trade data dissemination
H) Reliable, effective and impartial rule based management by professionals having no trade interest.
I) On-line position monitoring for contracts. Margin calculation, monitoring of positions of the trading and
clearing members.

OCEIL has an in-house ClearingHouse at AHMEDABAD. It has connectivity with all members
and the clearing banks There is a provision of adequate margin to ensure that the chances of default are
reduced .The clearing house is the counter party to each trade and will be responsible to and reporting to
the Exchange Officials. A computerized system ensures the on-line calculation of margin. The position is
marked to the end of the every trading session to calculate the profit or loss at any given point of time. The
clearing bank, having a nationwide network is equipped with electronic fund transfer facility. The Exchange
has a trade guarantee fund and proposes to setup a customer protection fund.
FUTURE PLANNING-:
1) To become National Commodity Exchange.
2)To emerge as the largest commodity exchange in the country.
3)Consolidation of existing commodity exchanges.
4) Trading in more commodities including sugar.
5) Greater involvement of institutions.
6) Reaching every corner of the country

OIECL-s strategy is to focus on the securitization of commodities through warehouse receipts system,
electronic transfer of stocks in demat form, interface of on-line trading of such stocks to be linked with
interest rates and to focus on the participation of commodity funds for investment and banks and
institutions for both, finance & investment.

Pledge Finance Scheme:

On the recommendations made by the All India Rural Credit Survey Report of
Reserve Bank of India , in 1954, pledge concept was developed to help the producers to come out
of the clutches of the village money lenders and to avoid distress sale and situation of glut in the
market .In lieu of the produce stored with the different agencies, finance was made available to
the extent of 70 to 80 per cent of the value of the produce on a very low rate of interest.Pledge
loan facility is being provided by CWC /SWC, Agricultural Produce Market Committees in many
states and Rural godown Scheme or Gramin Bhandaran Yojana of Directorate of Marketing and
Inspection , govt. of India.
Recently, NAFED has also launched anew scheme to extend pledge loan facility to small
and marginal farmers against the stock stored in NAFED’s societies’ godown. Under this scheme,
small and marginal farmers will be immediately advanced an amount of up to 80 per cent of the
assessed value of the stock on the given day for non-perishable stock and up to 60 per cent for
perishable stock, against hypothecation or pledge of stock to NAFED.An interest rate of one per
cent per month will be charged by NAFED for this service. (Economic Times-10-4-04).
Under this scheme the produce must be of defined quality or graded before taken into
possession in the warehouses. Quality of the stored produce is maintained on scientific lines to
prevent the storage loses and delivers the same to the depositor on his request.
Legal Reforms: As in the other sectors of the economy, process of reforms in agricultural
marketing has started with the liberalisation. Its initiation was first observed with withdrawal of
compulsory quality control on notified commodities by Govt,.of India.To maintain and ascertain the
quality of the produce for export was left with the exporter trader.
The ban lifted over the interstate movement of the agricultural produce has provided
an opportunity to the farmers to dispose of their produce more profitably anywhere in the country.
To avoid the risk due to price fluctuations, more and more agricultural commodities
have been notified by the government of India and brought under the ambit of Forward Market
Commission for forward / futures trading.

Directorate of Marketing and Inspection, Govt.of India, has prepared a model State Agricultural
Produce market Act, and proposed certain amendments to provide privatisation of Agri-Business,
bringing uniformity in the marketing environment throughout the country and to provide better
infrastructure to handle the farm produce and promote contract farming with legal protection.
For the international trade in agricultural commodities and agr-products, quantitative
restrictions have been removed in many commodities and they have been brought under the
Open General License (OGL) category. Such reforms in the age of open economy are imperative
for the promotion of farm produce in the international market and grab the opportunity for getting
more profits by entering the new markets.

E. COMMERCE
According to WTO E. Commerce is production, distribution, marketing, sale or delivery
of goods and services by electronic means. The world is becoming one whole
 market.The E.Com. environment is going to be charecterised by free flow of trade .

Commercial transactions may be divided into three main stages-

(1) Advertising & searching stage

(2) Ordering & payment stage

(3) Delivery stage.

E Com is an advance state of electronic technology. It is just an extension of business

conducted on net. It is an interactive TV with Internet taking over computing sphere. A
complete reinvention of how one does business through E.Com. makes communication,
information gathering & trade between companies and consumer easier and faster.

E. Com can take two forms-

(1) Direct E. COM, Under this product or service such as music or

professional legal advice, delivered to the buyer.

(2) Indirect E.Com: Here the product is ordered on the net but it is delivered in
the normal way eg Book Supply com.

India got internet connectivity in 1989 . There is a good scope for expanding
customer base, coupled with quicker service & immediate delivery. Advantages
of E COM-

a) Sale of specialized products to affluent sections- retail sellers on E COM can sell
specialized & high priced products that appeals to an audience of affluent society

b) Wider access to customer globally at a low marginal cost.

c)Sale to institutional members- who have embraced Web most conventionally.

d) Closer relationship- buyers and sellers can build closer relationship

electronically.

e) Suitability to certain products eg. Soft ware, market research and sports travel
can get immensely benefited from E COM.

f) Suitability for the products affected by changes, as they offer only current products
 on the site-adjusting price in real time in response to fluctuations in demand.

g) Global prices among productive units, zero transaction cost & no barriers to
entry, E com. Economy comes quite close to these features of perfect
competition. As large number of buyers and sellers can instantly interact with
each other.

h) Consumers can compare the prices of the products of different sellers and
obtain goods at lowest quote.

i) Development of Cybermediaries.When consumers make a purchase transaction,

these cybermediaries record personal details of the consumers ( eg. Consumers
income group, their preference for brand, colour, size etc.) and process & analyze
this information and new products are developed accordingly.As such,
intermediaries are being replaced by the cybermediaries

j) Smaller production units can easily launch a web site and compete with large firms
of the real world.

k) Free flow of information is expected to result in efficient allocation of resources.

l) Transaction cost is almost nil for products, which can be converted into digital
form and can be supplied online.

Problems of E COM

a) Indispensability and connection with banking system—business must be linked.

b) Growth of the credit card culture- the faster the growth of credit card, the faster
would gain consumer acceptance and adoption.

c)Absence of retail marketing- this is one of the precondition for adoption of E COM.

d) Language problem.

e) Scope for fraud- transactions being impersonal, anonymous and automatic can
be manipulated easily.

f) Absence of legal frame work- like the model law of E COM formulated by the
 UN Commission on international trade law in 1996. Govt. can effectively Tax
E.Com transactions, but tax collection authorities do not have the powers to tax
products, which are sold or produced beyond the local/ national boundaries.
Since domestic consumers can access the global market, tax collection will be
crucial.

g) Backup service and updating web page.

h) Unsuitability to certain industries e.g. foodgrain, cosmetics, perfumes

ORGANISED RETAILING

Retailing is one of the traditional business operations,

which has repercussions in all the sectors of the economy.
No wonder that retailing has found its way in agriculture
too, after a boost in this sector due to economic reforms
in the last decade. Owing to increased derived demand
of agro inputs and realizing the advantage of an
integrated approach, input companies are trying to
provide (in addition to conventional offerings) all
possible solutions to farmers’ field related problems.
The Indian rural market size which includes FMCG,
agri inputs and farm machinery is estimated to be about
1,25,000 crores (source : Fertilizer News), 50% of which
is contributed by agri inputs. It is expected to increase
to two lakh crores in 2005-2007. The companies
entering this arena are lured by two factors viz. the vast
untapped potential of the rural market and slowly
increasing purchasing power of the rural population.
The huge potential of the rural market along with the
benefit that can be accrued by organizing the existing
fragmented market has led to the concept of organised
agri input retailing or ‘one stop shops’. Companies like
ITC, Rallis, Tata Chemicals, DSCL, and Mahindra &
Mahindra have quietly spawned innovative business
models to tap this big business opportunity.
‘Tata’ and ‘Mahindra & Mahindra’ have ventured into
a similar proposition with hub and spoke model. The
Tata Kisan Vikas Kendras by ‘Tata’ (Mahindra Krishi
Vihar in case of Mahindra & Mahindra’s), act as a hub
or resource center connected with the various Tata Kisan
Kendras (TKKs) under them as spokes. Services offered
by the TKKs include – agro input supplies, farm
equipment leasing, agronomy services, information,
training and other services like-crop insurance, buy-back
facility, credit facility etc.
DCM Shriram Consolidated Ltd. (DSCL), has started
utility shopping centers called “Hariyali Kisaan Bazaars”,
which seek to cater to all needs of farmers, under one
roof. Significantly, they do not only stock DSCL
products but also provide farmers a choice from the
entire range of quality products and prices are clearly
displayed to ensure complete transparency in business
dealing.
ITC through its unique web based portal known as echoupal
is carrying out activities like – dissemination
of Information (about scientific farm practices & risk
management, weather forecast, prevailing market price
in local and global market etc.), facilitating the sale of
farm inputs (now with embedded knowledge) and
purchase farm produce from the farmer’s doorstep, thus
facilitating decision making by farmers based on the
latest information.
Taking a step further ITC opened its first rural mall
known as Choupal Sagar, one of the first organized retail
forays into a hinterland. It offers almost everything –
from toothpastes to television, hair oils to motocycles,
mixers-grinders to water pumps, shirts to fertilizers.
Leveraging on their strength in procurement and the
confidence they have built for the brand in the minds
of farmers, the company has successfully forayed into
agri business retailing.
Issues and challenges facing agri-retailing :
Indian Agri business sector has the potential to transform
India into the leading agri economy of the world. But
there are certain initial challenges that the sector has to
win over such as
. Lack of supply chain integration
. Sidelining arhathias (middlemen) from the valuechain
. Difficulty in credit recovery and reluctance of farmer
in approaching banks
. Low penetration of ‘one stop-shops’ (due to huge
capital requirement)
. Efficient buy-back system (purchase of farm output)
. Efficient compensation delivery system in case of
product failure
Opportunities ahead :
At the same time the retailing in Agri business sector
has many opportunities via.
. Government’s impetus to private extension services
. ‘One stop – shops’ can act as facilitators of micro
finance
. New channel evolved can be used by FMCG and
consumer durables
. Can act as accreditation agency for certifying
farmer’s produce
. Customer database can serve as a source of genuine
and readily available information

NEED FOR IMPROVEMENT

Investment in rural infrastructure

Without a strong and dependable cold chain system, the food
processing industry cannot survive. The number of cold storages
increased from 4,146 at the end of 2001 to 4,417 by the end of
2002. The government is putting special emphasis on establishing
cold storage chains throughout the country with private
participation. The scheme is aimed at reducing the post-harvest
losses, which now hovers around 8-38 per cent of total
horticultural produce and other perishable items like dairy
produce, meat, fish, chicken etc. This opens up significant
opportunities for private participation in the sector.
Investment in financial infrastructure
Changes in the financial structure of the sector are moving in
tandem with improvements in physical infrastructure and open up
potential opportunities for financial sector players. Three areas
in the rural economy that are looking at significant activity and
change are:

ALL ABOUT BENEFITS OF AGRI MARKETING

AGRICULTURAL MARKETING

1. The problems of agricultural finance discussed in the previous chapter relate to the
preharvest requirements of the cultivators. The disposal of the produce after the harvest
and the return obtained, therefore, also have a significant effect on production and on the
welfare of the cultivator. Production in agriculture being seasonal, the crop is harvested
during a short period and consumed gradually. While commodities like cotton and
groundnut require large storage space which the average cultivator lacks, fruits,
vegetables and sugarcane are of a perishable nature. The farmer has, therefore, to dispose
of his surplus immediately either at the village or at the mandi. In the absence of staying
power the large number of small farmers compete with each other and the markets
witness conditions of occasional glut and scarcity. A major part of the commercial crops
like cotton, jute, sugar-cane and oilseeds has to be marketed immediately as the farmers
are in need of cash for meeting their dues and other expenses. As regards foodgrains the
marketable surplus varies by crops and regions but may be placed at about 20 to 30 per
cent under normal conditions. The total quantity and value of the marketed produce, even
in a predominantly subsistence economy as in India is considerable.

2. Sale of agricultural produce involves a number of functions such as assembling,

storing, grading, standardising, transporting and financing the produce and negotiating
sale. Some of these operations may be performed by the farmer, but storage and sale of a
commodity and finding finance for purchase, call for specialised knowledge and adequate
resources which the individual cultivator does not possess. Those who render these
services, therefore, perform a useful function for which a reasonable return is due.

3. The village money lender or the mandi arhativa advances loans to farmers for securing
production requirements like seeds, and manures and for meeting other needs. These
debts some times carry an understanding or and obligation to sell the produce to or
through the lender or his nominee. At the time of sale the position of advantage occupied
by the village banker acts reflected either in a lower price or unfair weights or delayed
settlement. If the sale takes place in the mandi or the market through the brokers or
arhatiyas the farmer pays not only for the services rendered by the middlemen but is also
subjected to other unwarranted deductions.

4. To remove the disabilities of the farmers in the mandi, regulated markets have been
established in the States of Bombay, Madras, Punjab, Hyderabad, Mysore, Pepsu and
Madhya Pradesh. Unauthorised deductions are prohibited and the charges of brokers and
weighmen regulated. In some of these places the system of open auction or sales has been
introduced. These improvements have benefited the cultivator to a certain extent.
Regulated markets, however, do not exist in the States of Uttar Pradesh, West Bengal,
Bihar, Orissa, etc. Some

242

AGRICULTURAL MARKETING 243

of the States which have adopted the Agricultural Produce Markets Acts have a large
number of markets which still continue to be unregulated. It is necessary to extend the
operation of the Act so as to cover all the important markets in each State by 1955-56, as
this is the first step in improving marketing facilities.

5. The management of regulated markets vests in committees on which growers are also
represented. Their voice is, however, seldom effective. Many of the marketing
committees are not yet fully conscious of their responsibility of utilising their funds for
developing marketing facilities. The Madhya Pradesh Government have, therefore
amended the Cotton and Agricultural Produce Markets Act with a view to entrusting the
management of regulated markets to the Cooperative Societies and the Cotton Market at
Amravati has been handed over to the local marketing co-operative.

PROGRESS OF CO-OPERATIVE MARKETING

6. The benefits of a regulated market which attempt only to improve the existing practices
are limited; without changing the marketing structure the number of middlemen and costs
cannot be reduced. Efforts in this direction have been made in some States by organising
cooperative marketing. For example, 1,600 cane cooperative unions and other primary
societies have been organised in Uttar Pradesh in the last 10 years. They handle 85 to 90
per cent of the total cane supplied to sugar factories. The average value (3 years ending
1951-52) of about 50 lakhs tons of cane annually sold by the societies amounted to more
than Rs. 25 crores. This has been achieved under the Sugar Factories Control Act which
requires every member of the society in the zone to deliver a specified quantity of cane
through the cooperative society for which minimum prices are paid by the factory. The
cooperatives are paid a commission of about Rs. 1/4/- per ton for their services by the
sugar factories. This is taken into account while calculating the sale price of sugar.
Besides arranging the sale, these cooperatives are making an attempt to link up credit
with marketing. They supply seeds, manures, fertilizers and other requirements. The
unions also carry on rural welfare activities.

7. Cooperative marketing of cotton has been attempted in Bombay where 84 cotton sale
societies functioned in 1948-49. While the societies in Karnatak arrange the sales of the
produce of their members in individual lots, the Gujerat cotton growers pool cotton of a
similar variety for purposes of sale. The cooperatives own II ginning and pressing
factories in the State. The producer-cum- consumer societies in Madras which have been
converted into marketing societies and a few others in other States are also making efforts
in this direction. Some of them have taken up procurement work for the Government.
Provincial marketing societies which have been established in 9 States to assist the
primary units registered only a small volume of business which amounted to Rs. 1.15
crores in 1949-50.

8. The progress of marketing societies, in spite of immense scope, has so far been slow.
The entry of a co-operative even as an agent is not generally favoured by the trade. For
instance, it refused to by cotton offered by the cotton sale society in Karnatak and
boycotted its sales.

244 THE FIRST FIVE YEAR PLAN

The buyers also make payment after a time lag and the cooperatives acting as agents are
required either to raise a larger amount of finance to meet their commitments or to keep
the amounts outstanding. The U. P. sugar factories, for example, were in arrears to the
extent of about Rs. 2 crores, to the societies by the end of the year 1950. Some of the
cooperatives had to engage contractors for finding finance and making payments. The
performance of the contractors was unsatisfactory and their charges were heavy. To
overcome such difficulties the Gujerat Cotton Sales Society established a ginning factory.
This facilitated the sales and the ginning charges were reduced by 50 per cent. The
Society however, did not own the pressing factory and utilized a plant belonging to the
traders. After sometime the press owners raised their charges by more than 75% and
declined to undertake the pressing work on behalf of the Society. The society was,
therefore, compelled to erect its own press. The cane growers of Ahmednagar District in
Bombay State who had suffered for the last 30 years from violent fluctuations in prices of
gur they produced, have recently set up a Cooperative Sugar Mill which has not only
ensured them better prices and timely payment but has also helped them in improving the
efficiency of production through the supply of manures, fertilizers and seeds. The society
tries to work with each farmer on his problems and provides long term credit for
development. The loyalty and the support of the members, the enlightened leadership,
financial aid in the shape of share capital Rs. 6 lakhs from the Bombay Government and a
loan of Rs. 20 lakhs from the Industrial Finance Corporation are some of the important
factors which have led to the success of the scheme.

9. It would thus appear that even after the linking of credit with marketing, cooperatives,
which act only as commission agents for sale, (as in Uttar Pradesh) are not effective and
that ownership and management of processing facilities on a cooperative basis are
essential for protecting the interests of the growers and strengthening the economy. The
benefits of efficiency and economy in the processing activities are considerable, and if
they are transmitted to cultivators, there will be an incentive for increasing production. A
co-operative which functions in this manner can also assist in crop planning by
introducing improved varieties of seeds, by giving the necessary technical advice to
cultivators and by financial help wherever necessary.

10. There are, however, some commodities which are marketed without elaborate
processing. In such cases the marketing cooperative will have to establish direct dealings
with the consumer cooperatives. In Canada, the Grain Growers' Cooperative Company in
Winnipeg having been boycotted by the Canadian traders, had to negotiate sales of wheat
with the Scotish Cooperative Whole-sale. In this country there exists a considerable
volume of inter and intra State trade in wheat, pulses, fruits, vegetables, etc. By
contacting its counter-parts in other States the provincial marketing association should
work out an arrangement for imports and exports. Similar arrangements within the State
could also be made.

11. Some of the marketing societies appear to have been organised without adequate
share capital. The Madras Provincial Marketing Society, for instance, has a share capital
of about Rs. 50,000 while Orissa and West Bengal Apex Marketing Societies are
functioning with a share

AGRICULTURAL MARKETING 245

capital of about Rs. 13,000 and Rs. 5,000 respectively. The credit limit assessed by and
assistance available from the State Apex credit agency and the, Reserve Bank for
financing marketing operations depend upon the capital structure an. owned resources of
the society and the volume of its business is largely regulated thereby. It is, therefore,
necessary that marketing associations especially those which are meant to be apex
agencies should obtain sufficient capital from their constituents.

12. Marketing requires technical skill and specialised knowledge. Associations operating
in a group of villages or in a commodity do not have the volume or turnover to warrant
employment of trained or qualified personnel. The area of operation of a marketing
society should, therefore, be fairly large, say a Tehsil. Further, separate societies for
individual commodities should be restricted only to such staples of trade as have a
specialized wholesale market.

STORAGE AND WAREHOUSING

13. Another difficulty that the societies encounter relates to storage facilities. Most of the
surplus produce in an area is assembled and sold at the mandi or market which is
generally at the rail or motor head and possesses road transport and banking facilities. On
the strength of the goods pledged the banks finance the marketing operations. Release of
goods and their despatch either on consignment or sale can be arranged more quickly
from the godowns at the mandi than from those located in the rural areas. It would,
therefore, be an advantage to develop storage facilities at mandi centres. Some godowns
space-temporary, semi-temporary or permanent- are available in every mandi. This
accommodation is often unsatisfactory as it fails to provide adequate protection to goods
from damage and deterioration by moisture, rodents, insects, pests, etc. Moreover, even
for getting such space, fairly high rent has to be paid. It would, therefore, be better if the
cooperatives plan to have their own storage facilities. Some State Governments,
particularly Madras, Bombay, and Orissa are alive to this problem and are rendering
assistance by providing loans and subsidies for the construction of godowns. Other
States, we suggest, may follow this practice.
14. Several committees and commissions including the Royal Commission on
Agriculture, the Central Banking Enquiry Committee, the Marketing Sub-Committee, the
Agricultural Finance Sub-Committee, the Cooperative Planning Committee and the Rural
Banking Enquiry Committee have emphasised the need to promote warehousing in the
country and have also made various suggestions in this connection. In the absence of
warehouse receipts which could serve as collateral for the promissory notes of the
borrowing banks, it has not been possible for the Reserve Bank to extend assistance to the
cooperative and scheduled banks under section 17 of the Reserve Bank Act for financing
marketing operations. The Reserve Bank, therefore, suggested establishment of Licensed
warehouses. The States of Bombay, Madras, Madhya Pradesh, Mysore, Hyderabad and
Travancore-Cochin have already enacted the necessary legislation. We recommend that
similar action should be taken by other State Governments as well. Even though the
Warehousing Act has been passed in some States more than four years ago, licensed
warehouses have not been established so far. This is largely due to the

246 THE FIRST FIVE YEAR PLAN

fact that the law, being an enabling piece of legislation, leaves it to the trade, private
investors, limited companies or the cooperatives to set up the warehouses. The investors
generally hesitate to take up a new venture in which they have little experience. Further,
the law provides not only for regulation and inspection of the warehouses but also for
fixing the charges at a reasonable level. Under the present conditions when the money
market is tight and there are other more remunerative fields for investment it is doubtful
if private capital would be attracted, particularly in producing areas. Progress will,
therefore, depend mostly on the initiative of the cooperatives and their ability to secure
the required long term capital. We therefore suggest that the State Governments and the
Reserve Bank should assist warehousing development by measures such as provision of
loans, etc. to organisations which are willing to undertake this work.

FUTURE PATTERN OF DEVELOPMENT

15. Cooperatives will be successful to the extent that they render efficient service to the
growers at the minimum cost. This in turn depends upon their ability to undertake
processing activities, command warehousing accommodation, and obtain sufficient
financial resources and, above all, honest, capable and efficient management. Though
some States have fostered the growth of marketing societies, a policy for their
development has yet to be laid down or followed for the country as a whole. Cooperative
marketing linked with production, finance and cooperative ownership of processing
industries will be a useful instrument in increasing production, cutting costs and
introducing a system of crop planning. Favourable conditions for their growth have,
therefore, to be created without loss of time.

16. In this context we suggest that processing plants established hereafter should be
owned and managed by cooperative societies, and licences and other forms of support
given to them by the States. Where such societies do not exist active and timely steps
should be taken to organise and to equip them. As regards cooperative management and
ownership of the existing facilities the progress will depend upon the speed with which
the necessary organisation can be created and personnel trained. Where the movement
has developed well in other fields such as the States of Madras and Bombay--marketing
societies may develop more rapidly as to them would be available the long standing and
valuable experience of cooperative workers. Cooperatives in other States would also
benefit thereby as they would be able to build societies after taking into account the result
obtained in these States.

17. The technical, marketing, financial and administrative problems involved in these
operations need expert study, guidance and supervision particularly in the initial stages.
As every State may not be in a position to provide the experts and in some cases they
may not have full-time work, it would be an advantage to have a standing committee of
four experts on processing and marketing at the Centre. The Committee should assist the
State Governments

AGRICULTURAL MARKETING 247

and the cooperatives in drawing up detailed schemes after a careful examination. It would
be their responsibility to review the progress of work of every unit in the State from time
to time and make a comparative study of the factors which hinder the work. In the past
many a marketing cooperative has foundered because the local manager and the Board
are not able to foresee or tackle a problem on their own. While failures in private trade or
industry often go unnoticed, mistakes or shortcomings of a cooperative attract a good
deal of public attention and criticism because of their democratic character and economic
and social significance. Hence the need for and importance of expert guidance. As
regards long term finance required by the societies for purchasing machinery and other
equipment we consider that it should be made available by the State and Central
Industrial Finance Corporations.

18. As the cooperative gain a surer foothold in the commodity markets it should be
possible to bring the management of regulated markets more and more under cooperative
direction. Immediately, cooperatives should be given adequate representation on the
managing committees of regulated markets. As the positive services made available to
growers by these cooperatively directed market committees become more evident, the
committees may be empowered to make a small charge on the produce handled by them
for a further expansion of these services. In this manner it would be possible for each
market to build up funds of its own. On their strength the cooperatives could obtain
accommodation from the bank for financing their operations.

GRADING
19. The introduction of proper grades and standards is another matter in regard to which
the State can usefully assist. Grading of farmers' produce before sale on the basis of well
defined grades in a regulated market will help in the proper valuation of his produce
which will enable him to claim a price commensurate with the quality offered, thus
providing an incentive to improve its quality, Grade standards are also necessary as a
basis for the issue of negotiable receipts by warehouses and economical development of
public storage facilities. The poor quality of the agricultural produce has been an
important handicap in export markets. Shipments of cashew nuts, black pepper, turmeric,
wool, etc., fetch reduced prices and get condemned abroad as they contain foreign matter
and are not of uniform quality. On the other hand, the introduction of grading on the basis
of Agmark quality standards has yielded satisfactory results in respect of tobacco and
sann hemp. To remove the handicaps experienced by other commodities and promote
export trade, it is proposed to undertake grading of wool, bristles, lac, sheep and goat
skins, cashew-nuts, vegetable oil seeds, oils and kopak, the export value of which was of
the order of Rs. 110 crores annually during the 3 years immediately after partition. These
commodities would be brought under compulsory grading in successive stages. The total
estimated expenditure on the scheme would be Rs. 86.47

EFFICIENCY ……..
The overriding objective of agricultural marketing is to maximise efficiency. The purpose
of maximising efficiency i5 to minimise growers’ costs and to maximise growers’
profitability. Marketing efficiency is therefore the measuring stick which should be put
across ALL marketing schemes and proposals to see if they do, in fact, maximise
growers’ net returns.

The following tests should apply to every proposal:

• Is the marketing system technically and economically efficient?

• Does it promote adoption of the latest and best technology?

• Does it transmit quickly all relevant market information to growers?

• Is it politically and commercially independent?

BENEFITS OF EFFICIENT AGRI MARKETING….

An efficient and organized marketing system is necessary to enable

producers to realise a just price for their produce and to reduce their
exploitation by middlemen, commission agents and traders. Realising the
need for efficient marketing system, the Royal Commission which was set up
in 1928 recommended to improve the economic conditions of the farmers and
protect them from the clutches of traders by providing better selling facilities,
basic infrastructure etc. In pursuance of the Royal Commission's
recommendations the Government of Madras enacted the "Madras
Commercial Crops Market Act" in 1933, which heralded the beginning of
regulated markets in Tamil Nadu. Later, in 1959, the 1933 Act was modified
as " Tamil Nadu Agricultural Produce Market Act 1959". This Act envisaged
the formation of Market Committees at district head quarters with functions of
identifying agricultural produce, notifying them under the Act and establishing
regulated markets in important assembling centres.

Agricultural Marketing and Agri-business

o To enhance marketability of agriculture commodities by providing
infrastructure facilities, revamping the regulated markets.
o Provision of post harvest handling facilities for value addition and
prevention of wastage (like cold storage).
o To provide backward and forward linkages through marketing, agroprocessing
and export.
o Better realization for agriculture produce through alternative markets like
product-wise Terminal Markets
o Stepping up export of agri / horti produce-with setting up of AEZ and
establishment of Food Laboratories.
o Policy to attract private sector in storage and agro-processing industries.
Integrated approach from planting to marketing, which includes choice of
crops, grading, packaging, storage and marketing for domestic and
international.
CONSTRAINTS…….
Constraints
• Very high difference in price between the farmers’ realisation and consumer
even for the fresh produce. In processed food the high price of raw materials,
excessive spoilage, inefficient and costly transportation, high cost of finance
due to high taxes and duties leads to low demand of processed foods.
• Lack of linkage with R &D institutions with the users like farmers and industry.
• Impediment in the flow of credit from financial institutions to the food processing
industry due to the improper understanding of this sector to attain the required
level of imparting skill.
• Low margins, seasonality and high perishability being the distinct features of
this industry the access to seed capital and working capital is not easy.
• Indian brands of processed food are yet to be established in the international
Market.
• Competition with imported goods in the wake of liberalization of world trade.
• Week database and lack of market intelligence.
• Backward linkage between the farmers and the processor is yet to take proper
shape to tide over the impediments.
• Multiplicity of laws and regulatory authorities affect the growth of industry.
• Prevailing packaging system lacks requisite quality and shelf life.
• Lack of knowledge of quality parameters and standards.
• Lack of participation by people, local bodies, NGOs farmers' organisation and
industrial association.
Food Processing Policy will therefore, have to address itself to:
• Promoting innovative measures for fostering group co-operation in adoption of
pre-harvest and post-harvest technologies.
• Development of cropping pattern as per food processing units’ requirements.
• Speedy development in infrastructure to promote food-processing industry.
• Removing legal / statutory hurdles affecting growth of food processing industry.
• Facilitating liberalized financial assistance to the industry considering the high risk
and capital-intensive nature.
• Processing standards may be upgraded by introduction of machanised cleaning,
sorting / grading of agricultural produces
• The policy will seek to create an appropriate environment for entrepreneurs to set
up food processing industry through Fiscal initiatives / intervention like
rationalization of tax structure on fresh foods as well as processed foods and
machinery for production of processed foods.