Profile of Indian Economy
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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.


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 Crop/ year Rice Wheat Coarse Cereals Pulses Foodgrains (I) Kharif (II) Rabi Total (I+II) 102. 1 94.7 196.8 112.1 100.8 212.9 87.2 87.6 174.8 116.9 96.6 213.5 103.3 101.3 204.6 105.3 200001 85.0 69.7 31.1 11.1 200102 93.3 72.8 33.4 13.4 2002- 200303 04 71.8 65.8 26.1 11.1 88.3 72.1 38.1 14.9 200405* 85.3 72.0 33.9 13.4 Tonnes) 200506** 73.8 26.4 5.0

*4th advance estimates **1st advance estimates (Kharif only) Source: Ministry of Agriculture

Commercial Crops Production (Million Tonnes) Crop/year Groundnut Rapeseed & Mustard Soybean Other Oilseeds Total nine oilseeds Cotton* Jute and Mesta** Sugarcane 200001 6.4 4.2 5.3 2.5 18.4 9.5 10.6 296.0 200102 7.0 5.1 6.0 2.6 20.7 10.0 11.7 297.2 200203 4.1 3.9 4.7 2.1 14.8 8.6 11.3 287.4 200304 8.2 6.2 7.9 3.0 25.3 13.9 11.2 237.3 200405@ 7.0 8.4 7.5 3.2 26.1 17.0 10.5 232.3 20052006** 5.9 6.6 2.1 14.6 15.9 10.1 257.7

*Million bales of 170 kgs. Each @ 4th Advance estimates **1st Advance estimates (Kharif only) Source: Ministry of Agriculture


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 Vegetables Spices Plantation Crops Flowers Others Total 3.8 6.1 2.4 3.0 0.1 1.0 16.3 45.2 84. 8 2.9 9.7 0.2 1.6 144.4 4.8 5.9 2.4 3.1 0.1 0.9 17.2 49.2 84.8 3.8 13.1 0.2 0.9 152.8 5.0 6.1 2.5 3.2 0.1 0.9 17.8 53.1 91.6 4.1 14.1 0.2 1.0 164.1 5.2 6.3 2.6 3.3 0.1 1.0 18.6 57.6 99.4 4.4 15.3 0.2 1.1 178.1

Source: National Horticulture Board * Estimated



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).

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 AprilOctober 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 reexports, 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 jointventures / 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 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 oneeighth 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

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 13,370,000 13,670,000

2001–02 199,480,000 93,340,000 72,770,000 33,370,000 2004–05 192,730,000 87,800,000 73,030,000 31,880,000

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

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

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.

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.

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.

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.


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.


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.


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 March, 2006. done by the Department, most of the States may amend the APMC Act by


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

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:






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 Commodities already harvest requirements of important commodities in terms of quality, packing, standards etc. are being loaded on to the portal. 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,




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? ♦ ♦ ♦ ♦ ♦ (b) 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 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.

♦ ♦ (c)

Collective distribution Credit accessibility 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.,


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


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.


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)


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) 2) 3) Assured market and support price. Efficient timely technical guidance- almost free of cost. Crop monitoring on a regular basis. Financial support in kind.

4) 5) 6) 7)

Assured quality of seeds and pesticides. Better price for produce- No Middlemen. Gain of bulk supply instead of small lots. Remunerative returns and timely payment.

To the buyers: 1) 2) 3) 4) 5) 6) 7) Backward market integration is possible with assured supply. Ensured required quality- ensures residual toxicity level. Uninterrupted and regular flow of quality raw material Protections from fluctuation in market pricing. Buyers can plan on long term basis. Buyers select the products, which have international demand. Selection of location- agroclimatic conditions matching with the commodity’s requirement and less prone to natural calamities. SUCCESS OF COTRACT FARMING LIES IN – 1) 2) 3) Buyer’s ability to implement the plan. Monitoring the growth of the plants package of practices, pest management and sanitation measures 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. 4. 4. FORWARD MARKET COMMISSION –Established in 1953. The Spices and Oil seeds Exchange Ltd. Was established Sangli in–1953. Central Government has powers to notify the commodities and jurisdiction in Which forward contracts are regulated. There is ban in about 100 commodities on forward trading.


Two broad categories of Operators are namely., Hedgers and Speculators. RISKS IN AGRICULTURAL MARKETING: a) b) c) qualitative and quantitative institutional 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. 2. 3. 4. 5. 6. 7. 8. Futures Contact is highly standardized contract. Organised through exchange/association. Contract entered is for standard variety known as Basic Variety. With permission to deliver other identified varieties known as Tenderable Varieties. Units of price quotation and trading are fixed. Not alterable. Delivery period specified. Seller may deliver the gods at exchange or other pre-specified centres. In Futures Market, actual delivery of goods takes place only in a few cases. 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. 2. 3. 4. 5. 6. 7. 8. 1. 2. 3. 4. 5. Price discovery and price risk management with reference to the given commodity. Producer can get an idea of price likely to prevail at a future point. Consumer can also get an idea of the price at which commodity would be available. 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. Price stabilisation, leads to integrated price structure. Facilitates production and manufacturing activities. Maintains balance in supply and demand. Encourages competition and acts as price barometer. CHARCTERISTICS OF COMMODITIES FOR FUTURES TRADING: Plentiful supply. Must be storable – least perishable to undertake future delivery. Homogeneous, gradable – future delivery without dispute in quality. Large demand from large number of consumers. 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.

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 COMa) 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) b) Indispensability and connection with banking system—business must be linked. 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) e) Language problem. 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

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

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:

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.

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.

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.

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.

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

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?


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 • 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.

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