SUPPLY CHAIN ANALYSIS OF PADDY IN NALGONDA DISTRICT

OF TELANGANA

BY

R PANDU

B.Sc. (Hort.)

PROJECT REPORT SUBMITTED TO PROFESSOR JAYASHANKAR

TELANGANA STATE AGRICULTURAL UNIVERSITY IN PARTIAL
FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE
OF

MASTER OF BUSINESS MANAGEMENT

(AGRIBUSINESS MANAGEMENT)
CHAIRPERSON: Dr. P.C. MEENA

SCHOOL OF AGRIBUSINESS MANAGEMENT

COLLEGE OF AGRICULTURE
RAJENDRANAGAR, HYDERABAD-500030
PROFESSOR JAYSHANKAR TELANGANA STATE AGRICULTURAL
UNIVERSITY

(Formerly part of Acharya N. G. Ranga Agricultural University)

2015
 CERTIFICATE

Mr. R PANDU has satisfactorily prosecuted the course of project and that project
report entitled “SUPPLY CHAIN ANALYSIS OF PADDY IN NALGONDA DISTRICT
OF TELANGANA” submitted is the result of original research work and is of sufficiently
high standard to warrant its presentation to the examination. I also certify that neither the
project report nor part thereof has been previously submitted by him for a degree of any
university.

Date: Chairperson
 DECLARATION

I, R PANDU, hereby declare that the project report “ SUPPLY CHAIN ANALYSIS OF
PADDY IN NALGONDA DISTRICT OF TELANGANA” submitted to the Professor
Jayashankar Telangana State Agricultural University for the degree of Master of
Business Administration in School of Agribusiness Management in the major field of
Agribusiness Management is the result of the original project work done by me. I also
declare that no material contained in the project report has been published earlier in any
manner.

Place: Hyderabad (R PANDU)

Date: RMBA/2013-11
 LIST OF CONTENTS

Chapter No. Title Page No.

I INTRODUCTION

II REVIEW OF LITERATURE

III MATERIAL AND METHODS

IV RESULTS AND DISCUUSSION

V SUMMARY AND CONCLUSION

LITERATURE CITED
 LIST OF TABLES

Table No. Title Page No.

1.1 Major rice producing countries

1.2 Year wise Paddy MSP prices
1.3 State wise production during last four years
1.4 District wise yield of paddy crop in Telangana
Year wise area, production and productivity of rice in combined
1.5
AP
4.1 Area, production and yield of Nalgonda district
4.2 Distribution of educational status of the respondents
4.3 Distribution of age group of respondents
4.4 Distribution of land holding of respondents
4.5 Crops cultivated by the respondent farmers
4.6 Source of seed for paddy farmers
4.7 Source of purchase of fertilizer and pesticides by sample farmer
4.8 Human labour utilization in paddy cultivation
4.9 Type of irrigation used by sample farmers
4.10 Source of machinery for Paddy growing farmers
4.11 Milling efficiency of Paddy processing in Telangana
4.12 Disposal pattern of paddy in the study area
4.13 Cost of cultivation of paddy in Nalgonda district
4.14 Marketing costs, margins and price spread of Paddy in Channel I
4.15 Marketing costs, margins and price spread of Paddy in Channel II
4.16 Marketing costs, margins and price spread of Paddy in channel III
4.17 Marketing efficiency of Paddy in different channels
4.18 Constraint in paddy marketing in study area
 LIST OF ILLUSTRATIONS

Figure
Title Page No.
No.

1.1 Country wise of rice production

1.2 Area,production,yield of paddy in combined AP

3.1 Physical and political map of Nalgonda district

4.1 Land holding pattern of sample farmer

4.2 Source of seed in the study area

4.3 Source of labour for paddy growing farmers

4.4 Type of irrigation in the study area

4.5 Source of machinery for paddy growing farmers

4.6 Disposal pattern of paddy study area

 SYMBOLS AND ABBREVIATIONS

% : Per cent

@ : At the rate of

& : And

et al. : And other people

etc. : Et cetera

Rs. : Rupees

Qtl : quintal

Fig. : Figure

Ha : Hectare

c : Celsius

Kg : Kilogram

RBQ : Rank Based Quotient

Mt : Million Tonnes

No. : Number

Sl. No. : Serial number

Viz. : Namely

i.e : That is
 Acknowledgement
It is by the lavish and boundless blessing of the Almighty God that the author has been able to
complete his studies successfully hitherto and present this humble piece of work for which I am eternally
indebted.

With a humble heart, the author extol the genuine cooperation, inspiration, advice, affection and
the unconditional support offered to him by the Chairperson of his Advisory Committee, Dr. P.C MEENA,
Senior scientist, NAARM, Rajendranagar, Hyderabad right from the initiation of the work to shaping of
the manuscript.

The author also greatly express his deep sense of gratitude and a great privilege to work under the
highly exceptional guidance of Dr. P. Radhika, Associate Professor, School of Agribusiness Management,
College of Agriculture, Rajendranagar, PJTSAU for her continuous support and encouragement at all
times.

The author expresses his sincere thanks to Sri. M.H.V.Bhave, Associate Professor, Department of
Statistics and mathematics and member of the Advisory Committee for his invaluable guidance, suggestions
and support during the author’s course of study.

Furthermore the author express his deep sense of gratitude and a great privilege to work under the
highly exceptional guidance of Dr. Seema, Professor and Head, , School of Agribusiness Management,
College of Agriculture, Rajendranagar, PJTSAU for her continuous support and encouragement at all
times.

The author also expresses his heartfelt love and affection from the inner core of heart to his beloved
parents Shri R.Keshya and Smt.R.Salamma, for their blessings, guidance, inspiration, encouragement and
moral support throughout my educational career. They have been the source of confidence and motivation
all through his life.

The author owes much also to his loving brothers R.Yadagiri and R. Jagan for their everlasting
affection, support and encouragement in his life.

It is time to surface out genuflect love and affectionate gratitude to the author’s dearest friends
Venkatesh, Ravinder, thulasi, krishna, sravan and Vidyasagar and for their blessings, inspiration,
encouragement and moral support throughout my educational career.

Words are not enough to express my heartfelt thanks to my senior Suresh, Narayan reddy, my dear
juniors Rajini, and Tippu and also thankful to Non-teaching staff Upendra, Victoria and Anand for their
moral support, which instilled in me confidence to proceed forward.

Finally the author is very much thankful to Acharya N. G. Ranga Agricultural University and
Indian Council of Agricultural Research for the financial support received to pursue MBA (Agribusiness).

Date: R PANDU

Place: Hyderabad (AUTHOR)

AUTHOR : R PANDU

TITLE OF THE SUPPLY CHAIN ANALYSIS OF PADDY IN NALGONDA

:
PROJECT WORK DISTRICT OF TELANGANA

DEGREE : MBA (ABM)

FACULTY : AGRICULTURE

DEPARTMENT : SCHOOL OF AGRIBUSINESS MANAGEMENT

CHAIRPERSON : DR. P.C.MEENA

PROFESSOR JAYSHANKAR TELANGANA STATE

UNIVERSITY :
AGRICULTURAL UNIVERSITY

YEAR OF
: 2015
SUBMISSION

ABSTRACT
Rice (Oryza sativa.) is the most important and extensively grown food crop in the World. It
is the staple food of more than 60 percent of the world population. Rice is mainly produced
and consumed in the Asian region. India has the largest area under paddy in the world and
ranks second in the production after China. India is a major rice consumer .Food, the basis
need of the people, is an agricultural product and is already in short supply in our country.
This shortage is going to be more pronounced by the turn of this century as the population
is likely to be doubled some time after. Many countries which used to produce limited
quantities of rice have become self-sufficient, and have even at certain times exported their
surplus. But in many regions where rice is grown people still do not have enough to eat.
India is the home country for rice and it is staple food for more than 65% of its
population. It is being grown in variety of situations.

Objectives of Investigation

1. To study the source and supply of key inputs in Paddy cultivation.

2. To study the postharvest practices and cost involved in Paddy processing.

 3. To ident ify the various marketing channels and compare the efficiency and
profitability.

Nalgonda district in Telangana state is also a major producing area of Paddy, and
has the second largest number of millers in the Asia especially in Miryalguda region.
Therefore Nalgonda was purposively selected to conduct the study.

A. Channel I: Producer ─ Pre-harvest contractor ─ Commission agent cum wholesaler

─ Retailer ─ Consumer
B. Channel II:Producer-Village trader-Wholesaler(local) ─ Commission agent(distant)
─Wholesaler (distant) ─ Retailer (distant) ─ Consumer
C. Channel III: Producer ─ Procuring agency (FCI/others)─Miller- Distributor
Agency─ Consumer

The producer share in consumer’s rupee was the highest in channel, III since it is the
shortest channel (67.53 per cent). Whereas the producers share in consumer’s rupee in channel I, II,
and III are 65.07per cent, 66.33 per cent and 67.53 per cent respectively. The marketing efficiency
index of channel I, II and III was 1.86, 1.97 and 2.07 respectively. The constraints analysis of
data collected was subjected to conventional analysis which includes tabular,
averages and percentages approaches. Beside this, graphical representation like pie
charts and bar graphs have also been utilized. The highest among the constraints
identified under production, marketing fluctuation, lack of storage facilities and
transportation respectively. The study suggested an overall improvement in providing
market information, quality of rice, provision of storage facilities etc.
 CHAPTER-I

INTRODUCTION

Rice (Oryza sativa.) is the most important and extensively grown food crop in the
World. It is the staple food of more than 60 percent of the world population. Rice is mainly
produced and consumed in the Asian region. India has the largest area under paddy in the world
and ranks second in the production after China. India is also a major rice consumer. Food, the
basis need of the people, is an agricultural product and is already in short supply in our country.
This shortage is going to be more pronounced by the turn of this century as the population is likely
to be doubled some time after. Many countries which used to produce limited quantities of rice
have become self-sufficient, and have even at certain times exported their surplus. But in many
regions where rice is grown people still do not have enough to eat.

India is the home country for rice and it is staple food for more than 65% of its population. It
is being grown in variety of situations.

International Rice Production Scenario

The world production of rice is 605 million tonnes per year, equal to 403 tonnes of milled
rice. Half of this is grown in China (30%) and India (21%). Only 26.5 million tonnes is traded
internationally. Besides the traditional main exporters (Thailand, Vietnam, India and Pakistan), a
limited but relatively important part of rice traded worldwide comes from developed countries in
Mediterranean Europe and the United States. Only four countries are responsible for three-
quarters of the trade. Thailand is the biggest exporter at 38%, Vietnam is second at 15%, then the
United States 12% and India 10%. Most rice is imported within Asia or to Africa. The Middle
East is the leading importer region, accounting for 35 percent of the total exports. The European 1
Union is a small importer with 3%. The EU is almost self sufficient in Japonica rice (short grain).
It only needs to import flavoured rice and its purchases are increasing by 15% a year. Ninety
percent of the imported rice is brown or husked rice which is milled within the EU by large
milling companies. Seventeen percent of the European rice is imported from India and Thailand.
Europe is dependent on these countries for flavoured rice. However, if we talk about world rice
production from 2008-2013, the figures below show the worldwide rice production by countries.

1
Table 1.1 Major rice roducing countries (Qty in thousand MT)

Countries 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Bangladesh 31200 31000 31700 33700 34000 34200

Brazil 8570 7929 9300 7888 8160 8500

Burma 11200 11642 10528 10816 10660 11000

Cambodia 3992 4056 4233 4268 4600 4900

China 134330 136570 137000 140700 143000 144000

Egypt 4673 4564 3100 4250 4675 4850

India 99180 89090 95980 104320 104000 10630

Indonesia 38310 36370 35500 36500 37500 37700

Japan 8029 7711 7720 7646 7756 7720

Korea south 4843 4916 4295 4224 4006 4220

(Source: AIREA: All India Rice Exports Association, 2014.)

2
Fig.1.1 Country Wise Share of Rice Production

Rice Production (% Share Country wise)

CHINA INDIA BANGLADESH BURMA BRAZIL

JAPAN EGYPT CAMBODIA INDONESIA SOUTH KOREA

1%

1% 1% 11%
2%
2%

3% 40%

10%

29%

Source: All India Rice Exports Associations (AIREA)

There has been a major decline in world rice production since late 2008-09 due to
many reasons including climatic conditions in many top rice producing countries as well as policy
decisions regarding rice export by the governments of countries with considerable rice production.
Global rice prices started increasing in November 2010-11 after months of steadily
declining since reaching an all-time high in May 2012-13. Problems related to rice supply in
two majo r rice pro ducing countries- India and t he Philippines- have been the primary
reason for low world production of rice and the reversal of price trend.

3
Table 1.2 Year wise Paddy MSP has been as follows

Marketing year Common Grade-A

2010-11 950+50 bonus 980+50

2011-12 1000 1030

2012-13 1250 1280

2013-14 1310 1345

2014-15 1410 1450

Source: Commission for Agricultural Costs and Prices (CACP)

Rice trend in India

Rice is one of the most important food crops of India in term of area, production
and consumer preference. India is the second largest producer and consumer of rice in the world.
The productivity of rice has increased from 1984 kg per hectare in 2004-05 to 2372 kg per hectare
in 2011-12. Indian share in global rice production has been hovering in the range of 19.50 to 24.52
% .Rice production in India crossed the mark of 106 million MT in 2013-14 accounting for
21.41% of global production in that year. The production of rice in India has shown an
increasing trend. It has increased from 34.58 million tonnes in 1960-61 to 94.8 million tonnes in
2009-10. The demand for rice in India was projected at 120.6 million tons for the year 2014 and
will require a production level of 3,000 kg/hectare, significantly greater than the present
average yield of 1,930 kg/hectare. Government of India is targeting to achieve production of 129
million tons of rice by 2015-16 with the growth rate of 3.7% along with other food grains.
Projected demand for rice is 140 million tons by 2025. (National Food Security Mission- NFSM).
From a nation dependent on food imports to feed its population, India today is
self-sufficient in grain production and also has a substantial reserve. The progress made by
agriculture in the last four decades has been one of the biggest success stories of free India.

4
Agriculture and allied activities constitute the single largest contributor to the Gross Domestic
Product, almost 14% of it.

Table 1.3 State-wise Production during last four years (Qty in thousand MT)

Production Production Production Production

States
(2010-11) (2011-12) (2012-13) (2013-14)

West Bengal 14.6 12.33 11.65 15.3

Uttar Pradesh 10.78 12.01 12.89 14.6

Andhra Pradesh 11.03 14.38 9.02 13.0

Punjab 11.23 10.83 11.31 11.52

Haryana 3.62 3.47 3.96 4.02

Orissa 6.96 6.55 6.01 6.86

Tamil Nadu 5.91 6.13 6.32 6.96

(Source: USDA- United State Department of Agriculture)

Paddy in Telangana
Rice is the major food crop and staple food of the state. Agriculture has been the
chief source of income for the state's economy. Important rivers of India, the Godavari,
Krishna flow through the state, providing irrigation. Apart from major rivers, there are many small
rivers Tunga Bhadra, Bima, Dindi, Kinnerasani, Manjeera, Penganga, Pranahitha, Peddavagu and
Taliperu.Which flow through this region there are many multi-state irrigation projects in
development, including Godavari River Basin Irrigation Project sand Nagarjuna Sagar Dam, the
world's highest masonry dam. In the Nalgonda district the Krisna river flows.

5
 The gross irrigated area in the state increased to 31.64 lakh hectares in 2013-14 from
25.57 lakh hectares in 2012-13, showing an increase of 23.74 percent over previous year. The net
area irrigated in the state has also increased to 22.89 lakh hectares in 2013-14 as against 17.74
lakh hectares in 2012-13, showing an increase of 29.03 percent. Net area irrigated by wells was
the highest in 2009-10 at 84.33 percent and fell to 74.79 percent in 2013-14, while area irrigated
by canals has increased from 5.07 percent in 2012-13 to 12.67 percent in 2013-14. During the
given period on an average 76 percent of net irrigated area is through wells showing the heavy
dependence on well irrigation.
Productivity (production in kilogram per hectare of land) of rice crop is almost stable
between the period 2009-10 to 2014-15(Kharif), but the productivity of rice during Kharif 2014-
15 decreased to 3054 Kg/ha as against 3227 Kg/ha during same period of the previous year
i.e. 2013-14. Highest yield for rice crop is registered in Nizamabad and lowest is in
Rangareddy district. The gap between the state average and the district yields in rice crop is high
in Mahbubnagar, Rangareddy and Adilabad. (Govt. of Telangana Socio economic data, 2014-15).
Table 1.4 District-Wise Yield of Paddy Crop in Telangana (Kg/ha) 2013-14
Sl. No. District Yield
1 Adilabad 2745
2 Khammam 2994
3 Karimnagar 3591
4 Mahabubnagar 2839
5 Medak 3653
6 Nalgonda 3061
7 Nizamabad 4004
8 Rangareddy 2284
9 Warangal 3141

Total 3297

(Source: Directorate of Economics and Statistics, Hyderabad.)

6
Table 1.5 Year wise area, production and productivity of Rice in combined AP.

Year Area(000ha) Production( 000MT) Yield(Kg/ha)

2010-11 4752 14420 3035
2011-12 4096 12891 3147

2012-13 3628 11422 3173

2013-14 4365 13256 3180

(Source; Directorate of Statistic Evaluation, Govt. of combined Andhra Pradesh, 2014.)

Fig 1.2 Area, Production, Yield of Paddy in Combined Andhra Pradesh

16000

14000

12000

10000
AREA
8000
PRODUCTION
6000 YIELD

4000

2000

0
2010-11 011-12 2012-13 2013-14

(Source; Directorate of Statistic Evaluation, Govt. of combined Andhra Pradesh, 2014.)

Gro wing d emand fo r hig h va lu e r ice cro p ind u ced b y r is ing inco me s
and consumption patterns coupled with declining farm incomes due to rising costs and
stagnating productivity has necessitated the steps towards improving supply chain of paddy.

Supply chain plays an important role not only in stimulating production and
co nsu mpt io n but also in accelerat ing t he p ace o f eco no mic development. An efficient
marketing channel can contribute to increase in the marketable surplus by scaling down the

7
losses arising out of the inefficient processing, storage and transportation. It guarantees to
the farmers better prices for farm products and induces them to invest their Surplus in the
purchase of modern inputs so that the productivity may increase.

Supply chain encompasses all the activities in fulfilling customer demands

and requirements. These activities are associated with the flow and transformation of goods
from the raw materials stage, through to the end user. The widening of the market channel
helps to increase the income of t he producer. But lack o f market ing facilit ies has been
the major impediment. Transportation costs and marketing margins of both retailers and
wholesalers were identified as the major reasons for high marketing costs, adversely affecting
the profitability. An efficient marketing helps the farmers in planning their production in
accordance with the need of the economy by price signals. Therefore this study is planned to
understand the efficiency and scope of various channels to further impro ve their
functioning with the following objectives.

Objectives of Investigation

1. To study the source and supply of key inputs in Paddy cultivation.

2. To study the post harvest practices and cost involved in Paddy processing.
3. To identify the various marketing channels and compare the efficiency and
Profitability.
LIMITATIONS OF THE STUDY

 The study is based on the data collected from recall memory of the respondents including
farmers/growers, which may not reflect the data in true sense.
 As the respondents do not understand the genuine purpose of the research study, they have
the sense of fear to part with the exact information.
 Investigator of the study had limited resources in terms of time, manpower and money.
 Respondents are also having the limitation of time.
 Generalization of result is also not possible as the study pertains to a selected area.

8
STRUCTURE OF THE REPORT

The study is presented in six chapters as follows

1. Introduction: The importance of the study, problem setting and objectives are covered.
2. Review of literature: The available and relevant literature is thoroughly reviewed.
3. Material and Methods: The methods and material encompassing sampling, data
collection, analytical tools, concepts and terms are explained.
4. Results and Discussion: The results and discussion chapter presents the results obtained
after the analysis of the data collected.
5. Summary and Conclusions: Summary and conclusions are presented along with the
suggestions and policy implications.

9
 CHAPTER - II
REVIEW OF LITERATUTE

For any investigation, the findings of earlier studies may possibly give insights
of the problem and sets direction for the research problem. An extensive survey of literature
must therefore be undertaken in order to have a perfect knowledge of the various concepts
related to the study. Careful studies of the earlier studies conducted in India and abroad on
logistics in paddy marketing provide guidance and clarity for the present study. In this
chapter an attempt has been made to review the literature of the past research work in
relevance to the present study. The review has been presented under the following heads.
2.1 Marketing channels and marketing efficiency of Paddy.
2.2 Post harvest practices and paddy milling.
2.3 Inputs for production and constraints in marketing.

2.1 MARKETING CHANNELS AND EFFICIENCY OF PADDY

Bupinder Singh et al. (1979) examined how the share of the producer
and the costs and margins of different agencies involved in the sale and purchase of major
food grains (wheat and paddy) varied over time and the study indicated significant changes
in the structure of food grains marketing over the last decade or so. The major change that
occurred was the intervention of governmental agencies in the process of marketing.
These changes brought about noticeable changes in the costs and margins of different
agencies involved in marketing. The study showed that on the whole the marketing of food
grains became more efficient due to state intervention. This is because of the fact that
participation of governmental agencies has curbed speculative propensities of the traders.
But despite the increase in marketing efficiency, operating costs of the governmental
agencies were relatively higher as compared to the private trade. There is, therefore, an
urgent need to conduct an in-depth analysis of different elements of their cost structure
with a view to streamlining the procedures and thus economies on costs.
Prasad et al. (1980) conducted a study to identify the marketing agencies
and channels involved in the marketing of paddy and wheat in Allahabad district, Uttar
Pradesh and revealed that the producer's share in the consumer's rupee is very low, due to the

10

2
presence of a large number of middlemen between the producer and the ultimate
consumer. Among different cost items, transport was the highes
Gangawar et al. (1980) studied the seasonal fluctuations in arrivals and
prices of paddy in Karnal district of Haryana. The study emphasized on how in1976/77 the
producer's share in the consumer's rupee declined due to an increase in the margins of the
wholesalers/rice millers and retailers. The government channel of trade was inefficient
because marketing costs were higher when produce was sold by this method.
Wholesalers/rice millers' margin could be reduced by increasing the competition between
them.
Rajagopal et al. (1986) conducted a case study of paddy marketing system in
Madhya Pradesh. The marketing channels studied were: (I) farmers selling produce
through commission agents/brokers to traders in weekly markets, (II) farmers selling
produce through brokers to the processing units, (III) farmers selling paddy to marketing
cooperatives, and (IV) farmers selling paddy in regulated markets. Cooperative
marketing and processing societies (channel III) in the case study region were found to be
highly efficient in procuring farmer's produce and giving them their highest share in the price
of the final product, followed by processing units (channel II) and regulated markets
(channel IV). The performance of private traders in village markets (channel I) was
found to be poor. The efficiency of the cooperative marketing channel was highest
because of a credit-marketing linking system adopted in the district since 1968. The
farmers' response to this channel was highly significant.
Aktar and Islam (1986) in their work of spatial and inter-temporal price
differentials in the marketing of Boro paddy in Bangladesh used 3 models. The concept of
breakeven price or minimum expected price was used to fi nd o u t t h e s p a t i a l a nd
i n t e r t e m p o r a l p r i c e differentials. During harvest period the differences between
breakeven price and actual price for both HYV and Pajam variety of Boro paddy were
considerably higher ranging from taka 50.43 to taka 60.48 per maund.
Prasad et al. (1987) evaluated some aspects of new agricultural market
yards on food grain marketing efficiency, using a case study of the food grain market in
Muzaffarpur, Bihar and indicated that less imperfection was expected to occur in
the food grains market structure since the construction of the new market yard.
Fluctuations in seasonal prices were also less during that period. The most significant

11
impact of the market yard is an increase in the producer's share in the consumer price and a
reduction in profit received by wholesalers and retailers.

Rajgopal et al. (1990) studied the relationship between market structure

and farm decisions in paddy cultivation in Raipur district, Chhattisgarh, south eastern
Madhya Pradesh and found that the marketing cooperative channel had the highest efficiency
followed by rice millers in village market and through regulated markets. Higher farm
costs were associated with marketing cooperatives for small farmers and regulated
markets for large farmers. The price shifts have shown an upward trend in the above
channels and promoted market arrivals.
Pothuluru et al. (1994) studied the proportion of marketed farm produce
by crop and farm size group and examined the problems encountered in marketing
farm produce in Ramannapet mandal, Nalgonda district of Andhra Pradesh and revealed that a
considerable amount of farm output, particularly paddy and sorghum and a good
proportions of production was marketed by poor farmers to money lenders/traders in the
village because most of them were under a heavy burden of debt and hence were compelled to
sell through this channel. Cooperative marketing credit was the only solution to save small
and marginal farmers from the exploitation and malpractices of middlemen.
Kumar, S. et al. (1994) analysed the efficiency of rice marketing at Chanpatia
market of Bihar and concluded that a majority of small farmers sell their produce through
the traditional marketing channel which is largely controlled by the village
intermediaries. Medium and large farmers sell produce (either raw or processed) directly to
millers or wholesalers. Marketing margins were found to be higher for retailers than for
other market intermediaries.
Chattopadhyay et al. (1994) conducted that nature of competition in grain
trade in a group of villages in West Bengal. The study revealed that a majority of sellers were
restricted to the trade channel offered by village wholesalers. As a marketing channel,
cooperatives played no role in the region and he also concluded that although technical
progress changed the production conditions, it has had very little impact on
infrastructural development, such as transport facilities, credit, storage, market information,
and market technology.

1
Chauhan et al. (1994) studied the economic efficiency of various paddy
marketing channels through selected indicators such as producer's share, marketing cost,
12
middlemen margin, price deviation, peak seasonal price variability, and lean seasonal price
variability and revealed that the producer's share seems very low in all the channels
while the cost of marketing and middlemen's margin were high. They also suggested that the
regulated markets should be given more facilities and incentives by government in
order to enhance the share of the producer.

Biradar et al. (1996) studied the marketing costs, margins and price-spread of rice
in four principal markets in Kolhapur district, Maharashtra and concluded that the
regulated markets had not attracted enough farmers to sell their produce. Reducing
commission on sales would encourage farmers to sell their produce.

Mohapatra et al. (1998) focused on identifying the deficiency in management

of marketing systems and improving profit margin of rice farmers. The study established
three important marketing channels of rice, Channel-I, Producer-to-Consumer; Channel-II,
Producer-to-Retailer- to- consumer and Channel-III, Producer-to-Trader-to-Retailer-to-
Consumer and the study emphasized that there is a tendency on the part of the farmer to
sell their produce to retailers (in channel II) though they were aware that their share of the
consumer's rupee is higher in channel-I.

Madhappa et al. (2000) studied about that channels and margins in rice
marketing in North Western Tamil Nadu. Results from this work revealed that all the
marketing channels bring a fair share to the rice producers. The organized marketing
channels, though efficient in reducing the cost of marketing and in bringing more shares
to rice producers, were not efficient in reducing the intermediary margins.
Gauraha et al. (2002) examined the marketing channels and their efficiency,
costs and margins for rice in Durg district, Chhattisgarh, India and stated that there is a
tendency on the part of the farmers to sell their produce to retailers though they were
aware that their share of the consumer's rupee is higher in the direct marketing channel.
Chakraborty et al. (2005) conducted a study to estimate the average marketing
costs and margins for some agricultural products (rice, vegetables, and fruits) in
Tripura and indicated that the rice farmers get comparatively better margins (80% of
the consumer's Rupee) than vegetable and fruit growers (50% and 34.62%,
reipectively).

13
 Rahman et al. (2006) focused on studying the standard of living of rice
farmers, production structure, rice selling, marketing channel, rice prices, and profit by
intermediaries, marketing efficiency and farmers' attitudes towards marketing in south-
western part of Bangladesh. The study found that 82% farmers sold exclusively unhusked
rice and only 18% farmers sold partially husked rice. The quantity of unhusked rice sold to
wholesalers of unhusked rice, stockiest, huskers and village merchants was 32%, 19%,
27% and 14%, respectively. Although, among all eighteen channels husked rice selling to
retailers of husked rice was observed to be the best channel, only 3% of unhusked rice was
converted to husked rice and sold through this channel. Husked rice sold through
wholesalers of husked rice was also found to be a comparatively efficient channel, but
only 5% of unhusked rice was converted to husked rice and sold through this channel.
The study found that the marketing of rice in the surveyed area was not efficient, and
suggested that efficient marketing is essential for increasing their income and living
standard.

Hnin Yu Lwin et al. (2006) evaluated that rice marketing channels and the
interaction of market participants in selected areas of Myanmar. They mentioned that the
lack of formal co-operative structures, farmers support groups and growing market power
of millers at the farm gate level result in farmers having low bargaining power in trade of
paddy.

Ingle et al. (2007) identified four marketing channels of food grains in Akola
in Maharashtra. The marketing channels studied were: channel I-producer to consumer;
channel II- producer to village merchant to commission agent to wholesaler to
retailer to consumer; channel III-producer to commission agent to wholesaler to retailer to
consumer; and channel IV- producer to commission agent to wholesaler to processor to
wholesaler to retailer to consumer. It was found that channel III was the most popular
in cereals and channel IV was the most popular in pulses. Channel I had the least transfer and
generated the highest profit, however, farmers do not adopt it at large scale. Through
channel II, 70-75% of the produced cereals were sold, while 70-80% of the produced pulses
were sold through channel IV.
Tawale et al. (2009) study on estimation of marketing cost, marketing
margin and price spread through different channels of rabi jowar in Osmanabad district of
Maharashtra revealed that the price paid by consumer was Rs.853.6 per quintal in

14
channel-I (producer - consumer) in which the producer's share in consumer's rupee was
99.5%. Price spread was found to be Rs 3.6. In channel-II (producer — wholesaler — retailer
-consumer) price paid by consumer was Rs. 1008. per quintal in which producer's share in
consumer's rupee was 84.9%. Price spread was found to be Rs. 152.1 per quintal. In
channel-III (producer — primary wholesaler —secondary wholesaler — retailer —
consumer) price paid by consumer was Rs. 1085.9 per quintal in which producer's share in
consumer's rupee was 79.2%. Price spread was found to be Rs.226.4 per quintal.

Shelke et al. (2010) conducted a study on to examine the existing

marketing system of paddy. They studied the role of different channels of marketing and
distribution in paddy and examined the costs incurred and marketing margins retained by the
wholesaler, retailer, and processor in the marketing channel.
Deshmukh et al. (2010) conducted a study on marketed surplus, cost margin
and price spread in the case of pearl millet marketing in Beed district of Maharashtra.
The results revealed that the price paid by the consumer was highest (Rs.920 per
quintal) in Channel III (producer -primary wholesaler - secondary wholesaler-retailer-
consumer), in which the producer's share in the consumer's rupee was 66.2%. In the case
of Channel II (producer-primary wholesaler-retailer-consumer), the price paid by the
consumer was Rs.775 per quintal, in which the producer's share in the consumer's rupee
was 77.8%. In Channel I (producer-consumer), the price paid by the consumer (Rs.599
per quintal) was less as compared to that in Channels II and III but the producer's share in
the consumer's rupee was highest, i.e. 97.7%, as compared to that in the other channels. The
net price received by the producer (Rs.610.00) was highest in Channel III as compared to
Rs.603.00 per quintal in Channel II and Rs.585 per quintal in Channel I. Similarly, the
price spread was highest in Channel III (Rs.311.28), followed by Rs.172.00 in
Channel II and Rs.14.00 in Channel I. It was found that Channel III was beneficial to both
producers as well as intermediaries.
Pachouri (2012) conducted a study on economic inefficiencies in farm market
linkages in agriculture value chain in India: Problems and solutions. The study identified
various bottlenecks in agriculture value chain system which is leading to low income to
farmers and inflation in food prices. Lack of proper facilities of weighing, storage, grading,
sanitation facilities, post harvest management etc are predominated in traditional marketing.

15
The study suggested reforms in agriculture marketing through promoting the role of private
and cooperative sectors.
Ibitoye et al. (2014) in their study on economic assessment of rice processing in
Bassa local government area of Kogi state, Nigeria identified the main players in the rice
value chain viz., farmers, paddy traders, millers, rice traders and retailers. The study also
mentioned the main value adding activities such as production, harvesting, storage and paddy
aggregation at trader’s level, parboiling, milling, wholesaling and retailing. The study
suggested the need for soft loans, price regulatory agencies, better roads and other
infrastructure facilities for the better performance of the activities in the value chain.
Nagaraj et al. (2015) is their study on supply chain of Paddy found that supply
chain of paddy is a very complex processed dominated by network of intermediaries called
“mill owners and stockists. Every year during harvesting through stocking, milling and
packing they create a value above 45% of their investment in the value chain. In the process it
is observed that farmer is the only stakeholder who is paid least and supply chain
management of paddy suffers from huge losses to the government as more than 65% farmers
sell paddy to the local agents of “mill owners and stockists”. Taking stock of the issues and
opportunities, a conceptual model is suggested using e-governance and Public Private
Partnership(PPP) in managing the supply chain of paddy which ensures fool proof
mechanism not only to control prevailing losses but also arrives at a unique wealth creation
opportunity, which can redefine the face of agricultural developments in the state.

2.2 POST HARVEST PRACTICES AND PADDY MILLING

Mathur et al. (1982) examined the constraints faced by cooperative rice mills in
Madhya Pradesh in paddy procurement and processing, marketing of rice, finance,
inventory and state of food policies and indicated that while cooperative
organizations had the physical infrastructure, they were not equipped to develop the
potential of vertical integration, which resulted in low utilization of capacity, leading to poor
financial performance and suggested that the performance of the cooperative rice
mills can be improved if appropriate steps were taken in organizational development,
marketing and financial management.

Jayasena et al. (1986) evaluated three main types of commercial rice mills, the modern
mill, semi-modern mill and the traditional steel huller mill used for small scale rice milling in
Sri Lanka on the basis of milling quality and losses and emphasized that the total milling

16
output of the modern rice mill was 69.2% while those of the semi-modern and
traditional huller mill were 68.8% and 67.5%, respectively. The modern rice mill gave the
highest head rice yield of 66.1% and the traditional huller mill gave the lowest at 60.3%.
Impurities in milled rice were 0.3% for the modern rice mill, 0.5% for the semi-modern rice
mill and 0.7% for the traditional huller mill.
Duma et al. (1990) studied the technical performance of the UPLB (University
of the Philippines Los Balios) - improved village rice mill which utilizes a
traditional steel huller under field conditions in the Philippines and stated that the
milling recovery and head rice percentage were 3-8% and 9-16% higher than a traditional
mill.
Dash et al. (1993) subjected to determine the economic status of huller
owners in different districts of Orissa, revealed that about 30% of the huller owners
were satisfied with their current rice milling practice and did not want to switch over
to modern rice milling machines because of high investment and the levy system that
may be imposed on modernised hullers.
Rahman et al. (1996) conducted a study for rice processing in
Bangladesh, by traditional devices (dheki), as well as small, large and automatic rice
mills and revealed that the processing losses are very high, due to traditional processing
methods and use of inefficient machinery and concluded that the rubber roll huller should
be used in Bangladesh for better milling output and quality of rice.
Dash et al. (1997) studied on post-harvest operations in the rice milling
industry in Orissa and observed that of the total rice production, 76% was parboiled and
53% was milled using traditional hullers. The milling capacity and energy utilization of
rice mills were compared with the actual paddy production.
Singh et al. (2000) conducted a study to determine the existing postharvest
practices followed by the farmers in Patna District of Bihar and revealed that majority of
the farmer carry paddy, wheat and pulses on heads. Stored in jute bags, followed by drums
and earthen pots. 28% of women had poor knowledge about postharvest losses, but they
did not get any training or advice on postharvest activities.

Gupta et al. (2000) evaluated performance and economics of 17 modern rice

mills of different milling capacities viz. 1 t ha-1, 2 t ha-1, 3 t ha- and integrated paddy
processing complex in Punjab, India. He reported that in modern rice mills, the margins

17
were maximum in 2 t ha -1 mills followed by integrated paddy processing complex. The
-1
break-even point was lowest in 2 t ha mills and highest in integrated paddy processing
complex.
Mansoor-ul-Hassan et al. (2002) assessed and compared Head Rice Yield
(HRY) of three modern milling units, three shellers and one huller with that of laboratory
mill to see their milling efficiency. HRY, on an average, was 63.7% and 56.8% in the
modern mills and shellers/hullers, compared with 71.2% to 70.9% in the lab mill;
showing a difference of 8.1% and 14.1% respectively.
Kenghe et al. (2006) indicated to compare the relative performance of
huller mill with mini rice mill and modern rice mill and observed that maximum head rice
yield and minimum broken percentage was found when paddy was milled in modern rice
mill. The quantity of bran received from the traditional huller mill was high but low in
quality.
Ahuja et al. (2007) conducted a study to determine the impact of farm
mechanization on paddy yield and found that yield of using combine exceeded the manually
harvested paddy by 6.5%, and had lowered price by 1.8%. Losses due to shattering in
paddy crop were 2.9% higher during manual harvesting in comparison to combine
harvesting. Average time saved by farmers due to adoption of combine harvesters in paddy
was 0.94 days/ha. 1
Shinde et al. (2009) studied the milling efficiency of each instrument used in rice
mill and revealed that the paddy cleaner gave maximum output of 984.5 kg/h at feeding
rate of 992.00 kg/h and effectiveness of the cleaner screen was 81.93%. Maximum
separation effectiveness of paddy separator was achieved at feed rate of 764.4 kg/h at which
output capacity and effectiveness was 759.8 kg/h and 42.3% respectively. Maximum
shelling efficiency of rubber roll Sheller was obtained when clearance between rubber
roll was kept at half of thickness of paddy to be milled which gave output capacity of
1561.96 kg/h and efficiency of about 86.1%. Higher output capacity and efficiency of
grader was 566.80 kg/h and 67.2% respectively.

2.3 KEY INPUTS FOR PRODUCTION AND CONSTRAINTS IN MARKETING

Ranade et al. (1982) indicated that possibility of increasing the income of

groundnut farmers through vertically integrated groundnut cooperatives. It analyzed the
groundnut system at all-India level with specific reference to four major groundnut

18
producing states and then tested the expectations at the micro level for a sample of 54
farmers in four districts of Andhra Pradesh and stated that in spite of wide fluctuations in
groundnut production, private trade and industry managed to maintain their levels of profit.
During the years when groundnut production declined, oil and oilcake prices increased
much more than producer prices; the producers' share in the total value generated in the
system declined. At the micro level the increase in farmers' income after integration
through cooperatives was about 35% to 115% depending upon the marketing channel
and also recommended a cautious adoption of vertically integrated groundnut cooperatives in
view of the fact that such cooperatives were likely to face stiff competition from private
trade, government restrictions on the export of de-oiled cake, and organizational
rigidities usually associated with the cooperative sector.

Menon et al. (1983) studied the major problems in seed production and
distribution. They pointed out flaws in the present delivery system, and suggested remedies,
including more active involvement of village cooperatives and Farmers' Service
Societies, and greater cooperation between research and extension services.
Talukdar et al. (1985) conducted a study in the Kamrup district of Assam to
examine the efficiency and equity of farm prices for rice and concluded that pricing
efficiency is depended on various channels of distribution which were affected by
marketing margins and costs. There was an inverse relationship between marketing costs
and size of holding and a direct relationship with the length of channel. The most efficient
channel was considered to be producer-wholesaler-cum-millers-retailers -consumers, in
which both consumers and producers benefited in terms of total effectiveness.
Sinha et al. (1997) examined the constraints of rice production in Patna and Gaya
districts, Bihar. The results revealed that on an average, the yields were 1.4 t ha' a lower than the
potential yield of 4.0 t ha'.Credit, labour, marketing problems and tenancy of land were the
main constraints in rice production and also technological constraints such as no use of
balance fertilizers, no or partial plant protection measures, and lack of irrigation, also
contributed to low yields.

Lal et al. (2008) conducted an experiment to determine the constraints

in adoption of IPM in rice cultivation and marketing in Bhagalpur district of Bihar and
stated that the overall percentage regarding the constraints pertaining to transfer of technology

19
2
was 66.9 in the adoption of IPM in rice cultivation and constraints pertaining to service, supply
and marketing was 70.3 percent.

Vijay Kumar et al. (2008) examined on the marketing behaviour of rice producers
in Sitamarhi district in Bihar and found that majority of the respondents did not have a
marketable surplus. Major production and marketing problems faced by the respondents were:
lack of capital or fund (66.7%), weak market infrastructure (46.7%), limited transport facilities
(41.4%), and fluctuating market prices (20.9%).

Shivamurthy et al. (2008) in his study on the constraints in rice production

in the Eastern Dry Zone of Karnataka stated that 98% and 89% of the farmers expressed
problems associated with high cost of inputs and cost of cultivation, respectively. The other
constraints in rice cultivation consisted of the non-availability of loans (84%), high interest rate
on loans (64%), inadequate insurance coverage (48%), susceptibility of the area to drought
(90%), lack of market facilities (71%), lack of transport facilities (52%), lack of profitable
marketing channels (79%), shortage in labour resources (61.0%), high wages (51.0%) and
shortage of skilled labour (41.0%), and also suggested to overcome constraints in rice
marketing including the need for provision of marketing facilities to avoid
exploitation by middlemen (71%); continuous supply of inputs such as certified seeds and
fertilizers; provision of subsidies to reduce the costs of inputs (61%); timely introduction of
the minimum support price for rice and prompt payment (57.0%).

Baddawalage et al (2010). Revealed in their study that there is a substantial

variation in input use among farmers and their response to the expected price of rice.
Substantial variations in the use of fertilizer and seeds were also found, while the labour
usage pattern was consistent within the region. The productivity of small scale farming
was higher than that of large scale farming. The results further indicated that farmers do
not possess adequate knowledge about optimum management practices and most of them
being part time farmers do not allocate sufficient time to follow management practices.
The results also revealed that food security is the major concern to engage in Paddy
farming. This is followed by the quality attribution.

Prakash et al. (2013) examined input use pattern and production pattern
under paddy cultivation. It was evident from table 1 that leased-in farmers have used
marginally higher quantity of seeds (27.32 kg/acre) than those of owner farmers (25.84
20
kg/acre) in order to maintain higher density of plant population for any kind of
uncertainty. However both owner and leased-in farmers used seeds more than
recommended quantity (RDS-25.10 kg/acre). Both owner and leased-in farmers treated
seeds with chemicals such as Carbendazim, Copper Oxychloride and Agrimycin as the
seed treatment as these chemicals minimize the loss due to pest and diseases at initial
stages. However, there were no significant differences in use of seeds and seed treatment
chemicals between owners cultivated land and leased-in land.

r
e
2

21
 CHAPTER-III
MATERIAL AND METHODS

The present study was carried out in Nalgonda distict of Telangana state. The
specific objectives pertain to the analysis of supply chain management, marketing strategies
and constraints of Paddy production and marketing in Nalgonda district. This chapter
presents the description of study area, nature and method of data collection, sampling
procedure and analytical tools applied in attaining the objectives of the study under the
following sub headings.
3.1 Description of study area.
3.2 Sampling procedure
3.3 Data collection
3.4 Items studied under investigation from farmers
3.5 Tools of analysis
3.1 DESCRIPTION OF STUDY AREA
3.1.1 Geographical description of the study area
Geography of Nalgonda district in Telangana covers with the variant landforms and pleasant
landforms. Nalgonda district is situated in the State of Telangana between 16-25 degree and
17-50 degree of the Northern Latitude and 78-40 degree and 80-05 degree of Eastern
longitudeecovered.
Nalgonda District is located in the Southern part of the Telengana region,
Nalgonda district became part of Telangana with effect from 2014 that is after
reorganization of Telangana after bifurcated from Andhra Pradesh. It was formerly known
as "Nilgiri" Nalgonda District is bounded by the Medak district and Warangal district in the
North, Guntur district and Mahbubnagar district in the South, Khammam
district and Krishna district in the East and Mahabubnagar district and Ranga Reddy
district in the West. It’s in the 91 meters to 103 meters elevation range. This District belongs
to Southern India.

22
Source: mapsofindia.com

23
3.1.2. Geographical description of the study area
The population of Nalgonda district was around 3,488,809 as per 2011 census. The male
population was 1,759,772 and the female population was 1,729,037. The population growth
since the last census was 7.41 per cent and Nalgonda has a population density of 245 per sq
m and it has a literacy rate of 64.20 per cent, with male literacy of 74.10 per cent and female
literacy of 54.19 per cent.
With regards to sex ratio in Nalgonda ,it stood at 983 per 1000 males compared to
2001 census figure of 966.The average national sex ratio in India is 940 as per latest reports
of census 2011directorate.In 2011 census, child sex ratio is 923 girls per 1000 boys
compared to figure of 952 girls per 1000 boys of 2001 census data.
3.2 SAMPLING PROCEDURE
3.2.1 Selection of Study State
The study was conducted in Telangana state. Telangana state is purposively selected
because rice is one of the main crop in this state.
3.2.2 Selection of the district
Nalgonda district in Telangana state is also a major producing area of Paddy, and has
the second largest number of millers in the Asia especially in Miryalguda region.Therefore
Nalgonda was purposively selected to conduct the study.
3.2.3 Selection of villages and farmers
From the district 8 paddy cultivating mandals have been selected based on the
production from each paddy cultivating mandal two villages have been selected randomly. A
total of 112 farmers were selected from 8 mandals and 16 villages i.e., 14 farmers from each
mandal. Further 8 middleman, 8 millers, 8 input dealers and 8 retailers i.e., one from each
mandal were identified for the study.
In each village all farmers growing paddy were listed out and 7 farmers were
selected from each village making a sample size of 112 farmers from 8 mandals for the
study.
Mandal wise distribution of sample farmers
Sl. No. Mandal No. of farmers
1 Pedda Adisarlapally 14
2 Peddavoora 14
3 Gurrampode 14
4 Devarakonda 14
5 Chandampet 14

24
 6 Nidmanure 14
7 Tripuraram 14
8 Miryalguda 14
Data was also collected from eight middle men, eight millers, eight input dealers and
eight retailers i.e., one from each mandal.
3.3 DATA COLLECTION
3.3.1 Nature and source of data
The primary data on paddy production, post production operations, market
functionaries and various constraints were collected from the sample farmers through a pre-
tested questionnaire. Similarly, primary data were also collected from dealers intermediaries
regarding quantity handled, various marketing channels and constraints faced by them
through a pre-tested questionnaire.
The relevant secondary data were collected from books, web sources, Directorate of
Argiculture Planning and Marketing, Telangana State Governament and Prof Jayashaker
Telangana State Agricultural University, etc.
3.3.2 Methods of analysis
The data collected was subjected to conventional analysis which includes
tabular, averages and percentages approaches. Besides this, graphical representation
like pie charts and bar graphs have also been utilized.
3.4 ITEMS STUDIED UNDER INVESTIGATION FROM FARMERS
3.4.1 Varieties grown
The paddy varieties cultivated by the sample farmers has been collected.
3.4.2 Cropping pattern
The information on different crops cultivated by the farmers along with paddy are
also collected and recorded.
3.4.3 Post production operations and costs
A lot of activities are performed by farmers after the paddy harvesting which adds
to the cost of production. The cost of activities such as threshing, winnowing, grading,
transport etc. was calculated to get an idea of post production costs.
3.4.4 Identification of market functionaries
There exist a lot of market functionaries which leads to price spread. The existence
of large number of market functionaries leads to inefficiencies in the supply chain of paddy
from producer to consumer. An attempt was made to identify the various market

25
functionaries which are dealing with paddy produce.
3.4.5 Supply chain of paddy production
Supply chain of paddy production starts from the supply of inputs required by the
input manufacturers until the various inputs required for production are made available to the
farmers. A lot of goods and services are involved to produce the paddy through different
channels. The motive is to make inputs available to the farmer in most efficient and
profitable way.
3.4.6 Constraints faced by the farmers
Constraints faced by the farmers were grouped under the following heads
a. Production constraints
b. Marketing constraints
c. Transportation constraints
d. Price fluctuation constraints
e. Storage constraints
3.5 TOOLS OF ANALYSIS
The data collected from primary sources were analyzed in multiple stages.The
collected data were tabulated by using Microsoft excel and is illustrated appropriately to
make meaningful inference. Price spread, producer share in consumer’s rupee, middlemen’s
margin and channel efficiency were calculated by using simple percentages to arrive at the
results. The data were summarized by using of statistical tools like averages and percentages
to obtain meaningful results.
3.5.1 Cost of marketing
The total cost incurred on marketing, in cash or in kind, by the producer-seller and by
various intermediaries involved in the sale and purchase of the commodity till the
commodity reaches the ultimate consumer was computed as follows.
C = Cf +Cm1 + Cm2 + Cm3 + ……….Cmn
Where
C = Total cost of marketing of the commodity.
Cf = Cost paid by the producer from the time, the produce leaves the farm till sale.
Cmn = Cost incurred by nth middleman in the process of buying and selling the product.
3.5.2 Producer’s share in consumer’s rupee
It is the price received by the producer as a percentage in consumer’s price.
If ((PC) is a consumer’s price and (PF) is the producer’s price then the producer’s share

26
in consumer’s rupee may be expressed as follows.

Ps = (PF/PC) × 100

3.5.3 Marketing margin of middleman

This is the difference between the total payments (cost + purchase value) and receipts
(sale price) of the middleman (ith agency).
a) Absolute margin of the ith middleman (Ami)

(Ami) = PRi – (Ppi + Cmi)

b) Percentage margin of the ith middleman (Pmi)

PRi – (Ppi + Cmi )

P mi = ––––––––––––— × 100
PRi
Where,
PRi = Total value of receipts per unit in rupees (sale price).
Ppi = Purchase value of goods per unit in rupees (purchase price).
Cmi = Cost incurred on marketing per unit in rupees.
3.5.4 Analysis of price spread under different channels
It is the difference between the price paid by the consumer and the price received by the
producer. The price spread was worked out by using following method

Price spread = Pp - Pf

Where,
Pp = price paid by the consumer
Pf = price received by the producer
3.5.5 Analysis of marketing efficiency under different channels
Marketing efficiency is a measure of market performance. It is calculated by using the
Shepherd’s formula as follows

27
Where, ME = [(V/I)-1]
ME = Index of marketing efficiency
V = Value of goods sold
I = Total marketing cost

28
 CHAPTER-IV

RESULTS AND DISCUSSION

In accordance with the pre-determined objectives of the study, data has been collected
and analyzed by using suitable techniques. This chapter deals with the presentation and
discussion of the results emerged from the research work. For easy understanding and
convenience of this chapter, it is presented under the following sub-heads:

4.1 Over view of Paddy status in Nalgonda district of Telangana.

4.2 Socio economic characteristics of the respondents

4.3 Source of key inputs in paddy cultivation.

4.4 Post-harvest practices and cost involved in paddy milling.

4.5Marketing channels, marketing efficiency and price spread of Paddy

4.6 Problems associated with production and marketing of Paddy.

4.1PADDY STATUS IN NALGONDA DISTRICT OF TELANGANA

Nalgonda district covers an area of 14,22,000 ha of which only 5.6% of the area is under
forests, 7.8% is put to non-agricultural uses, 4.3% is under pasture and 21.2% is under current
fallows. From table 4.1 it can be noticed that the area under paddy was 2,08,524 ha with
production of 6,83,868 tones in 2012-13.and in 2013-14 area under paddy was 2,01,000 ha
with production of 6,59,192 tones.
The area under paddy has decreased to 1,80,500 ha with production of 5,91,961 tonnes in
2014-15 and yield has increased (3150 Kg/ha) compared to 2013-14(3061 Kg/ha).
Table 4.1: Area, production and and yield of paddy in Nalgonda district
Sl .No Year Area(ha) Production(lakhtonnes) Yield(Kg/ha)
1 2012-13 208524 683868 3280
2 2013-14 201000 659192 3061
3 2014-15 180500 591961 3150(Forth Adv.Est.)
(Source: Statistics of the Agriculture Department, Telangana.)
Particularly, the paddy cultivation came down considerably in both rabi and kharif during
2014-15 year. The State government discouraged the cultivation of paddy under canals due to
29
lack of water in major reservoirs during rabi, however, there was no increase in cultivation of
alternative crops either.
4.2 SOCIO ECONOMIC CHARACTERISTICS OF THE RESPONDENTS
The socio economic characteristics of the respondents include age group, educational
status, land holdings, type of crop grown, etc. This analysis helps to have a comprehensive
understanding about the socio economic conditions of the respondents so as to execute the
research in a most appropriate manner and make suggestions accordingly.
4.2.1 Distribution ofeducational status of the respondents
The particulars regarding the educational status of the respondents are presented
separately for farmers in table 4.2. It is observed from the figures that out of 112farmers, were
12 illiterates, which constituted 10.71per cent. A total of 17.85 per cent of the farmers were
educated up to class 7th, while 18.75 percent of the farmers are educated up to class 10 th. The
number of farmers who completed education up to intermediate and degree level was
31.25per cent and 17.82per cent.
Table 4.2 Distributionof educational status of the respondents
Farmers
Sl. No. Education level
Number Per cent
1 Illiterate 12 10.71

2 Up to 7th 20 17.85

3 8th to 10th 25 18.75

4 Intermediate 35 31.25

5 Degree 20 17.82

Total 112 100

4.2.2 Distribution of age group of respondents

It is observed from table 4.3 that the number of farmer respondents were maximum in
the age group of 41 to 50, constituting about 30 per cent of the total farmer respondents
followed by 30 respondents in the age group of 31 to 40 (26.7 per cent). The farmer’s
respondents in the age group of 20 to 30 were 28, while the age group of 51 to 60 had 20
respondents.

30
Table 4.3Distribution of age group of the respondents
Farmers
S. No. Age group (years)
Number Per cent
1 20-30 28 25.00
2 31-40 30 26.7
3 41-50 34 30.3
4 51-60 20 17.85
Total 112 100
The highest per cent of farmers were observed under the age group of 41-50 (30.3 per cent).
The lowest per cent is recorded in the age group of 51-60 years.
4.2.3 Distribution of land holdings of the respondents
Table 4.4 Distribution of land holdings of the respondents

Sample Avg. landholding Avg. cultivated

Sl. No. Size group
size size (ha) area (ha)

1. Small (<2 ha) 36 0.91 0.84

2. Medium (2-4 ha) 42 3.00 2.93

3. Large (>4 ha) 34 5.67 4.63

Total 112 3.19 2.80

Fig.4.1 land holding pattern of sample farmer

6 5.67

5 4.63

4
3 3.19
2.93 2.8
3

2
0.91 0.84
1

0
Small(<2 Ha) Medium(2-4 ha) Large (>4 ha) Total

Avg land holding size Avg cultivated area(ha)

31
 The table 4.4 reveals that the average size of land holding of small farmers was 0.91
ha, whereas of medium farmers was 3.00 ha and the large farmers was 5.67 ha. It is also noticed
that average cultivated land in the case of small farmers was 0.84 ha, medium farmers was
2.93 ha, and large farmers was 4.63 ha, respectively. The average cultivated land size of
all the farmers put together was 2.80 ha.
4.2.4 Cropping pattern
It is observed from table 4.5 that of the total112 farmers of 41.07 per cent (46) farmers
were cultivating paddy only, while farmers cultivating paddy and cotton were 35 (31.25 per
cent). Farmers cultivating Paddy and Maize were 14 (12.5 per cent), while Paddy and other
crops cultivated in the area were 17(15.17per cent).
Table 4.5 Crops cultivated by the farmers

Sl. No. Crop Number of farmers Per cent

1 Paddy 46 41.07

2 Paddyand cotton 35 31.25

3 Paddy and maize 14 12.5

4 Paddy and other crops 17 15.17

Total 112 100.00

4.2.5 Varieties cultivated

Farmers grow a short duration varieties like Tellahamsa, JGL-384, MTU-1010 etc.
4.2.6Soil type in study area
Telangana is situated on the Deccan Plateau, in the central stretch of the eastern seaboard of
the India Peninsula. In the Nalgonda district of Telangana state, there are varieties of soils
ranging from fertile alluvial to very poor sandy soils. Various soil types, including chalkas,
red sandy soils, dubbas, deep red loamy soils, and very deep black cotton soils are found .Red
soils are predominant, accounting for 48 percent of the total area. Other soil types in the State
are black cotton soils, alluvial, rocks and boulders accounting for 25 percent, 20 percent and 7
percent of the area, respectively.

32
4.3 SOURCE OF PURCHASE OF KEY INPUTS IN PADDY CULTIVATION

Seed, fertilizer, pesticides, labour, irrigation, and machinery are considered as key
inputs in paddy cultivation.
4.3.1 Source of seed, fertilizer and pesticides in study area
Table 4.6.Source of seed for paddy farmers
No. of farmers who
SI. No. Source of seed
purchase seed
1. Fellow Farmers 44(39.2)

2. Dealer/shopkeeper 42 (37.5)
3. ICAR research station 04 (3.5)
4. SAU 07 (6.25)

5. KVK 09 (8.03)

6. PACS 06 (5.3)

Total 112 (100)

Note: Figures in the parentheses indicate percentage to the total.
Fig .4.2 Sources of seed in the study area.
50
44
45 42
40
35
30
25
20
15
9
10 7 6
4
5
0

Source of seed

33
 Table 4.6 indicates that about 39.2 % of farmers buy seed from ,fellow farmers which is
d considered an informal channel .While in the case of organized or formal seed system there are
two institutions involvedviz. private and public sector. Dealers/shopkeepers are being categorized
as private sector and 37.5 % i.e 42 sampled farmers purchase seed for crop production
from dealer. Public sector in the present seed system in the study area consists of research
station, SAU, KVK and PACS. About 3.5% farmers purchased seed from research station,
6.25% farmers purchased seed from SAU, 8.3% farmers fulfill their seed requirement
from KVK and 5.3% farmers' seed source was PACS.
Thus it can be concluded that informal channel of seed purchase is still predominant among
3 paddy farmers and in case of formal channel dealers play a predominant role.
4.3.2 Source of purchase of fertilizer and pesticides by sample farmer

Private dealers/shop keepers, govt. agencies like co-operatives (PACS) are major
points to purchase of fertilizers and pesticides.

Table 4.7. Source of purchase of fertilizer and pesticide by samplefarmers

No. of farmers
Sl.
Source of seed Fertilizers Pesticides
No.
1. Dealer/shopkeeper 86 (76.78) 112 (100.0)

Govtagenci
2. 26(23.21) -
es and
Total 112(100) 112(100)

Table 4.7 shows that 76.78% of sample farmers purchased fertilizer from private dealers and
23.21% farmers purchased from govt. agencies like co-operatives. About 100% of sample
farmers purchased their pesticides from dealers.

From the above information it can be concluded that majority of farmers are
purchasing pesticides and fertilizers from private dealers or shop keepers.

34
4.3.3 Human labour utilization

Table 4.8 revealed that 10.71% of small farmers depend solely on family labour for
their paddy cultivation whereas 7.14% of them solely depend on hired labour and 14.28%
depend on combination of hired and family labour.
About 4.46%, 8.9%, 21.42% and 2.67% of the medium farmers, depended
on family, hired, combination of family and hired and permanent labour
respectively. About 17.85%, 5.35%, and 7.14% of large farmers depended on hired,
combination of family and hired and permanent labour for their cultivation
respectively.

From the above information it can be concluded that majority of farmers (46%)
are depend on combination of hired and family labour.

Table 4.8. Human labour utilization in paddy cultivation

Source of labour

Sl. Farmer Combination

No. category Family Hired (family &hired) Permanent
Small 12 8 16
1. -
(<2 ha) (10.71) (7.14) (14.28)
Medium 5 10 24 3
2.
(2-4 ha) (4.46) (8.9) (21.42) (2.67)
Large 20 6 8
3. -
(>4 ha) (17.85) (5.35) (7.14)
Total 112 17 38 46 11
4.
(100) (15.17) (33.92) (41.07) (9.8)

Note: Figures in the parentheses indicate percentage to the total.

35
Fig.4.3 Source of labour for paddy growing farmers
50 46
45
40 38

35
30
24
25
20
20 17 16
15 12 11
10
10 8 8
5 6
5 3
0 0
0
Family Hired combination Permenent

Small(<2 ha) Medium(2-4 ha) Large (> ha) Total(112)

4.3.4. Type of irrigation used by sampled farmers

Irrigation facilities available in the study region are exclusive canal, water pump,
combination of canal and water pump. The distribution of farmers according to the
type of irrigation is being presented in table 4.9.

Table 4.9. Type of irrigation used by sample farmers

Sl. No. Type of irrigation No. of farmers
1. Canal 88 (78.5)
2. Water pump 14 (12.5)
3. Combination (canal and water pump) 10 (08.9)
Total 112(100)

Note: Figures in the parentheses indicate percentage to the total.

The table 4.9 shows that 78.5% of sampled farmers were dependent on canal for
irrigation purpose, 12.5% farmers on water pump, 8.9% farmers utilized both the
combination (canal and water pump) to irrigate their field while no farmer

36
 wasdependent on river for irrigation water. It was also observed that there was severe
shortage of electricity in the study area because of which farmers had to depend on
diesel as alternate energy source for various agricultural operations.
The water pump used also depends on diesel for the source of energy. Thus it
can be concluded that the major source of irrigation in the study region is diesel operated
water pump.

Fig.4.4.Type of irrigation in the study area.

Type of Irrigation
Canal Waterpump Combination(canal and waterpump)

9%

12%

79%

4.3.5 Source of machinery for paddy growing farmers

Table 4.10 shows that 58.9% of sample farmers used hired machinery.Incase of
small, medium and large farmers 25.00%, 23.21%, and 11.16% used hired machinery.About
41.07% of sampled farmers are having their own machinery for their paddy production,
of which 7.14%, 14.2% and 19.6% of farmers are small, medium and large, respectively.

Thus it can be concluded that majority of sample farmers (58.9%) are depended on
hired machinery.

37
Table 4.10. Source of machinery for paddy growing farmers

SI.No. Source of machinery

Farmers category
Own Hired
4 Small 8 28
1.
(<2 ha) (7.14) (25.00)
Medium 16 26
2.
(2-4 ha) (14.2) (23.21)
Large 22 12

3. (19.6) (11.16)
(>4 ha)
Total 112 46 66
(100)
(41.07) (58.9)
Note: Figures in the parentheses indicate percentage to the total.

Fig.4.5 source of machinery for paddy growing farmer

30

25

20

15 own machinary
Hired machinery
10

0
Small(<2 ha) Medium(2-4 ha) Large (>4 ha)

4.4 POST HARVEST PRACTICES AND COST INVOLVED IN PADDY

MILLING
Paddy crop should be harvested, when the grains become hard and contain about 20-
22 percent moisture. Harvesting before maturity means a low milling recovery and also a
higher proportion of immature seeds, high percentage of broken rice, poor grain quality and
more chances of disease attack during storage of grain. Therefore, it is of the paramount

38
importance to harvest the crop at suitable time. Harvesting of the crop when it is not fully
matured might result in loss of yield with poor quality grains. If harvesting is delayed, grain
may be lost due to damage by rats, birds, insects, shattering and lodging. Thus, timely
harvesting ensures better yield, good quality of grains, consumer acceptance and less
breakage when milled. The right stage for harvesting as commonly understood by laymen is
when panicles turn into golden yellow and the grains contain about 20 percent moisture.
When the moisture in the paddy grains reaches 16-17% in the standing crop in the fields, the
crop sustains a heavy loss owing to shattering and damage by birds and rodents.
It is estimated that about 10 percent of food grains produced in India, are lost in
processing and storage. It has been reported that about 9 percent of paddy is lost due to use of
old and outdated methods of drying and milling, improper and unscientific methods of
storage, transport and handling. It has been estimated that total post harvest losses of paddy at
producers’ level was about 2.71 percent of total production.

Threshing, drying, winnowing and milling are the important post harvest practices
in paddy. Majority of sampled farmers (58%) followed manual threshing whereas 40%
of farmers used machinery for their threshing operations while only 2% of farmers used
combined harvesters.

There are around 570 rice mills in Nalgonda district of Telangana state out of which
more than 85% are hullers and shellers and only 15% of the existing processing facilities can
be considered as modern mills. These rice mills are mainly found in theMiryalguda
region,comprising of Miryalguda,Tripuraram and Kodad.

The total sample of millers consists of 8 mills (one from each district), 6 of them are
traditional hullers and shellers and 2 of them are modern mills.

Head Rice Yield (HRY) helps in calculating the milling efficiency. Table 4.11 revealed that
HRY, on an average, was 62.00% and 69.00% in traditional hullers and modern mills,
respectively and broken rice, on average, was 6% and 4.50% in traditional hullers and
modern mills, respectively. The presence of husk percent was 25.05% and 22.25% in
traditional hullers and modern mills, respectively.
4

39
Table 4.11. Milling efficiency of paddy processing in Telangana (Head Rice Yield from
100 Kg paddy)

Particulars Traditional Hullers &Sheller Modern mill

HRY 62.00 Kg 69.00kg

Husk 25.00 Kg 22.25 Kg

Broken Rice 6.0 Kg 4.50 Kg

Milling efficiency of paddy processing in Nalgonda district of Telangana

(Head Rice Yield,husk and broken rice from 100 kg paddy.)

In traditional hullers and shellers the Head Rice Yield (HRY) is 62 kg and in
modern mills it is 69 kg per 100 kg Paddymills.Thus it can be concluded that compared
to traditional hullers and shellers 13.7% of HRY is more and 9.9% of broken rice is less in
modern mills.

Cost of milling in the study area, on an average, was Rs 100 per quintal of paddy

4.4.1. Paddy marketing channels in the study area

The following marketing channels were identified in the private and institutional
marketing system in the study area.

Private sector
Channel-I: Producer -Pre harvest contractor-Distant wholesaler cum Commission agent-
Miller - Retailer – Consumer
Channel-II:Producer-Village trader - Wholesaler (local) -Commission agent (distant) -
Wholesaler (distant) -Retailer (distant) -Consumer
Channel-III: Producer -Wholesaler (Paddy) -Miller -Wholesaler (Rice) -Retailer -Consumer.
Channel-IV:Producer -Local Retailer –Consumer.
Channel-V: Producer -Consumer.

40
Institutional sector

Producer–Procuring agencies (FCl/Co-operatives/state Govt.) -Miller -Distribution agency

-Consumer.

4.4.2 Disposal pattern of paddy based on mode of marketing.

Paddy was marketed through different modes, namely pre-harvest

contractor, village traders, wholesaler, commission agents, FCI, miller and directly to
the consumer.

Table 4.12 reveals that 17.85% of sample farmers disposed their produce to pre-harvest
contractor and 14.28% of sample farmers disposed their produce to village traders and
16.07% of sampled farmers disposed their produce to commission agents whereas 12.50% of
farmers dependent on cooperative wholesaler for disposal of their produce. About 13.39% and
23.21% of sampled farmers were found to dispose their produce to FCI (Food Corporation of
India) and miller, each, while 2.67% of sampled farmers disposed their produce directly to
the consumer

From the above information it can be concluded that majority of farmers (23.21%)
were disposing their produce to miller while 76.79% of farmers were disposing their produce
to other modes.

Table 4.12. Disposal pattern of paddy in the study area

Sl. Mode of Small Medium Large

Total
No. marketing farmers farmers farmers

Pre-harvest
1. 14 (12.5) 6 (5.35) - 20(17.85)
contractor

2. Village traders
10(8.92) 5(4.46) 1(0.89) 16 (14.28)

Commission
3 8(7.14) 6(5.35) 4(3.57)
agent 18(16.07)

41
 4. Wholesaler -
8(7.14) 6(5.35) 14(12.50)

5. FCI
4(3.57) 5(4.46) 6(5.35) 15(13.39)

6. Miller -
10(8.92) 16 (14.28) 26 (23.21)

7 Consumer - 2(1.78) 1(0.89) 3(2.67)

Total 36(32.14) 42(37.5) 34(30.35) 112 (100)

Fig.4.6.Disposal pattern of paddy in study area.

Disposal pattern-farmer no.

Wholesaler
13%
Commission agent
16%

Village trader
14% Preharvest
contractor
Consumer 18%
3%

Miller FCI
23% 13%

42
4.5 CHANNEL EFFICIENCY ANALYSIS BASED ON COST AND RETURNS
AND PRODUCER'S SHARE IN CONSUMER'S RUPEE

The present study to identify the most efficient channel which gives more profit
margins to the producer, keeping the cost and return structure in mind. Further channel
efficiency was analyzed on the basis of marketing costs, margins, and price spread
in different channels.

4.5.1 Cost of cultivation of paddy in Nalgonda district of Telangana

The cost and return structure of paddy farming in Nalgonda was presented in table
4.13 which reveals that the total cost of cultivation was Rs 22,910.0. The yield obtained
by paddy farmers was 24 qt and the price for produce sold was Rs 1297/qt. The gross
return obtained by the sample farmers was Rs 31,128/acre and the net return obtained by
farmer was Rs 8218/acre.
4.5.2 Identification of supply chain in Paddy marketing
Among the five marketing channels stated earlier, the following three channels are
considered to be most important as per their share in the marketing channel

Channel I: Producer -Pre harvest contractor-Distant wholesaler cum Commission agent-

Miller - Retailer -Consumer
Channel II: Producer-Village trader-Wholesaler (local)-Commission agent (distant) -
Wholesaler (distant) -Retailer (distant) -Consumer.

Channel III: Producer -Procuring agency (FCI/Co-Op/GOVT) -Miller -Distribution agency -

Consumer.

43
Table 4.13. Cost of cultivation of paddy in Nalgonda district of Telangana
Cost of cultivation :( per/acre)

Number of labors Total

Particulars Cost
Human Bullock Machinery cost
Per hour
Land 2100
450 550 machinery 3100
Preparation(ploughing) (3 hrs)
cost Rs 700.
200 3600
FYM/Manures cost 1000(per trip)
(per trip) (3trips)

Seed cost 1000 1000

Sowing cost 300 150(per day) 300

Transplanting 1200 150(per day) 1200

Fertilizer cost 3200 3200

Plant protection cost 2500 2500

Inter culture 600 150(per day) 600

Weeding 1200 150(per day) 1200

Irrigation cost 900 150(per day) 900

Harvesting 4000 150(per day) 4000

Price(Rs/q) 1310 1310

Yield(Quintal/acre 24 24

Total cost of cultivation 22910

Gross income 31128

Net income 8218

44
4.5.3. MARKETING CHANNELS, MARKETING EFFICIENCY AND PRICE
SPREAD
Table4.14 Marketing costs, margins and pricespread forpaddy in Channel I
(Producer -Pre harvest contractor-Distant wholesaler cum Commission agent-Miller – Retailer
-Consumer)

Sl.No Particulars Rs./q Per cent share in

consumer’s rupee
1 Net price received by the producer 1150 65.07
2 Cost incurred by pre-harvest
Loading/unloading 5.0 0.28
Transportation 6.0 0.33
Sub total 11.0 0.62
Net margin of pre-harvest contractor 100.0 5.65
3 Purchase price of Commission agent 1261.0 71.35
4 Costs of Commission agent cum
wholesaler
Packing 9.5 0.53
Material used 13.0 0.73
Loading/unloading 14.25 0.80
Transportation 12.25 0.69
Sub total 49.0 2.77
Net margin of Commission agent 100.5 5.68
5 Purchase price of miller 1410.5 79.81
6 Costs of miller
Packing 4.8 0.27
Material used 10.5 0.59
Loading/unloading 6.5 0.36
transportation 7.5 0.42
Milling cost (Rs/ q)Paddy 85 4.80
Miscellaneous 10.5 0.59
Sub total 124.8 7.06
Net margin of the Miller 100.7 5.69
7 Purchase price of Retailers 1636 92.57
8 Costs of retailers
Loading/unloading 4.2 0.23
transportation 4.3 0.24
Storage losses 18.5 1.04
Miscellaneous 3.5 0.19
Sub total 30.5 1.72
Net margins of the retailer 100.8 5.70
9 Consumers price 1767.3(100) 100

45
As given in table 4.14, the channel I comprised of Producer ─ Pre-harvest contractor ─
Commission agent (cum wholesaler)-miller ─ Retailer ─ Consumer. The producer price from
the pre-harvest contractor was Rs. 1150 per qtl, which is 65.07 per cent of the consumer
rupee.
The per quintal marketing cost incurred by the pre-harvest contractor includes
loading/unloading was @ Rs. 5 (0.28 per cent), transportation@ Rs.6 (0.33 per cent). All
these costs together accounted to Rs.11.0 per quintal which constituted 0.62 per cent of
consumer’s rupee. The price at which the pre-harvest contractor sold to the wholesaler cum
commission agent was Rs. 1261.00 resulting in a profit margin of Rs. 100 per quintal. The
cost incurred by the Commission agent cum wholesaler was Rs. 1261.00 per quintal which
includes packing Rs.9.5 (0.53 percent), material used Rs.13 (0.73 percent), transportation
costs (Rs.12.25/q), loading/unloading 0.80percent (Rs.14.25) etc. Subsequently the produce is
sold to the miller at Rs. 1410.50 per quintal. It was79.81 per cent of consumer’s rupee.
The millers expenditure accounted to Rs. 1410.50 per quintal, of which packing
,material used and transportation cost was Rs.4.8,Rs. 10.5, Rs. 7.5 of 0.27,0.59,0.42 per cent
.and milling cost and miscellaneous cost was Rs.85,10.5. Subsequently the produce is sold to
the retailer at Rs. 1636.0 per quintal. It was92.57 per cent of consumer’s rupee.
The total price spread in this channel is Rs. 1767.3. Of the four intermediaries
involved in the marketing channel I, the retailer’s margin is higher (5.70%) followed by that
of miller (5.69%), commission agent cum wholesaler (5.68%) and pre-harvest contractor
(5.65%).

Table4.15Marketing costs, margins and price spread for paddy in Channel- II

(Producer ─ Village trader ─ Wholesaler (local) ─ Commission agent (distant) ─Wholesaler
(distant) ─ Retailer (distant) ─ Consumer)
Per cent share in
S.No Particulars Rs./q
consumer’s rupee
1 Net price received by the producer 1290 66.33
Cost incurred by village trader
Packing 8.0 0.41
Loading/unloading 8.4 0.43
Transportation cost 5.5 0.28

46
 Sub total 21.9 1.12
Margin of village trader@4% 51.6 2.65
2 Cost incurred by the wholesaler (local) 1363.5 70.11
Packing 5.0 0.25
Loading/unloading 15.5 0.79
Transportation cost 10.8 0.55
Miscellaneous charges 7.6 0.39
Sub total 38.9 2.00
Margin of the wholesaler (local)@4.4% 60.0 3.08
3 Cost incurred by commission agent 1462.4 75.20
Packing 3.0 0.15
Loading/unloading 8.0 0.41
Transportation cost 8.5 0.43
Miscellaneous charges 6.0 0.30
Sub total 25.5 1.31
Margin of commission agent (distant) 80.5 4.14
4 Cost incurred by the wholesaler (distant) 1568.4 80.6
Packing 4.0 0.20
Loading/unloading 8.2 0.42
Transportation cost 7.5 0.38
Miscellaneous charges 9.0 0.46
Sub total 28.7 1.47
Margin of the wholesaler (distant) 86.5 4.45
5 Cost incurred by Retailer 1683.6 86.5
Material used 16.5 0.84
Loading/unloading 15.5 0.79
Transportation cost 14.4 0.74
Storage losses 100.0 5.14
Miscellaneous charges 14.5 0.74
Sub total 160.9 8.27
Margin of the retailers 100.2 5.15
6 Consumers price 1944.7 100

Price spread in marketing channel - II

The marketing channel II comprises of producer, village trader, local wholesaler,
distant commission agent, distant wholesaler, distant retailer and final consumer. The table
4.15 indicates that the cost incurred by the village trader towards package was Rs. 8 per
quintal accounting to 0.41 per cent of consumer’s price. Similarly, the cost of loading
/unloading amounted to Rs.8.4 per quintal (0.43 per cent of consumer’s price). The
commission to the mediator who arranged for the contract (@ 4 per cent of the price paid to

47
the producer) accounted to 2.65 per cent of the consumer’s rupee. Thus, the produce is sold to
local wholesaler at a price of Rs. 1363.5 per quintal. (70.11 per cent of consumer’s rupee).
The major components of local wholesaler expenditures included transportation cost
(Rs. 10.8), packing (Rs. 5.0) and miscellaneouscharges, loading /unloading (Rs.7.6, 15.5).
The margin to the local wholesaler accounted for Rs. 60.0. The produce was sold to distant
commission agent at Rs. 1462.4 per quintal.
The cost incurred by the distant commission agent accounted to Rs. 1462.4 per quintal
which included transportation cost (Rs.8.5), packing material cost (Rs.3.0), loading and
unloading (Rs. 8.0). The distant commission agent got the margin of Rs.80.5 per quintal (4.14
per cent of consumer’s rupee) and sold the produce to the distant wholesaler.
The distant wholesaler’s purchase price was Rs. 1568.4 per quintal. A major cost
incurred by distant wholesaler was miscellaneous charges (Rs. 9.0/q), transportation (Rs.7.5),
loading/unloading charges (Rs. 8.2), packing cost (Rs 4.0) etc. The margin, which distant
wholesaler receives was Rs. 86.5 per quintal constituting 4.45 per cent of consumer’s rupee.
Distant wholesaler sold to retailer at Rs. 1683.6 per quintal,which included transportation cost
(Rs. 14.4), packing material cost (Rs. 16.5), storage losses (Rs. 100), miscellaneous charges
(Rs. 14.5) etc. The retailer got the margin of Rs. 100.2 per quintal (5.15 per cent of
consumer’s rupee). The final consumer’s price was Rs. 1944.7 per quintal.
The price spread which shows the difference between price paid by the consumer and
price received by the producer was Rs. 654.7 per quintal in channel II

Table4.16 Marketing costs, margins and price spread for paddy in Channel- III

(Producer-Procuring agency (FCI/Co-Op/GOVT) -Miller -Distribution agency -Consumer)

Per cent share in
S.No Particulars Rs./q
consumer’s rupee
1 Net price received by the producer 1450 67.53
2 Purchasing price of Procuring agency
Packing 38.4 1.78
Material used 37.9 1.76
Loading/unloading 37.3 1.73
Transportation 40.0 1.86
Sub total 153.6 7.15
Net margin of the procuring agency 120 5.58

48
 3 Purchase price of miller 1723.6 80.27
4 Costs of miller
Packing 10.0 0.46
Material used 26.5 1.23
Loading/unloading 15.5 0.72
Transportation 19.4 0.90
Milling cost (Rs/ q)Paddy 100.0 4.65
Miscellaneous 14.5 0.67
Sub total 185.9 8.65
Net margin of the Miller 100.5 4.65
5 Purchase price of Distribution agency
2010.0 93.61
Material used -
Loading/unloading 3.5 0.16
Transportation 8.7 0.40
Storage losses 30.09 1.14
Miscellaneous 5.0 0.22
Sub total 47.2 4.44
Net margins of the distribution agency 90.0 4.19
6 Consumers price 2147.2 100

Price spread for paddy in marketing channel-III is given in table 4.16.The produce,
when ready for harvest, is sold to FCI/Govt Co-operatives at a price of Rs.1450.00(67.53
percent in consumer rupee).Material used and unloading cost was Rs 37.9, Rs.37.3and
packing cost was Rs.38.4 respectively. The margin for procuring agency was Rs. 120.0 per
quintal which was 5.58per cent of consumer’s rupee.
The miller’s purchased from procuring agency at Rs. 1723.6 per quintal, the milled
incurred Rs185.9 towards this cost he sold the produce at Rs2010.His margin constituted 4.65
per cent consumers rupee.
The distribution agency paid Rs. 2010.0/q to the miller for one quintal of paddy. The
distribution agency incurred a cost of Rs.47.2 and retained a margin of Rs.90 Per quintal of
paddy. The margin retained by distribution agency was 4.19 percent of consumer’s money.
The total price spread in this channel was Rs. 697.2.
Thus the above analysis clearly shows that the longer the channel and the number of
intermediaries in the system, bigger is the price spread and the share of producer in
consumer’s rupee declines.

49
Marketing efficiency
The marketing efficiency of each channel is analyzed and presented in table 4.17
Marketing efficiency index (MEI) represents the effectiveness of a marketing system in which
it operates. The marketing efficiency for channel I, II, and III was 1.86, 1.97, and 2.07
respectively.

Table 4.17Marketing efficiency of Paddy in different channels

Rs./q
Particulars
Channel I Channel II Channel III
Consumer’s price 1767.3 1944.7 2147.2
Total marketing cost (price spread) 617.3 654.7 697.2
Marketing efficiency 1.86 1.97 2.07
*Total marketing cost includes marketing cost and profit margin of intermediaries
It is observed from this efficiency index that channel III was the most efficient one.
This is because channel III does not involves few intermediaries and hence, it is the most
efficient among the four identified channels.

4.5 CONSTRAINTS IN PADDY MARKETING

Table 4.18. Constraints in paddy marketing in the study area

Sl. No. Constraint particulars Farmers (%)

1. Unstable price 14

2. 55 Inadequate storage facilities in rural areas 25

3. Malpractices in markets 12

4. Lack of profitable marketing channels 30

5. Limited transport facilities 20

6. Timely introduction of MSP and prompt payment 11

50
Table 4.18. reveals that 30% of the sampled farmers faced constraints of lack
of profitable marketing channels and 11% of farmers faced constraint of timely
announcement of minimum support price (MSP) and prompt payment in the study area.
About 20% sampled farmers faced limited transport facilities constraint and 14%
of farmers faced constraint in unstable market prices in the study area.

From above information it can be noticed that the major constraint (30%) in paddy
marketing is lack of profitable marketing channel in study area.

51
52
 CHAPTER-V
SUMMARY AND CONCLUSION

Rice (Oryza sativa.) is the most important and extensively grown food crop in
the World. It is the staple food of more than 60 percent of the world population. Rice is
mainly produced and consumed in the Asian region. India has the largest area under paddy
in the world and ranks second in the production after China. Country has also emerged as a
major rice consumer.

Rice is the major food crop in Telangana. In terms of rice productivity, the state
had a productivity level of 3297 kg/ha in 2013-14 where as the productivity of rice in
Nalgonda was 3061 kg/ha . Rice is cultivated in 10 districts of Telangana. Out of this,
4 districts are falling under low productivity group which accounts for 40 percent of
36.57 lakh hectares of total area under rice in the state (Govt. of Telanagana, 2014).
Growing demand for rice induced by rising incomes and consumption patterns coupled with
declining farm incomes due to rising costs and stagnating productivity has necessitated the
steps towards improving supply chain of paddy.

Supply chain encompasses all activities in fulfilling customer demands and

requirements. The widening of the market channel helps in increasing the demand on a
continuous basis and thereby guarantees a higher income to the producer. But lack of
marketing facilities has been the major impediment. Transportation costs and marketing
margins of both retailers and wholesalers were identified as the major reasons for high
marketing costs, adversely affecting the profitability. An efficient marketing helps
the farmers in planning their production in accordance with the need of the economy by
price signaling.
Therefore, this study is planned to understand the efficiency of various channels
and scope to further improve their functioning with the following objectives.

Objectives of Investigation

1. To study the source and supply of key inputs in paddy cultivation.

2. To study the postharvest practices and cost involved in Paddy processing.

5

52
3. To identify the various marketing channels and compare the efficiency and
profitability.

Methodology

Nalgonda district was purposively selected as the study area. Sample consist of 112
farmers and 8 middle men, 8 millers, 8 input dealers and 8 retailers i.e., from the district. The
survey method was adopted for collecting primary data with the help of pre-tested
schedule. The data collected was subjected to conventional analysis which includes
tabular, averages and percentage approaches. Beside this, graphical representation
like pie charts and bar graphs were also been depicted.

Findings
It is observed from the figures that out of 112 farmers were illiterates, which
constituted 10.71per cent. A total of 17.85 per cent of the farmers were educated up to class
7th, while 18.75 percent of the farmers are educated up to class 10th. The number of farmers
who completed education up to intermediate and degree level was 31.25, 17.82per cent).
That the numbers of farmer respondents were maximum in the age group of 41 to 50,
(30.3per cent) followed by 30 respondents in the age group of 31 to 40 (26.7 per cent). The
farmer’s respondents in the age group of 20 to 30 were 28, while the age group of 51 to 60
had 20 respondents. The average size of land holding of small farmers was 0.91 ha, whereas
of medium farmers was 3.00 ha and the large farmers was 5.67 ha. It is also noticed that
average cultivated land in the case of small farmers was 0.84 ha, medium farmers was 2.93
ha, and large farmers was 4.63 ha, respectively. Total of 41.07 per cent (46) farmers were
cultivating paddy only, while farmers cultivating paddy and cotton were 35 (31.25 per cent).
Farmers cultivating Paddy and maize were 14 (12.5 per cent).
Dealers/shopkeepers are being categorized as private sector and had a share of 37.5
% in the farmer’s purchases i.e. 42 sampled farmers purchase seed for crop production
from dealer. Public sector in the present seed system in the study area consists of research
station, SAU, KVK and PACS. About 3.5% farmers purchased seed from research station, 6.25
% farmers purchased seed from SAU, 8.03% farmers fulfill their seed requirement
from KVK and 5.3% farmers' seed source was PACS.

It was also observed that 76.78% and 100% of farmers purchased their fertilizers and
pesticides from dealers, respectively. About 15.17%, 33.92%, 41.07%, 9.8% of the sampled

53
farmers were dependent on family labour, hired, and combination and permanent labour
for their paddy cultivation, respectively. About 78.5% of sampled farmers were dependent
on canal for irrigation purpose, 12..5% farmers on water pump, 8.9% farmers utilized
both the combination (canal and water pump) to irrigate their field . It was also observed
that there was extreme shortage of electricity in the study area because of which farmers
had to depend on diesel as alternate energy source for various agricultural operations.

About 7.14%, 14.20% and 19.6% of sampled farmers who were small, medium and
large farmers, respectively had their own machinery, whereas 25%, 23.21% and 11.16% of
small, medium and large farmers were dependent on hired machinery.
About17.85% of sample farmers disposed their produce to pre-harvest contractor and
14.28% of sample farmers disposed their produce to village traders and 16.07% of sampled
farmers disposed their produce to commission agents whereas 12.50% of farmers dependent
on cooperative wholesaler for disposal of their produce. About 13.39% and 23.21% of
sampled farmers were found to dispose their produce to FCI and miller, each, while 2.67%
of sampled farmers disposed their produce directly to the consumer
Post harvest practices and cost involved in paddy milling

There are around 570 rice mills in Nalgonda district of Telangana state of which more
than 85% are hullers and shellers and only 15% of the existing processing facilities can be
considered as modern mills. These rice mills are mainly found in the Miryalguda region.

Existing marketing system of paddy in study area

Channel I: Producer -Pre harvest contractor-Distant wholesaler cum Commission agent-
Miller - Retailer – Consumer
Channel II: Producer -Village trader -Wholesaler (local) -Commission agent (distant) -
Wholesaler (distant) -Retailer (distant) - Consumer
Channel III: Producer -Wholesaler (Paddy) – Miller -Wholesaler (Rice) - Retailer-Consumer.
Channel IV: Producer -Local Retailer -Consumer
Channel V: -Producer-Consumer.
Channel Efficiency
Important channels identified in the study area are
Channel I: Producer-Pre harvest contractor-Distant wholesaler cum Commission agent-Miller
- Retailer –Consumer.

54
Channel II: Village trader- Wholesaler (local)-Commission agent (distant)-Wholesaler
(distant) -Retailer (distant) –Consumer.
Channel III: Producer - Procuring agency (FCI/Co-Op/GOVT) - Miller - Distribution agency -
Consumer.
The cost and return structure of paddy farming in Nalgonda was presented
which reveals that the total cost of cultivation was Rs 22910.0. The yield obtained by
paddy farmers was 24 qt and the price for produce sold was Rs 1297/qt. The gross
return obtained by the sample farmers was Rs 31128/acre and the net return obtained by
farmer was Rs 8218/acre.
The total price spread in channel I is Rs. 1767.3. Of the four intermediaries involved
in the marketing channel I, the retailer’s margin is higher (5.70%) followed by that of miller
(5.69%), commission agent cum wholesaler (5.68%) and pre-harvest contractor (5.65%).
The final consumer’s price was Rs. 1944.7 per quintal in channel II. The price spread which
shows the difference between price paid by the consumer and price received by the producer
was Rs. 654.7 per quintal in channel II. The price spread channel III is Rs.697.2. Thus the
above analysis clearly shows that the longer the channel and the number of intermediaries in
the system, bigger is the price spread and the share of producer in consumer’s rupee
declines.
Marketing efficiency index (MEI) represents the effectiveness of a marketing system in
which it operates. The marketing efficiency for channel I, II, and III was 1.86, 1.97, and 2.07
respectively.

Constraints in paddy marketing in the study area

Thirt y percent of the samp led farmers faced constraints in lack of profitable
marketing channels and 11percent of farmers faced constraint of timely announcement of
minimum support price (MSP) and prompt payment in the study area and 20 percent
sampled farmers faced limited transport facilities constraint and 14 percent of farmers
faced constraint in unstable market prices in the study area.
Conclusions
1. In the study area most of the farmers are educated above secondary school level and most
of the farmers are in the age group of 30 to 60 years.
2. There is almost an equal distribution of small, medium and large farmers in the study
area. The average landholding is 3.19 ha and average cultivated area is 2.80ha.

55
3. Most of the farmers (around 40%) are cultivating only paddy, where paddy in
combination with cotton or maize is cultivated by around 44% of farmers.
4. The small farmers are mostly using family labour, the medium farmers are using a
combination of family and hired labour, where large farmers are are using mostly hired
labour.
5. Farmers are using of traditional varieties due to the non-availability of seeds and lack of
awareness about high yielding varieties.
6. The small and medium farmers are using mostly hired machinery where as large farmers
are using own machinery.
7. Due to lack of market information regarding prevailing prices, arrivals etc., most of the
producers market the paddy/rice in the village itself, which deprives them of getting
remunerative returns.
8. The returns obtained to the farmer in paddy cultivation in the study area on an average is
around 35 per cent of the variable costs he incurred to cultivate the crop.
9. About 1/3 rd of the consumer price is each channel is the price spread that is seen in
each channel.
10. The constrains mostly faced by paddy cultivating farmers are lack of profitable
marketing channels lack of storage facility and transportation facilities.

Suggestions:
1. As most of the farmers are going for hired machinery, governments can help them by
giving the machinery on hire at low rates.
2. Replacement of low potential/pest susceptible old varieties by new high yielding
varieties with promising yield potential must be taken also encouraging cultivation of
hybrid rice through demonstrations and making seed making available to the farmers will
lead to better returns to the farmers.
3. There is power crisis that needs to be addressed as 14 per cent of the paddy cultivation
depends on bore well for irrigation.
4. Marketing transparency can be bought about by passing various crop related and market
related information o the farmers through the use of ICT.
5. Encouraging farmers to cultivate paddy in combination with commercial crops can lead
to increase in income for the farmers.

56
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 PROFESSOR JAYASHANKAR TELANGANA STATE AGRICULTURAL
UNIVERSITY
(Formely part of Acharya N. G. Ranga Agricultural University)
DEPARTMENT OF AGRIBUSINESS MANAGEMENT
“Supply Chain Analysis of Paddy in Nalgonda District of Telangana”
By R.PANDU - PG Scholar
Questionnaire for farmer
(The data will be used for research purpose only)
1. General details:
Name of the farmer
S /o
Village
Mandal
District
Mobile number
2. Socio economic particulars:

Total household size(male/female/children) M. F. C.

Num .of educated persons in Household

Primary and secondary occupation of HH

Education of farmer
No. of years of experience in cultivation of paddy
Total own land
Total operational land

Soil type (black/red)

Land type(low/up/medium)
If irrigated source of irrigation
(water pump / canal/ combination)

Variety sown (traditional/ HYV/ Hybrid)

62
Source of seed (farmer/dealer/ICAR research
station/SAU/KVK/PACS)
1.
Other crops cultivated 2.
3.

Crop rotation followed (yes/no)

Distance from nearest market

3) Where do you purchase of fertilizer and pesticides?

a. Dealer/shopkeeper b.Govt agencies (co-operatives) c. Middleman d.Others
4. Cost of cultivation:
Number of labors
Particulars qty Cost Cost Total cost
Human Bullock Machinery
Land preparation

FYM/Manures cost

Seed cost
Sowing cost
Fertilizer cost
Plant protection
cost
Inter culture

Weeding

Irrigation cost

Harvesting

Land rental value

(per acre)
Other costs (if any)
Total cost

5) Source of labour?
a. Family labour b.Hired c.Combination (family &hired) d.Permenet

63
6) Source of machinery used?
a. Own machinery b. Hired machinery c.Other any

7) What do you source of credit for paddy growing (production/equipment/special

finance/development/household)
a. Bank b.Moneylender c.Co-operative d.Other

8) To whom do you sell your produce directly?

a. FCI b. Miller c.Co-op eratives d. Middlemen e .consumer

9) What are the constraints in marketing?

a. Lack of profitable marketing channels b. Limited transport facilities

c. Fluctuating market prices d. Timely introduction of MSP

10) In your opinion, who is getting more benefits?

a. Producer b. Miller

c. Middle man d. Whole Sellers/Retailers

11) How do you get information about prices?
7
a. News paper b. Tele visio n c. Neighbor farmer’s d. Middlemen

12) DO you get incentive for good quality? Yes/No

13) Do you find any price fluctuation in even one market? Yes/ No

14) Who is responsible for that fluctuation in your opinion?

a. Middleman b. Stockiest c. Govt. d. Other

15) Any Suggestions to overcome these problems.

64
 APPENDIX-B
Miller — Questionnaire

SUPPLY CHAIN ANALYSIS OF PADDYY IN TELANGANA

Name
Mill name
Village
District
Address:
Mobile number

1. Distance from the mill to the case study villages.

2. Processing capacity of the mill (tones of paddy/day).

3. Installation year of the mill

4. Installation cost:

Machinery cost:

Loan amount:

Interest rate: Loan period:

5. Life time of the mill:

6. Milling recovery per 100 kg paddy

7. Total quantity of paddy purchased during 2014

Clean rice (head rice yield- HRY) Kg

Broken rice Kg

Rice bran Kg

8. Total quantity of paddy purchased during 2014

Place of purchase Quantity (Qt) Price /Qt Payment period

65
 Farm gate

Middlemen/ traders

Mill gate

9. Total quantity of paddy sold during 2014

Sold to Quantity (Qt) Price /Qt. Payment period

FCI

Govt Agencies

Wholesalers

Retailers

Consumers

9. Cost of milling: /Qt

10. Other costs involved in milling

11. Major constraints involved in paddy milling:

66
 APPENDIX C

Retailer-Questionnaire
SUPPLY CHAIN ANALYSIS OF PADDYY IN TELANGANA
Name
Village
District
Address:
Mobile number
1. From whom you purchase rice

a. Farmer b. commission agent

c. wholesaler d. miller

2. Do you prefer to purchase rice?

a. Purchases of paddy then milling at your own risk.

b.Prefers to buy rice directly from farmer/ miller/ wholesaler

3. If, do you prefer to farmer when do you contact the farmer for procurement of
paddy?

a. Before sowing

b.At the time of harvesting

c.At the time of marketing.

4. Total quantity of paddy purchased during 2014.

Source Average quantity (Qt) Average prices /Qt

Millers

Wholesalers

Retailers

Consumers

67
5. Total quantity sold during 2014.
Payment
Sold to Quantity (Qt) Price /Qt
period
Millers

Wholesalers

Retailers

Consumers
6. Costs involved

Storage
Transportation(Cost / Qt) Labour (Cost /Qt)
(Cost / Qt)

Owned
Hired

7. Storage losses during retailing

8. Major constraints involved marketing
Procurement
Storage
Marketing

68
 APPENDIX D

Middlemen/CommissionAgent—Questionnaire
SUPPLY CHAIN ANALYSIS OF PADDYY IN TELANGANA
Name
Village
S
Market area
District
Address:
Mobile number

` 9. Area covered in your district during 2014 (no. of villages).

10. When do you prefer to contact the farmer for procurement of paddy?
iod d. Before sowing
Pri e. At the time of harvestig
f. At the time of marketing
11. Total quantity of paddy purchased during 2014.

Quantity Price Payment period

12. Total quantity sold during 2014.

Payment
Sold to Quantity (Qt) Price /Qt
period
Millers

Wholesalers

Retailers

Consumers

7
69
 13. What do you prefer?

a. Buying from farmers and selling to the millers.

b. Charging commission for the service(if yes, / Qt)

c. B o t h

1 4 . P ad d y so ld d u r in g

a. Current season b. Stored for better price

15. Costs involved

Storage
Transportation(Cost / Qt) Labour (Cost / Qt)
P (Cost / Qt)
S
M Owned

Hired

16. Major constraints involved in marketing

Procurement

Storage

Marketing

70
71