INTRODUCTION The concept ‘Rural’ and ‘Marketing’, though used very frequently in various forums, have eluded any

precise and non- controversial definitions. When we join them, the resulting concept ‘Rural Marketing’ means different things to different persons. This confusion leads to distorted understanding of the problems of rural marketing poor diagnosis and, more often than not, poor prescriptions. The Indian rural market with its vast size and demand base offers great opportunities to marketers. Two – thirds of countries consumers live in rural areas and almost half of the national income is generated here. It is only natural that rural markets form an important part of the total market of India. Our nation is classified in around 450 districts, and approximately 630000 villages, which can be sorted in different parameters such as literacy levels, accessibility, income levels, penetration, distances from nearest towns, etc. Rural marketing and urban marketing are identical as regards basic marketing structure. However, rural markets and rural marketing have special features and dilemmas as compared to urban markets. The rural markets offer a great scope for a concentrated marketing effort because of the recent increase in the rural incomes and the likelihood that such incomes will increase faster because of better production and higher prices for agricultural commodities. The rural markets dominate Indian marketing scene and need special attention for the expansion of marketing activities and also for providing better life and welfare to the rural people. Given the development, which has taken place in the rural areas under the five- year plans and other special programmes, today the rural market offers a vast untapped potential. Development programs in the field of agriculture and allied activities, health education, communication, rural electrification, etc have improved the lifestyles of poor and the illiterate and some market agencies forecast the rural demand will supercede the urban demand in the near future.

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Profile of Rural Marketing 1. Fast changing pattern and demand During the last decade the rural consumers were in need for low end products which would meet their basic demands and necesities. But of lately due to change in technology rather advancement in technology the demand for people have also changed and the buying pattern which initially comprised of basic products have now shifted to luxiorous products. 2. Large and scattered market In the 1st place, in terms of number of consumers, the rural market of India is a very large market ; it consists of more the 600 million consumers. The second aspect is that geographically, it is a vast market. Practically the role of India, barring the metropolitan cities and towns constitute the market. It is also highly scattered market: the consumers are scattered over 5,70,000 villages spread through the length and breath of the country. In terms of business generated too, it is a big market; 22000 crore rupees worth of non-food consumer goods are being sold per year in the market at present.

3. Heterogeneous market It is not as if the whole of rural India can be taken as one homogenous entity. There is a great deal of difference among the various states in this regard. A study conducted by IMRB provides some clue to the relative status of the rural areas of different states. The study provides development index points for each state in the country collected village level data on various parameters such as availability of health and education facilities, the nature of facilities, availability of public transport, electricity transmission, banks, post offices, water supply and so on. A weight was decided upon for each facility, by type, based on the relative importance of that facility in industry to the extent of development reached by that village. The study has demonstrated that while the average village in India has 33 2

development index points, Keralas average 88; Bihars is just 22; MP, Rajasthan and UP are close to Bihar; and states like Maharashtra, Haryana, Karnataka range between 40 and 50. 4. Demand, Seasonal and Agriculture Dependent Regarding the nature of demand for various products, it can be seen that the demand is heavily dependent on agriculture. And as a natural corollary, it is seasonal in character. It is irregular as well, since agriculture in many parts of India still depends on the vagaries of the monsoon. Rural demand is not only harvest linked but also festival linked – the festivals often coinciding with the harvest. 5. Characterised by Great Diversity The rural consumer of India are also vastly diverse in terms of religious social, cultural and linguistic factors. 6. Steady Growth Despite Inhibiting Factors Despite several inhibiting factors, the rural market of India has grown steadily through the years. This is evident from the data presented earlier. Not only has the market grown in quantitative terms, but qualitatively too, it has undergone a significant change. Many new products have made their entry in to their rural market basket. The upper segment in particular have started buying and using a variety consumer products which were till recently unknown in the rural. In fact the impression that the rural market is confined to certain traditional consumer product and agri-inputs has totally lost its validity in today’s context.

Profile of Rural Consumer 1. Size of rural consumer population:

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00 in crores 64. Rajasthan and Kerela. which is used over the years by the rural people.4 total 76 24 100 The table shows that now 76% of India’s total population is rural. low standard of living.81 to total 80 20 100 in crores 50. Significant Aspects of Rural Consumer Profile Coming to consumer characteristics. And there are also states like Bihar and Orissa where as much as 90% of the total population is rural. 2. Rs. in several states like Uttar Pradesh. culture and even superstition strongly influence their consumption habits. low per capita income. religion.62 65.82 total 76.90 10. it can be seen that in general sense. Madhya Pradesh. Colgate Herbal’s priced at Rs. If we consider the state level picture.41 for a 200gms tube is an attempt to sell value added toothpaste at the lower end. This is a variant for the boring white Colgate cream.22 for a 100gm and Rs.1 20. Also.The size of India’s rural consumer group can be understood from the details provided in the following table: 1971 1981 1991 Population Percentage Population Percentage Population Percentage in crores Rural Population Urban Population Total Population 43. since the literacy level is low it’s advertising campaign never gave emphasis to the same old calcium content rather this time more over giving importance to the latest technology and the natural qualities that are well defined by the character “Billoo” in the advertisement.3 23. By and large. low purchasing power.20 15. the rural consumers of India are a tradition bound community.7 100. where the Indian brands are hoping to shut the multinationals.3 84.12 for a 50 gm. low literacy level and overall low economic and social position are the traits of the rural consumers.91 54. 4 . the rural population constitutes more than 80% of the total population.

Why is it the leader in the dental care products? It did not even leave the rural area with minimal of 200 people per village as compared to the heavily populated area with an average population of 5000 people per village.200 cities and towns. Every year 60 lakh is getting added to the literate population of Rural India.5 lakh villages or 25% of the total are in the category of 200 people or less.000 villages. Location Pattern of Rural Consumers Whereas the urban population of India is concentrated in 3. 4. Rural Income 5 . it has established itself in such a way that people accept Colgate as the tube with red and white box. Looking at the second point there’s something for the company for the taking. which is highly concentrated. More than 3 lakh villages or more than 55% of the total number of villages are in the category of 500 people or less and more than 1. Two aspects need to be specially emphasized: (1) In absolute numbers. unlike the urban demand. rural demand is scattered over a large area. Now. Take the case of Colgate again.000 villages only 6.000 people each. they haven’t changed the color of the box for say a decade and a half. and (2). 5. Coco Care had a brilliant strategy to market itself in different Indian villages. Literacy level It is estimated that rural India has a 23% literacy rate compared with 36% of the total country.3.70.300 have a population of more than 5. The adult literacy program launched by the government in the rural areas are bound to enhance the rural literacy rate in the years to come.5 crore of literate people in rural India compared with 12 crore in urban India. Statistics show that out of 5. there are 11. 70. the rural population is scattered over 5. Hence. Say in Maharashtra it had flyer distribution done in Marathi as a medium of communication. depending on the most spoken language over there. The inference is clear.

Potential and Changing Pattern of Rural Marketing Consumer products where rural consumption is more than urban consumption are Bicycles Safety razor blades Silk Clothing Books & Stationery Woolen Clothing Other Consumables Generators 80% Rural 67% Rural 59% Rural 55% Rural 53% Rural 53% Rural 95% Rural 20% Urban 33% Urban 41% Urban 45% Urban 47% Urban 47% Urban 05% Urban Products where rural consumption growth rates are higher as compared to urban 6 . The habit is particularly widespread among salary owners and self employed non-farmers. The commercial banks and the co-operative have been marketing the saving habits in rural areas for quite some years.An analysis of the rural income pattern reveals that nearly 60% of the rural income is from agriculture. as much as 70% of the rural house hold are saving a part of their income. Today. Rural Savings Statistics reveal that in recent years. Anything that contributes to agricultural prosperity will directly result in increase income for the rural population and the consequent increase in their spending capacity. 6. Evidently. rural prosperity and the discretionary income with the rural consumer is directly tied up with agricultural prosperity. as this being that golden season for the farmers.rural demand is more seasonal. Take the example of Hero Honda Splendor. rural consumers have been drawn into the saving habit in a big way. The pre dominance of agriculture in the income pattern has one more significance ie. it had a major promotion done in the crop-cutting season. Since the major income in the rural areas is from agriculture the demands turns out to be seasonal.

it would be totally naive to think that any firm can easily enter the market and walk away with a sizeable share of it. 5. The enterprise has to grapple with these problems and find innovative solutions to them. only because a few pioneering firms correctly understand these problems and came up with innovative solutions to them.   Tapping the Rural Market Problems While the rural market of India certainly offers a big attraction to marketers.markets are as follows: 1. 7. A firm seeking a share of this market has to work for it. 7 . 2. Literacy has brought about a change with respect to the rural outlook. that we now see a wonderful trend of growth in rural markets. 3. New employment opportunities due to change in government policies has resulted in round the year income for at least a certain section of the rural population. The savings pattern of rural India has resulted in better buying power for the rural consumer. as the market bristles away with a variety of problems. In fact. Green Revolution and after the Indian farmer has become prosperous. 6.    Packed Tea Alcoholic Beverages Tobacco Products Medicines Detergent Powder Soap Cake/Bar Detergent Cake/Bar Due to television the rural consumer is aware of international products. 4.

h. Sales Force Management In Rural Markets 4. f. j.What are these problems? How are they peculiar to the rural market? And how does a firm solve them? The existing problems in rural marketing are: a.   Transportation: Inadequate railways Bad or no roads 8 . i. c. b. Managing Physical Distribution In Rural Markets The main problems in physical distribution in the rural context relate to: a. Physical Distance Language/Culture Accessibility Money/Expensive Lack of Human Resource Competition Technology Rules & Regulation Lack of Information Size of the Market Buying Power Image Major Problems in Tapping the Rural Markets and the possible solutions are as follows: 1. d. l. e. Marketing Communication In Rural Markets 1. g. Managing Physical Distribution In Rural Markets 2. k. Channel Management In Rural Markets 3.

Many parts in rural India have only kacha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. As regards carriers.   Warehousing Problems No electricity (only 35% of India have electricity) Unavailability of godowns Marketing purposes Communication Problems Only 3% of India is connected by phones Unreliable post and telegraph facility 1947 – 1 postman for 9000 people 2000 – 1 postman for 47000 people Transportation problems Transportation infrastructure is quite poor in rural India. many parts of the rural India remain outside the rail network. Because of these problems in accessibility. the most common mode is the animal drawn cart. Though India has the 4th largest railway system in the world. delivery of products and services continues to be difficult in rural areas. nearly 50% of the 576000 villages in the country are not connected by roads at all. Accidents in India 1per day and 1 in 4 days complete loss to property and some life b. As regards road transport.    c. Immediate carriers or cargo operators Eg. Warehousing problems 9 .

Communication problems Communication infrastructure. Larger pipeline stocks 10 . they provide the warehousing service only to their members. lack of proper communication infrastructure poses difficulties. which form the third tier. a business firm has to manage with the CWC/SWC network which stops with the nodal points. As such. especially in physical distribution. is quite inadequate in rural areas. physical distribution costs get escalated with 80 per cent Of the total rural consumers living in the 'less than 1. The central warehousing corporation (CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in public warehousing in India. in such cases. The scattered nature of the market and its distance from the urban based production points. And the same is the case with rural godwons. Cost-Service Dilemma Gets More Acute The effect of these problems on the physical distribution front is certainly felt by any business firm venturing into the rural market. And there is no public warehousing agency in the interiors of rural India. the commercial advantages of operating through a public warehousing agency like CWC/SWC are lost to the firm. They adversely affect the service aspect as well as the cost aspect. The warehouses at the mundi level which constitute the second tier in the warehousing chain are mostly owned by cooperatives. They go only upto the nodal points or major market centers. consisting of posts and telegraph and telephones. Of course. None of these tiers function as public warehousing agencies . Since communication is the first requirement of efficient marketing.000 people' category of villages. warehousing and communication. Maintaining the required service level in the delivery of the products at the retail level becomes very difficult. or it has to establish its own depots or stock points run by its stockists / distributors. At the same time. do not extend their network of warehouses to the rural parts. Business firms find it quite difficult to get suitable godowns in many parts of rural India. compound the difficulty arising from the constraints in transportation. there are special problems in the rural context.In warehousing too.

Bullock cart has a special role in rural distribution. While it may not be necessary to have a netw6rk of own stock points throughout the marketing territory. they cannot take the route of ‘simply consigning the goods’ and retiring the bills through banks. as compared to the urban market. In fact. It means higher costs of transportation. Solving of Physical Distribution Problem The marketers have to find solutions to the distribution problems. Water transport too. Business firms operating in the 11 . trucks for medium/ short distance movement and delivery vans and bullock carts for local haulage should effectively serve the purpose. higher inventory carrying costs and transit and storage losses. the experiences of some companies operating in the 2rural market show that the cost of distribution in rural areas is two and a half times that of urban areas.and bigger inventories in warehouses are the natural outcomes of these constraints. costs of distribution channels too are much higher in the rural context. Some of the solutions are as follows: The Firm can Share Physical Distribution Responsibility with Its Stockists or C & F Agents With a view to keeping the costs low. But experience shows that firms with major aspirations in rural marketing cannot depend on such remote control operations. And as we will see in detail in the next section. While deriving solutions.' For them. effective presence in the market is a must. Combining different modes of transportation may be advantageous As regards transportation. the total distribution cost per unit is higher by as much as 50 per cent on an average in the rural market. some firms try out remote control marketing. Consequently. the marketers have to keep in mind cost and the service to the consumers. the system of rail-cum-trucks for long distance movement. the firm should have a network of stockists or clearing cum forwarding agents(C&F agents) at strategic locations for facilitating physical distribution can be shared by the firm and the stockists. has a role in specific areas.

Besides resolving the problem of product delivery. But the cost of operating such vans is quite high. they knew that such a level of business would accrue only out of a sustained and long term marketing effort and market presence. have successfully experimented with company delivery vans. the van also serves certain vital secondary purposes – it enables the firm to establish direct sales contact with thousands of rural consumers. 12 . as well as the will to stay in the market. Syndicated distribution may be of help in such cases. The delivery van here becomes a syndicated service. Company delivery van Companies like Hindustan Lever. The stockiest can own or hire vans or trucks and accordingly distribute the goods to the retailers and the dealers. Tomco Brooke bond – Lipton and ITC who are the pioneers in rural marketing in India. Assistance form stockiest The Company can also get assistance from stockiest. the firms can come together and encourage an independent agency to operate such delivery vans with a view to hiring its services. it also helps the firm in sales promotion. They are available in plenty and they are ideal for the rural roads. the idea cannot be easily implemented by firms with relatively less resources. they were not just solving a transportation problem. Syndicated distribution While the company delivery vans are very useful in rural distribution. for resolving the distribution problems in the rural market. And they were viewing the costs as a long term investment. Through the system of operating the vans. And the proposition can work only if the market/ area assures business potential enough to cover such costs. In the case of HLL. The delivery van takes the products to the retail shops in every nook and corner of the rural market.rural market of the country have to appreciate that the bullock carts play a major role in secondary transport. The company should help finance such kind of plant and projects. etc. they were developing the market. ITC. These firms had the resources.

The marketer must make the government must make the government realize the importance of rural markets and the corresponding network of post. higher costs and administrative problems In the first place. Here the cooperative rule can also help provide good warehousing facilities in rural areas. A system can be devised where in a group of companies can come together and have common warehousing facilities. compared with the urban context. Locally there are examples of private telephone exchanges that have worked wonders for specific areas. The long distances to be covered from the product 13 . Recently the government has alone sent corporate partnership in printing and disembursing postal and telegraphic material. Sorting out communication problems The communication problems in the villages can be sorted out (mostly) by the government alone. of tiers. Problems in Channel Management Multiple tiers. These have to be provided either by the government or the companies operating in particular areas. At present the CWC and the SWC concentrate their warehousing activities only at major markets. However the experiment doesn’t seem to have caught on. This task too is beset with many unique problems. There is an urgent need to have good warehousing facilities at local market to. However small exchanges have limited scope. telegraph and telephones. Channel Management In Rural Markets Organizing an effective distribution channel is the second major task in rural marketing. 2. the distribution chain in the rural context require large no.Central Warehousing Facility The Central Warehousing Corporations (CWC) and The State Warehousing Corporations (SWC) should also pay attention in providing suitable warehousing in rural areas. The smaller markets are handled by cash starved gram panchayat’s or Satellite municipalities.

there is the problem of availability of dealers. The scattered nature of the market and the multiplicity of the tiers in the chain use up the additional funds the manufacturer is prepared to part with. And no additional remuneration accrues to any of the groups. sales outlets in the rural market at the retail level suffer from poor viability. greater dependence The scope for manufacturers direct outlets such as showrooms or depots is quite limited in the rural market unlike in the urban context. But controlling such a vast network of intermediaries is a difficult task. it involves the manufacturer own warehouses/ branches office operations at selected centers in the marketing territory. A familiar paradox in rural distribution is that the manufacturers incurs additional expenses on distribution and still the retail outlets find that the business is not remunerative to them. Even if the firm is willing to start from scratch and try out rank newcomers. And on top of them. Dependence of the firm on the intermediaries is very much enhanced in the rural context as direct outlets are often ruled out. Such multiple tiers and scattered outfits push up costs and make channel management a major problem area.points and the scattered locations of the consuming households cause this situation. the choice of candidates is really limited. It becomes expensive as well as unmanageable. Control is almost indirect. And because of these factors the firm has to be more careful while selecting the channel members in the rural context. the distribution chain in the rural context needs the village level shopkeeper. At the minimum. Scope for manufacturers own outlets limited. Many firms find that availability of suitable dealers is limited. Moreover. Non availability of dealers In addition. Poor viability of the retail outlets Moreover. the business volume is not 14 . the mandi level distributor and the wholesaler/ stockists in the wholesalers / stockists in the town.

the rural dealers are handicapped in all these aspects. The Existing Market Structure It has been estimated that the Indian rural market is composed of 22. Possible Approaches for Effective Channel Management in the Rural Context Taking due note of the difficulties. The stock points belong to either the manufacturer 15 . cost of transportation.adequate enough to sustain the profitability of all the groups and the retail tier is the worst sufferer. Inadequate bank facilities Distribution in rural markets is also handicapped due to lack of adequate banking and credit facilities. Rural outlets need banking support for the three important purposes:  To facilitate remittances to principals and to get fast replenishments of stocks. cost of sub – distribution and cost of servicing the outlets are all very high in the rural market. let us see how a firm can go about these tasks. cost of selling. They find it uneconomic to operate outlets in rural areas as in their perception. It is estimated that there is only one bank branch for every fifty villages. One retail shop serves on an average 60 to 70 families in the rural areas. The structure involves stock points in feeder towns to service these retail outlets at the village level. Analysis shows that many companies hesitate to venture into rural markets largely because of the problems on the distribution front.000 primary rural markets and 20 lakh retail sales outlets of which nearly one lakh are fair price shops of the Public Distribution System (PDS).  To receive supplies through bank  To facilitate securing credit from banks As banking facilities are inadequate in the rural areas.

The Private Village Shops For a large variety of consumer products. The 'village shandy' is a widely used channel of the rural market. the stock point in the feeder town is the key to rural distribution. considering the many handicaps with which the village shopkeeper in India has to operate. with a major chunk constituted by the private shops. The Available Channel Choices Today. they are also the cheapest and the most convenient channel to align with.02 million sales outlets in rural India. there are 2. of the PDS The village shandy or weekly market Out of the above. As such. This is quite striking. the cooperative societies are mainly concerned with the distribution of agricultural inputs and the FPS with the distribution of essential commodities consumed by the common man. But its role in marketing branded products is somewhat limited. the channel types that are available in the rural markets are as follows:     The private shops The co operative societies The Fair Price Shops (FPS). we shall examine in some detail how the private village shops are utilised by the business firms in their rural distribution effort. The longer lead time for replenishments from the urban based production point 16 .or the marketer / distributor for the area. In fact. That means a larger inventory. the private shops are the main channel in the rural markets. According to a census of retail outlets carried out by the Operations Research Group(ORG). the private village shops are seen to be one of the cheapest distribution channels in the world. (co operatives or private). He is forced to deal in a large number of products in order to make his operations viable. In either case.

enlarges the inventory holding further. Even this level of turnover is generated only when he extends credit to his customers. the cost of which neither. All these factors lead to the blocking up of his capital. requires assiduous efforts on the part of the firm. And he incurs additional expenses for the frequent trips he has to make to the supply points in the towns/market centres. The average daily turnover of a rural shop is often less than Rs200. The scope of compensating for the higher costs through increased mark up is rather limited. it is mainly this human labour. And he keeps his shop open for 365 days in the year with the support of his wife and children and ensures that he does not miss a single possible sale. the village shopkeeper operates quite efficiently. He cannot add a higher mark up on many of the products he is handling simply because the consumer he is catering to cannot afford to pay a higher price. It has to select its outlets from out of existing shopkeepers or select a few freshers and appoint them as the outlets. But in spite of all these handicaps of low turnover. The choices are usually confined to the following categories:  Existing traditional private shops Money lenders willing to branch off to trade 17 . It is quite natural that firms seeking an effective presence in the rural market willingly embrace the private village shops as the major component of their distribution outfit. He keeps his shop open for 14 hours a day compared to the 8 hours service provided by the urban shops. high inventory costs and inadequate marketing support from the principals. gets accounted or paid for that makes the traditional private village shops of India one of the cheapest distribution channels in the world. Nor is he able to make up by increased turnover. In fact. the village shops function as an effective bridge between the scattered rural consumers and the urban-based producers. He also puts in hard work. he has to carry the inventory over a longer period of time. He achieves this feat largely through his inborn ability for astute management of money and other inputs. And as his sales are not uniform throughout the year. however. Organising one’s channel out of these private shops. And on their part.

volume of business does not shrink. If twenty retailers operate in the network of an original stockist. And at any point of time. Out of the retailers some remain attached to the original stockist and others are attached to the new stockists. the firm elevates them as stockists. in practice. but care is taken to see that his. The sales volume of the retailers will vary depending on the potential of the area covered and the capacity of the dealer concerned.  Land owners willing to branch off to trade Educated Unemployed persons The firm has to select personnel from among the above groups depending on the product line and other relevant factors and then train them and develop them into competent dealers. five or six of them get elevated over a period of time as stockists. some retailers grow in terms of business turnover. They take care of financing goods. If such retail points also happen to be transportation centres within the feeder town area. Under this system. warehousing of goods and sub. The area of operation of the original stockist shrinks in this process. Satellite Distribution A concept that has come to be known as satellite distribution can be tried in developing a distribution channel in the rural market. service convenience and other relevant factors. depending on location. The process continues as long as the market keeps expanding just like the second-generation stockists. the firm appoints stockists in feeder towns. Hence the name satellite distribution. enough retail points invariably hover around a particular stockist. This is achieved. The firm also appoints a number of retailers in and around the feeder towns and attaches them to the stockists. on account of the growth in demand and deeper market penetration. Over a period of time. to start with. The stockists take care of the sub-distribution job on the terms and conditions determined by the firm. The firm supplies the goods to the stockists either on cash or on credit or on consignment basis.distribution of goods in the area covered by the feeder town. a set of third generation stockists get established in course of time. The main advantage of this system is that it facilitates 18 .

Lipton India. some stocks move directly to village shops.market penetration in the interiors of the rural market. And this mammoth distribution outfit endows Lipton with a unique 'bazaar power' in the rural market. From these stock points.000 dealers and 230. their distribution network is the largest rural market network.000 redistribution stockists. the stocks reach the remotest rural markets going through the semiwholesalers. (HLL) and Lipton India who are pioneers in rural marketing in India. However.000.000 selling outlets consisting of 430. The network is indeed mammoth in width and depth of distribution and market coverage. the motivation of the earlier generation stockists is not destroyed due to overzealous and premature elevation of the retailers into stockists. The products are sold at a uniform price in 3. 19 . The Experience of Hindustan Lever and Lipton India We can understand some of the practical dimensions of running an efficient distribution channel in the rural markets by analysing the experience of Hindustan Lever Ltd.000 rural locations.500 towns and 70. The company's salesmen spend 30 per cent of their time visiting the rural dealers and consumers. the products reach 3. Lipton's network alone is composed of 660. The salient features of HLL's rural distribution system are as follows: From the factories.500 stockists located in towns with population of upto 20.000 catering points serviced through a network of 3. more than 70% of Lipton’s sales comes from semi. Many of the 230.260 salesmen. In fact. Special distribution methods are used to suit specific regions. While the major part of sales turnover of most big business firms comes frorn 12 big towns in the Country With a population of more than one million. From there. also has an extensive rural marketing outfit.000 catering points are serviced each and every day and others serviced every week by a large sales force comprising 1. specific climatic zones and villages with specific conditions of accessibility. the products move to about 40 C & F agents. now Brooke Bond-Lipton India Ltd.urban and rural areas and only 11% of it sales comes from the 12 big towns. the firm must ensure that in the process. today.

Loans to this effect may be provided on a low interest basis.  The firms and the government should launch a drive to develop retail outlets and arrange for loans for the retailers who are willing to take up ownership. The companies can provide financial assistance in terms of credit and initial write off. Quite often. The stockiest can directly supply to cooperatives. Assistance as far as handling and training in areas alien to the rural retailer should be provided free of cost. the firm -must appreciate that maintaining a network of retail outlets in the rural market becomes a viable proposition only over a period of time. 3.  Other necessary infrastructural facilities like construction material. etc should be provided by the manufactures and the government in a joint venture type basis. Infact an amendment should be suggested in a cooperative act that may provide for a further discount to such stockiest for a percentage of goods supplied elsewhere. The firm can assist him in this regard. promoting thereby viability of the retailer’s operations. Sales Force Management In Rural Markets 20 .it may collaborate with other firms and make a joint retailing offer. Here the cooperatives act may benefit the stockiest that does not have to pay local taxes for the product that he supplies to the cooperatives. know how.  Village cooperatives must be encouraged to handle distribution of consumer goods. In fact the firm can go a step further .Promoting the Viability of the Village Level Outlets Promoting the viability of the retail outlets is an important part of channel management in the rural context. Secondly. In the first place. The firm must be willing to view rural marketing as a long-term venture. the firms must help improve the viability of the retail outlets by encouraging and helping them deal in a number of product lines. The company should conduct special workshops and training jamborees and refreshers for an enterprising rural retailer. the retail dealer is not in a position to organise such activity by him.  Adequate training may be provided to the retailers to improve their sales efficiency.

It is common knowledge that the rural areas lack modem amenities compared with the urban areas. has located one of its salesmen in Khategaon. some firms locate their salesmen in towns and allow them to cover the rural areas assigned to them from these towns. Rural Marketing Calls for Some Unique Traits on the Part of Salesmen While the basic traits of personal selling such as empathy.Let us now turn to personal selling and sales force management in the rural context. Since the cultural pattern of rural communities differs from one another. Willingness to Get Located in Rural Areas First of all. As a general rule rural marketing involves more intensive personal selling effort compared to urban marketing. Lipton India for example. The company proudly cites this practice as one main source of its bazaar power. To circumvent this problem. Experience has also shown that successful rural marketing firms locate their rural salesmen right in the midst of the rural market to be covered. It takes three hours by bus to reach the location from Indore Similarly. Because of this factor. only those who are genuinely happy in living and working in the villages can become good rural salesmen. Cultural Congruence Location is just the starting point. salesmen are generally reluctant to work in rural centres. an interior place in Deva district in Madhya Pradesh. the latter require certain additional traits and capabilities in order to match the peculiar conditions of the rural market. a cultural background that is in consonance with 21 . which can be reached (only after a 2 1/2 hours journey by bus from Coimbatore followed by half an hours walk through paddy fields. it has located a salesman at Anthiyoor in Tamil Nadu. The salesmen must have proper acquaintance wi6 the cultural pattern of rural life in the given rural territory. communication skill and knowledge of selling techniques are required in equal measure by urban and rural salesmen. Experience has shown that such an arrangement does not produce optimum results. enthusiasm.

Capacity to Handle a Large Number of Product Lines The rural salesmen are often required to handle a much larger number of product lines compared with their urban counterparts. within each major language group. In urban marketing the salesmen are able to generate economic size of business through a limited number of product lines. usually do not generate economic volume of business if they handle just a few 22 . present a cultural convergence. the rural salesmen must have a great deal of patience. as their customer is traditional and cautious person. The rural salesmen on the contrary. the colloquial expressions and speaking manners vary considerably from locality to locality. for. they must help them eliminate items that are outside their specific requirements and those that are beyond their financial reach. Knowledge of the Local Language Another special requirement is that the rural salesman should be well versed with the local language. Urban markets in contrast. he must be well versed in the specific lingo and idiom of the local area/community. He may have to spend a lot of time with the customer and make several visits to him to gain a favourable response from him. Rural salesmen must also be able to guide the choice of products. For example. Attitude Factors Attitude factors are of particular significance in the rural context. he has to go one step further. Perseverance is another essential trait. in rural India. As such. On the contrary. They should not hook the customers into buying all the products in the catalogues. Whereas his urban counterpart can successfully manage with English and a working knowledge of the local language. the rural salesman needs a strong background of the local language. In fact.the culture of the given rural community is a specific requisite of success for the rural salesmen. their employers do not have to load them with too many items. It will not be possible for the rural salesman to clinch the sale quickly.

using the consumption pioneers and opinion leaders. Often. the items differ widely from one another. And mere classroom training will not meet the requirements of orientation of rural salesmen. Whereas the urban salesmen move in highly concentrated and compact market segments. the rural salesmen have to cover larger territories and scattered customers. the task of sales force management too carries certain added dimensions in the rural context. in motivating them and in developing them the sales manager has to adapt to the unique requirements of rural selling. On the other hand. In other words. the sales manager may have to devote a longer time. the products concerned may be very new in the rural context. Solving Sales Force problems by managing sales force in rural areas Managing the Rural Sales Force In tune with the special requirements which the rural sales force has to meet. he must endeavour to introduce them in the rural areas through creative selling. The rural salesmen cannot sit back and say that it will take. several years for a particular product to penetrate the rural market. In selecting the salesmen. in giving them orientation. For example. And they need to be educated about the rural marketing environment in addition to being trained in salesmanship and selling techniques. The salesmen need comprehensive on the job coaching in selected village markets. The rural salesmen are also required to travel more compared with their urban counterparts. Their workload and strain could therefore be more. The rural salesman has to be a carrier of a developmental message to the less privileged rural community. Rural marketing also presupposes the delivery of a new standard of living to the rural masses. the rural salesmen are required to become a jack of all trades. It is essentially developmental marketing. while providing orientation to the newly recruited rural salesmen.products. The rural sales manager must also support his salesmen with non- 23 . They are compelled to handle a large variety of items. Greater Creativity Rural selling also involves greater creativity. Quite often.

supervising them. the printed word has limited use in the rural context. For example. their cultural barriers and taboos and there overall economic backwardness adds to the difficulty of the communication task. It has been estimated that all organised media put together can reach only 30 per cent of the rural population of India TV is an ideal medium for communicating with the rural masses. Marketing Communication In Rural Markets Constraints in Marketing Communication in the Rural Context Marketing communication. The constraints of media further compound the difficulty. As regards the print media. attending to their official and personal problems and above all. the circulation is limited. Rural communication has to necessarily be in the local language and idiom. The literacy rate among the rural consumers being low. motivating them for better results in an exacting task for the sales manger. The situation is further compounded by the linguistic diversity. In short. the tradition bound nature of the rural people. Even in areas reached. the various publications reach only 18 per cent of the rural population. and promotion too. There are many constraints emanating from the profile of the audience and the availability of media. Rural salesmen also need more intensive sales training & as they have to handle a variety of products. 4. In addition to the low level of literacy.000 rural locations. Administering such a large and scattered sales force. Hindustan Lever's rural salesmen have to cover 70. And as already 24 . poses problems in rural markets.conventional means of market promotion suitable to the rural consumers. supporting them in sales calls. especially when the firm has big stakes in rural marketing and when it operates on a nation wide basis. But its reach in the rural areas is limited even today. sales force management in the rural context becomes an exacting job. coaching them on the job.

1. Therefore usage of print media or for that matter any print material is redundant. high price premium soaps. There is an indifferent attitude towards the purchase of certain goods such as packed food. These factors make rural communication more expensive. Rural communication has also become quite expensive. In addition. the low literacy level of the rural population acts as a further inhibitor in the use of the print media in rural communication. maker. altering attitudes and changing behaviour. For rural communication to be effective. The literacy rate is low. the crux of marketing communication in the rural context is one of finding a medium' that will deliver the required message in a cost effective manner to target an audience that is predominantly illiterate. Media related problems. because they are used to the traditional way of consumption. Rural communication has to go through all the time consuming stages of creating awareness. b. It has been estimated that 33 per cent of the total cinema earnings in the country come from rural India. a. 2. In short. Cinema is relatively more accessible. 3. 1. repeat exposures is a must. About 30% of the rural masses can be reached through organized media There is social backwardness in rural areas. it also has to work against deep-rooted behaviour patterns. 1.mentioned. toothpaste etc. This implies that in most of the consumer durable segment the user is seldom the buyer or the decision 25 . and if the gap between exposures is long the message loses its edge during period. Promotion and Marketing (Communication) Consumer/market composition related problems. Moreover even the segment that can be serviced by printed material is multi-lingual in nature. hair oils.

 Hoardings in the market place Van publicity Village mela kind of events Sponsorship to drama troops Organizing as well as advertising lottery tickets Use of bus tickets as a method of advertising Post and telegraph publicity Effective point of purchase advertising Puppet shows (both sponsorship as well as advertising) Music rewards and mike announcements Interpersonal Media: Interpersonal media has a special advantage in rural marketing in the sense that it facilitates 2 way communication and interaction. Theoretically TV covers 25% of the rural population. viii. iii. ii. radio. Infact it is observed that rural buyers prefer face-to-face communication. vi. Solving of promotion and communication problems  Media Mix: Apart from the organized media like TV. The interpersonal media can be conducted in the following 26 . ix. But in reality the %’s can be still lower. vii. Newspaper and the press. radio about 90% and the press around 20%. iv. newspapers etc. v. x. the rural marketer or the advertiser is expected to make correct use of the following: i.such as TV. They take and adhere to advice from the seller in the most responsive manner. Radio.

Information centers or service centers where rural consumers can sort information and advice regarding the use of certain products such as agricultural inputs and machinery. House to house or door-to-door promotion campaign. Sponsoring local sports. iii.. festivals or cultural events. Motivating the Rural Consumer What works in the urban market may not in the rural areas that are with respect to marketing.manner: i.e. Pesticide used by the farmers are same or similar to what are used in urban households but have to be packed or packaged and distributed differently due to the differentiation in usage. Sponsoring product related quizzes and other contest in schools or at community centers. ii. Live demonstration about products. 1. Therefore the marketer must bring the right product to suit the needs of the rural consumer. In this connection the following can be considered motivating. given earlier the rural consumer prefers smaller packages this is because  The rural consumer buys in low quantity due to low purchasing power. Group meetings of consumer or prospects (prospective buyers) with the marketing people. Similarly water is the universal commodity i. Also pricing becomes a factor here. either piped or bottled for the urban consumer and canalled or irrigated for the rural farmer. v. vi. 27 . Packaging: Unlike the Eg. iv.

It should be noted here that the rural consumer is highly price sensitive and competition is not between competitors but with the fact of “no-use”. Naming a particular brand is an important activity. This is because the fragile rural consumer may loose faith in the product and may either resort to alternative brands or traditional products. Short. Pricing: The product pricing must be reasonable and must depend upon the quality of the product. sweet and simple brand names can work wonders with the rural market. Distributing to various rural areas is very expensive. features and serviceability in that order. He may also prefer packs that have fancied designs. At times marketers will try to experiment with brand names that have local connections. In no way. The rural consumer may prefer a pack with either dark or bright or both dark and bright colors in a contrasting combination. While designing the packages. 2. 3. Branding: The rural consumer prefers to buy nationally advertised brands as compared to local brands. 28 . The new product should not only excite him but also satisfy him. design and quality of the pack is of great importance. 4. As far as the quality of the pack is concerned he may not mind medicour packaging and even no packaging if this results in lower prices. The dimensions of the quality that are to be considered are durability. the marketer must ever even think of sacrificing quality or manipulating its winning combination dimensions. Brand names should be such that the rural consumers don’t find it difficult to pronounce and remember. the color. They consider or perceive powerful national brands to have more value than locally available brands. Secondly the rural consumer may be trying out the product and doesn’t like to be saddled by the larger quantities. Product Quality: It is of utmost importance. However the cost of this should not be transferred under any circumstances on to the rural buyer.

Agricultural Marketing Concept and Importance The study of agricultural marketing comprises all the operations. but in accelerating the pace of economic development. Increasing demands for money with which to purchase other goods leads to increasing sensitivity to relative prices on the part of the producers. from the farms to the final consumers. farm equipments. The agriculture marketing system plays a dual role in economic development in countries whose resources are primarily agricultural. raw materials and their derivatives. packaging and retailing to the consumers. transportation and distribution. storage. and includes pre and postharvest operations. agencies and policies involved in the procurement of farm inputs by the farmers and the movement of agricultural products from the farms to the consumers. ecological and economic constraints. middlemen and consumers. 29 . based on technical and economics considerations. diesel. pesticides. such as textiles. electricity and repair services which are produced and supplied by the industry and non-farm enterprises. agricultural sector requires fertilizers. assembling. both functional and institutional. storage. It is the marketing system that transmits the crucial price signals. and the agencies conducting them. machinery. Importance Agricultural marketing plays an important role not only in stimulating production and consumption. milling or processing. The expansion in the size of farm output stimulates forward linkages by providing surpluses or food and natural fibers which require transportation. grading. involved in the movement of farm-produced foods. A dynamic and growing. It involves all the aspects of market structure or system. The agricultural marketing system is a link between the farm and the nonfarm sectors. subject to socio-cultural. Agricultural marketing is the study of all the activities. and specialization in the cultivation of those crops on which the returns are the greatest. and the effects of such operations on farmers.

pulses and nearly all of the productions of cash crops like cotton. With the introduction of green revolution agricultural production in general and food grains in particularly has substantially increased. The producer is primarily concerned with selling his products. marketing acts as a line between production and consumption. qualities and beneficial goods to consumers and therefore. Any increase in the efficiency of the marketing process. Agriculture supplies raw materials to various industries and therefore. 7. as they remain surplus after meeting the consumption needs of the farmers. consumers and government that determine the cost of marketing and sharing of this cost among the various participants. 9. 10. 5. 2. Scientific. Approximately 33% of the output of food grains. quick means of communication and transportation has introduced specialization in agriculture. oilseeds etc. really brings about an increase in the national income. Agricultural Marketing is one of the manifold problems. 4. The interaction among producers. Marketing process brings a new varieties. The producer. marketing of such commercial crops like cotton. Agriculture once looked as a subsistence sector is slowly changing to a surplus and business proposition. 11. as India is an agricultural country and about 70% of its population depends on agriculture. oilseeds etc. Development of technology. sugarcane. middleman and consumer look upon the marketing process from their own individual point of view. systematic marketing stabilizes the price level. assumes greater importance. 6. A reduction in the cost of marketing is a direct benefit to the society. 30 . An improved marketing system will stimulate the growth of number of agrobased industries mainly in the field of processing. market functionaries. which results in lower costs of distribution at lower prices to consumers. 3. are marketed.1. sugarcane. 8. Most of the total cultivated area (about 76%) is to under food grains and pulses. which have direct bearing upon the prosperity of the cultivators.

12. They have little time or inclination for gaining knowledge about the marketing side of their operations. Marketing of agricultural produce is as important as production itself. These farmers cannot organize themselves so as to bargain on equal terms with buyers to operate on a large scale and have powerful organizations behind them. Its dynamic functions are thus of primary importance in promoting economic development activities and for this reason it has been described as the most important multiplier of agricultural development. A marketing system can become a direct source of new technical knowledge and induce farmers to adopt upto date scientific methods of cultivation. As a link between producers and consumers marketing plays an important role not only in stimulating production and consumption but also in increasing the pace of economic development. Further most of the Indian farmers have loans for sowing and are heavily in debt. Most Indian farmers are small cultivators. differ from area to area (region to region) and are certainly perishable. these small cultivators are unorganized and scattered all over the country. The problem of marketing agricultural produce has assumed added significance particularly after the advent of modernization in agriculture. Economically agricultural produce is inelastic because it is difficult to vary the output in response to the price. playing an important role in the economic development and stability of a country. Next. Marketing is therefore. vulnerable to failure. Agricultural produce is bulky in nature hence difficult to transport and very much vulnerable to the forces of nature. they produce crops that are seasonal in nature. Thus they are forced to sell their produce immediately after the harvest and that too in their own villages. The call to “produce more” 31 . Significance of agricultural marketing The 2 basic elements of agricultural system are production and marketing.

without providing efficient marketing machinery, which can ensure fare, returns to the producer-seller. Carries no conviction with the farmer. The United Nations conference on food and agriculture held in October’ 95 at Quepec says, “Marketing is the crux of the whole food and agricultural problems”. It would be useless to increase the output of food and would be equally futile to setup optimum standards of nutrition unless means could be found to move food from the produce to the consumer at a price, which is remunerative to the producer and within the consumer’s ability to pay. The cost of marketing agricultural produce forms a substantial percentage of the price the consumer pays for it. This cost includes expenses borne by the cultivators till the assembly stage and those borne by wholesellers, distributors and retailers. The total marketing cost cannot be considered independently without relating it to the ultimate price realized by the producer. The marketing sector, infact, plays an active role under certain circumstances by changing the demand and cost functions in agriculture in such a way so as to encourage its expansion. According to the National Commission on Agriculture “Agricultural Marketing is a process which starts with a decision to produce a saleable farm commodity and it involves all aspects of market structure or system, both functional and institutional, based on technical and academic consideration and involves pre and post harvest operations assembly, grading, storage, transportation and distribution”. In Agricultural marketing we are concerned with demand and supply conditions, marketing operations including marketing functions, functionaries and cost, price fixation, market structure, conduct and performance and marketing efficiency. Fundamentally there are 3 entities involved in the marketing system they are as follows: 1. 2. 3. Producer Consumer The Middlemen

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Each of these entities has its own objectives, which often conflict with the others interest. The producers after making a lot of investment and putting in lot of hard work would naturally look forward to get the largest/best possible returns for his produce. The consumer on the other hand would like to get his required quantities of goods of pure quality at the least possible price. The middlemen would aim at realizing the largest possible net profits from the deal. An efficient marketing system should, therefore, aim at balancing this conflicting interest in such a way that each entity gets a fare deal. Increase production resulting in greater percentage increase in marketable surplus accompanied by increase in demand from urban population calls for a rapid improvement in the existing marketing system. It is necessary to improve the marketing system to aid the process of agricultural development for 2 reasons.  Firstly, If the additional produce does not move to the market to bring additional

revenue to the farmers, it may work as a disincentive to increase production.  Secondly, If the system does not support supply food-grains and other agricultural

commodities at reasonable prices to the consumer at the time and place needed by them, increased production has no meaning and plays no role in the welfare of society. Thus the farmer in general sell his produce at an unfavorable place at an unfavorable time and usually gets very unfavorable terms. It could be observed that inadequate credit facility to the farmer is the root cause of all defects in the agricultural marketing system in India where the poor peasants are under the firm grip of the moneylenders. The market structure in India is saddled in the long chain of middlemen between the cultivators and the ultimate consumer. These middlemen take away the Lion’s share of the price paid by the consumer and consequently the farmer-seller gets a poor price in his share. Markets for agricultural commodities may be broadly classified into 3 categories viz. 1. Wholesale 2. Retail Markets 3. Fairs

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There are various dimensions of markets which can be classified on the basis of the following dimensions: 1. On the basis of free intercourse or degree of competition 2. On the basis of time 3. On the basis of nature of commodities (Type of goods transacted) 4. On the basis of area of coverage 5. On the basis of location or importance 6. On the basis of nature of transaction 7. On the basis of volume of transaction 8. On the basis of no of commodities in which transaction take place 9. On the basis of stage of marketing 10. On the basis of extent of public intervention 1. Wholesale Market

The wholesale markets fall into 3 subcategories    Primary Secondary Terminal

Primary wholesale markets Primary wholesale markets, where the bulk of arrivals is from village or village hats. These market are periodically held, either once or twice a week or at longer intervals or on special occasions. Agricultural produce, or livestock or both are sold in these markets. There are about 22000 such markets located mostly in the interior of the country. The area served by a hat or a shandy varies considerably. In some cases it is only one village but in others it may have a radius of 6 or 7 miles.

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Here haggling and bargaining is a common feature. and Shandies in south India. Secondary Markets functions are usually in urban and semi-urban areas. Secondary wholesale markets Secondary wholesale markets. important trade centres or near railway stations. the bulk of the arrivals is from other markets.700 such markets in the. Orissa and West Bengal. earthen wares. In these markets. cloth. also known as mandis and Gunjs. stretch over a wide area covering from 10 to 20 miles. For the up keep of such markets superficially 3 types of taxes are collected viz. lac and glass bangles and articles of daily use and transactions take place either for cash or exchange in household requisites. Such markets are known as Painths or hats in U. country. Mostly wholesale as well as retail trade both take place in the same complex simultaneously. Sales Tax Service Tax Place Tax However in practice a large number of ritualistic deductions and local taxes are applied to the produce sold here. P. The village bania acts as a middleman in return for a small commission. Here facilities of storage and banking are available. b. Bihar. Such markets are organised by village panchayats and every shopkeeper has to pay some rent for the space he occupies. There are about 1.These markets deal in sale of Fruits and vegetables.. These are usually situated in the district and taluka headquarters. A large number of intermediaries exist in these 35 . c. food grains. Here transactions are generally between wholesalers or between wholesalers and retailers. a.

Cloth market. Terminal Markets Terminal Markets are those in which the produce is either finally disposed of directly to consumers or processors or assembled for shipment to foreign destinations or for redistribution to surrounding areas. They serve as convenient points fro assembling. which are produced locally and as a secondary market for other commodities. The manufacturers who use agricultural produce as a primary input purchase raw material in wholesale in these markets. It may be observed that a particular market may function as a Primary wholesale market for some agricultural commodities. of the city people as well as the surrounding villages. It may be noted that the actual producer the “Farmer is completely absent in wholesale markets”. grain mandi. They usually deal in all types of produce and serve the needs. sharafa market. Retail (Primary) Markets are basically assembly markets that are not regulated. even for the same commodity a market may function as primary wholesale market for certain parts of the year and as a secondary wholesale market for the rest of the year. They are owned by the retailers subject to municipal control. The traders who purchase from the primary markets in wholesale trade. distribution and exchange of goods moving from villages to bigger cities. hardware market. The wholeseller performs the marketing function of assembly and distribution. which possess sufficient warehousing and storage facilities and cover a very wide area extending over even a State or two.markets. vegetable market. shoe market. Such markets are usually the ports. sweetmeat market and grocery market are usually found located in different parts of the city. they buy in these markets. Again. 2. Retail Markets These markets are found scattered all over the town or a city or concentrated in particular localities. for consumer goods also these primary assembly markets become convenient points for reverse movement from industrial sectors (big cities) to the 36 .

at pilgrim centres and number over 1. 10% deal both in live stock and produce and 40% deal in agriculture products only.700. Imperfect market: A market is said to be imperfect where. horses. there must be a good number of buyers and sellers. P. Maharashtra. Such religious fairs are Maghmela at Allahabad. Gujarat. there should not be restriction on the movement of a commodity. b. 37 . on religious occasion. The trader being both buyers (of agricultural produce) and sellers (of consumer goods) ignore the interest of the farmers. Kartikisnan mela at Kurukshetra. There is restriction for movement of goods. M. Produce fairs are all found in Bihar and Orissa only. donkeys. The principle underlying a perfect market expects that there must be a uniform price for any one standardized commodity at a particular time at any place. Of the total 50% deal in live-stock only. Perfect market: A market said to be perfect. cows. Haryana and West Rajasthan.. Such fairs are organised by District Officers. P. when all potential sellers and buyers are promptly aware of the prices at which transaction takes place. Dimensions 1. Local bodies or private agencies. 3. bulls. Garhmukteshwar and Pushkar.. While live stock fairs are held in U.villages. Punjab. These fairs are held annually specially between the months of October and May and the duration of livestock fairs varies from one day to 3 months. any buyers can purchase from any sellers. Fairs These are held. sheep and goats are usually sold at these fairs. some buyers or sellers or both are not aware of the prices at which transactions takes place. Camels. On the basis of free intercourse or degree of competition a. bullocks.

Monopoly market: There is only one seller of the commodity Duopoly market: It has two sellers of a commodity.commodities are produced and not manufactured. Generally one market in one commodity. e. Leather exchange of Kanpur  Precious stones: These are highly specialized and well organized markets of world for e.Imperfect markets are: a. Oligopoly market: There are more than two but a still a few sellers of commodity d. b. These markets can be for machinery and manufactured goods 3. Long period markets: Time span available is long to adjust supply to meet demand even by managing production. bullion market of Mumbai 38 . Monopolistic competition: A large number of sellers will deal in heterogenous and differentiated form of a commodity. milk.g. cotton exchange Mumbai. etc. On the basis of nature of commodities (Type of goods transacted): a. vegetables. 2. c. For e. Commodity markets Produce exchange. fish.g. Short period market: In these markets commodities are perishable and can be traded for some time. Very short period markets: These are for few hours and are mostly for highly perishable commodities like fruits. c. b. b.  Manufactured goods markets: These are markets of manufacture and semi manufactured goods. On the basis of time: a. These commodities are like foodgrains and oilseeds.g.

 Stock exchange: This is market for investments stocks bonds debentures shares are purchased and sold in different parts of the countries for e. transaction mostly take place between farmers and traders. 3.Capital markets:  Money markets: Broad term include a number of agencies providing a finance to business. 5. b.g. silver. Produce is 39 . On the basis of area of coverage: 1.g. 4. On the basis of location or importance: a. Gold. Village Markets: Buying and selling activities are confined among buyers and sellers of the village or nearby villages mostly for perishable a commodities. These are at large trading centers like Mumbai. World Markets: Buyers and sellers drawn from the world biggest markets form area point of view and exist for commodities having world wide demand e. 2. Secondary Wholesale markets: These are generally located at districts headquarters or important trade centres near railway stations. Regional markets: (District/ Sate) Buyers and sellers for among commodity are drawn large area than the local markets in India there generally exist for food grains.. Durable goods such as Jute. Primary Wholesale markets: These are located in big towns near the centres of production of agriculture commodities.g Calcutta and Madras stock exchange 4. Tea. National Markets: Buyers and sellers are at National level e. London Foreign exchange market: It is international market and largely concerned with export and import trade of countries. Coffee.

40 .  Fairs: These are held on religious occasions. Spot or cash markets: Here goods are exchanged for money immediately after sale of within reasonable short period of time. are brought & sold. oilseeds. On the basis of no. Terminal markets: Here produce is either finally disposed off to the consumers or processors or assembled for export. Forward or future markets: Here a transaction takes place for a standardized commodity with a promise to pay and deliver a commodity at some future date. On the basis of nature of transaction: a. Transaction takes place generally between traders. b. of commodities in which transaction take place: a.  Sea board markets: These are located near seashore and are mainly meant for import and export of goods. Specialized markets: In these transaction takes place only in once or two commodities. b. Retail markets: Her commodities are brought by and sold to the consumers as per their requirement. These are located in Metropolitan cities like Mumbai.handled in large quantity. 8. On the basis of volume of transaction: a. General market: In these markets almost all the types of commodities. 7. gut fiber crops etc. c. such as foodgrains. madras and Calcutta. 6. Wholesale markets: Here commodities are brought by and sold in large lots or in bulks. b.

Market charges are standardized and fixed and practices regulated by Agril Produce Market committee. Still another practice is to settle the trade deal on the basis of the sample of the produce. Methods of Sale One of the most important aspect of marketing in India is concerned with different methods of trading employed in markets. 9. These are located generally in thickly populated areas. Under another method sellers settle the sale separately and individually with buyers. 10. There is yet another method known as “Dhara Sale” under which heaps of grain of different qualities are sold at a flat rate. separate markets exist e. These markets suffer from various defects in functioning.g. In other cases agricultural produce is auctioned in the open market and the buyer with the highest bid takes the produce. Consuming markets: Here produce is collected for final disposal to the consuming population. where production is adequate. They are located producing areas. b.For every group of commodities. Cotton markets etc. Regulated markets: Here business is done as per the rules and regulated by statutory market organization. Unregulated markets: Here business is conducted without ant set of rules and regulations. On the basis of stage of marketing: a. 41 . Producing markets: These markets mainly assemble goods for further distribution to other markets for production purpose. b. Food grain markets. On the basis of extent of public intervention: a. In some cases transactions are settled under a cover of a cloth with the help of fingers and signs. Traders frame rules and conduct business.

Jalap Sale Under this method the trader’s purchase the standing crop of the producer well in advance of the harvest at a price fixed on the date of the bargain. Sale by Tender System 9. Hatta Sale (Undercover) 6. Sale by Sample 5. Maghum Sale or Unbhav Sale 4. Dara Sale 1.Ways and means in which transactions takes place in the Indian agricultural market Many methods of sale are in vogue and simultaneously co-exist in different markets even in the same market different methods are followed for different commodities and some times even the same commodity. Forward Sale Under this system the producer-seller sells his anticipated future produce in advance to the trader directly at a price fixed at the time of striking the deal either in the village or at the business place of the trader depending upon the willingness of the party that initiates negotiations. 1. but the benefits of such methods are rational and convenience based. It is however possible that you may find some of these methods having no visible merits at all. The price is usually 42 . We shall discuss each one of these methods in detail. This is only an oral contract and is not enforceable in any court of law. The trader usually enters into a contract with a speculative motive and when the price declines subsequently he may force the seller to reduce the price by refusing to lift the produce. Sale by Open Agreement 7. Every method has its merits and demerits. 2. Sale by Open Auction 8. Jalap Sale 3. Forward Sale 2.

producer as well as traders stores notified agricultural produce. In return the buyer is supposed to pay the price ruling on the delivery day. They can use this as a certified sample of this produce. When such depositors will send their stock representative. open auctions can also be conducted on the basis of such representative samples. The produce or the commission agent shows the sample to the trader and finalizes the price. It saves the cost of transportation and inspection. This method is usually adopted in interior areas where price fluctuations get communicated within a conventional time lag. Sale by Sample It is the most convenient method of sale where the produce is systematically graded. 4. Usually the Jalap Sale goes against the agriculturalist seller as the price is fixed and determined by the buyer on the basis of the urgency to sell and not on the basis of the prevailing market rates. After the establishment of warehousing facilities in some regulated markets. In regulated markets. This regulated market process is 43 . However utmost honesty in the dealing is to be followed. further if the crop fails to give the expected return the buyer may force the producer to reduce the price further.coated in lump sum for the entire crop and the seller may receive 50% of the value of the sale transaction in advance. Samples are given to them from their produce. It is usually beneficial to the farmer as he dictates the price and the buyer should pay on a future date of his choice. Maghum Sale or Unbhav Sale Under this the seller is bound to deliver the produce to the buyer on a set date within a period prescribed by a verbal understanding between the 2. 3. This method is followed when cultivators borrow from traders or where their residence is far away from the market. Such price quotations are in most cases abnormally low.

Disputes may arise when the samples prove to be unrepresentative. Most of this secret language is a sign language that involves pressing fingers and finger joints. The highest offer made is intimated to the seller and if he agrees. Further. oligopsony may result in depressing the prices. In such kind of a sale. Thus the Hatta system of sale operates to the disadvantage of the producer. The sale under this system is open to a variety of malpractices as the seller remains in the dark all the time and it is only the commission agent and the ultimate buyer who really knows the negotiated price. Thus a sale gets confirmed.called quoting on samples. a sale with an open agreement is said to have been made. Also the buyer may exploit him through over weighing. 5. Oligopsony means the state of a market controlled by a few buyers in relation to many sellers. which is mostly understood only by the commission agents and the buyers. The buyers make these offers in a secret language. However there is no guarantee that the benefit of this higher price always goes to the producer. 6. Sale by Open Agreement Whenever the grower or the farmer deals with the buyer to enter into a sale/transaction with him. There are no middlemen and it is the seller who moves from one buyer to another in search of a remunerative price or offer. Hatta Sale (Undercover) Popularly known as undercover or secret sale. Under this system the commission agent covers his hand with a kerchief and invites offering individually from each buyer. as he is unaware of the price offered. ignorance of market conditions may prove to be damaging. 44 . manipulation of accounts deductions of unauthorized allowances and delays in making payments. The Tobacco and Cotton are the two important commodities sold by an open agreement. the bid is closed.

There the seller has the discretion to refuse the offer of the bidder if he considers the bid too low. The auction has to be done by lots and this results in a large number of traders in the beginning but the number thins out as the day progresses. The demerits of this system are: 1. Sale by Tender system Under this system the produce (preferably a graded one) is arranged lot wise and is open for inspection by the intending buyers. The process is very time consuming and requisites an extensively developed system of commercial grading. Sale by Open Auction Under this method the produce is sold through an open auction by the general commission agent or the brokers or some other auctioneer in the presence of the seller or his agent and the competing traders. While depositing the bid-slip. The objective of the system is to create conditions of perfect competition by eliminating undercover practices and providing for the interaction of the forces of supply and demand in relation to the quantity and quality variations. Higher bids are few and far between as the buyers are relevant to pay a high price for the produce. the buyer also 45 . The intending buyer after examining the lost records the bids in their tender slip supplied by the market committee. This is possible as a pre-auction inspection of the graded lots is allowed and disputes regarding the quality are eliminated. The offer of the highest bidder is accepted with the consent of the seller. 2. These tender slips are then deposited in a sealed box. The buyers too have the opportunity of putting forward repeat bids to reach a maximum paying capacity for striking a deal. They feel that if a product has come up for auction. The farmer who views the open auction process gets a kind of a physiological satisfaction. The time is stipulated (fixed) for submission of tenders. He feels he cannot be cheated due to the open method of price fixation (bidding). it is somewhat inferior 8.7.

Usually the tender box is opened and the market superintendent or secretary compares the slips. Dara Sales In this system. as it is time saving. The maximum price quoted is announced on the public address system for the benefit of the sellers and buyers. as indicated by the register is deemed as the highest. the heaps of grain of different quantities are sold at a flat price. If the seller is not willing to sell at the quoted price. And there is a certainty of completing the sale of all the lots by the stipulated hour irrespective of the numbers involved. The advantage claimed by the system is that within a short time a large number of sales can be affected 46 . 9. The tender system of sale has one definite advantage over the open auction system. It is further observed that the differences in price offered by the highest bidder and the nearest competitor in many cases is just a few rupees. he has to inform the market secretary within a predecided and stipulated time limit. The objective of using a priority register is that incase of tie-bid. In this system the physical system involved is the least for all parties concerned. the slip deposited first.signs a priority register. This clearly indicates that the prices quoted are based more on individual calculations of profit margins rather than by simply working out the parity price based on terminal prices. The highest quotation for the lot is recorded in the bid-declaration slip.

They obliviously charge a commission for this and also ‘Tolai’. They are of 2 types: a. 4. A very large number of intermediaries have come to exist between producer and consumers of these the major ones are: 1. 2. 3. He purchases at cheaper rates owing to the lack of competition from other beoparies. But it is more than often seen that these tola also arrange the sale of the producer by carrying samples to dealers in towns. especially the medium size holders also sell the produce directly to the village beoparies or town dealers visiting the village markets. collects the produce and takes it to the nearest market.Marketing Agencies The Next important aspect relates to the functionaries operating in the Indian agricultural markets. Tola or Weigh men also to some extent function as intermediaries. Itinerant Beopari wanders from village to village. Arhatiyas or Brokers: They usually occupy a very important position among all the intermediaries. Village Beopari is by far the most usual purchaser of the produce. 47 . Kutcha arhatiya mainly concentrates on the work of collecting and assembling the produce. He usually collects the produce from the villages and hats and brings it to the wholesale markets and from there it reaches the consumers. b. Local landlords and cultivators. Beoparies generally purchase when prices are low and sell it when they are high. Pucca arhatiya on the other hand arranges for the sale and distribution of the produce. Technically speaking they are supposed to only weigh the produce and charge a commission for certifying its weight. 5. who deals in his individual capacity.

Indian products that are surplus are non marketable in nature. The actual amount of crop sold is dependant on a large number of factors. One of the major factors in this case is “Marketable Surplus” the other factors being need for cash. 1.Both work together in tandem as master and apprentice. However it is not the largest exporter in even a single segment. This is because of 2 basic reasons viz. he in actual practice does it through a commission agent. Unlike the case of manufactured products where the entire produce is set aside for the market. in turn depends upon the production on one hand and the growers household and farm requirements on the other. In agricultural marketing is involved the putting up of the surplus in the market 48 . retailers. co-operatives and the Marketable surplus and marketed surplus India is the world’s largest producer in approx. Broadly speaking. 9 different agricultural commodities. commission agents. in agriculture all produce is not sold. They also advance loans to the village merchants and traders on the condition that the produce will be sold to them or through them. price trends. wholesalers. Although the seller is free to sell his produce in the market directly to the buyer. The intricacies involved in the market transactions have compelled him to adopt this costly agency. The marketable surplus. 70% of the produce is handled by the producers themselves and the balance is handled by trade comprising governments. availability of storage facilities etc. Indian consumers are more in number hence they do not leave any surplus and 2. Indian agricultural marketers have the tough task of making non-marketable Indian offers attractive.

” Objectively it is the arrivals. It is very difficult to calculate marketable surplus of agricultural crops because 49 . artisans and seed and stock to cover the future exigencies including wastage. Marketable surplus will always be less than the actual production. left after his genuine requirements of family consumption. out.through a definite channel. This means the “theoretical surplus available for disposal with the producer. the surplus is more. payment of wages in kind. when a farmer holds some of his surplus produce on the farm or consumes more than normal amounts of it. of the new crop. It is worth noting that marketed surplus of small subsistence farmer’s increases with a price fall because more quantity has to be sold to meet the minimum cash needs. A farmer's marketed surplus can be either more. farm needs. The size of the marketed surplus thus depends upon the relative share of small and large cultivators in the marketing. It is less. seed and wastage have been met. But it can be higher or lower than the level of marketed surplus during a period depending on the extent of hoarding from the current production or dehoarding of the accumulated stock by the producers. This usually happens when cash is needed immediately after the harvest to meet certain urgent needs. less or equal to his marketable surplus. direct from the producing areas. feed. and payments-in-kind to casual and permanent labour. The latter term refers to the quantity of produce that is actually sold in the market by the producer irrespective of his home consumption and other requirements. If the farmer retains less of the produce than is needed for the consumption at home. The surplus may be marketable surplus and marketed surplus. The former indicates the residential quantity left with the producer after meeting his requirements for family consumption. Large farmers market little when prices are low and hold stocks in anticipation or future higher prices. the landlord. and may thus vary considerably from one year to another.

such as acreage under cultivation. 5. such as the size of the farm and the family. Thus. social conditions prevailing in the region with regard to payment of wages. economic conditions of farmers particularly with regard to indebtedness etc. average size of holdings. 2. Even if one takes into account population changes. Besides. average yield per acre in the area. Therefore. the proportion of food grains in the total farm production and the amount of hired labour. There is always the fear of double counting. the amount of crop to be marketed is also determined by the nature and size of crops. farmers and traders have always the tendency to under-estimate the quantity of the crop sold or stored. 6. year-to-year changes in the crop size affect marketed surplus in a complex manner. Old crops cannot be easily demarcated from the new crop. the quantity retained for use in each farm depends on a variety of factors. Nor is the absolute quantity retained for home use constant from one year to another.production year varies from crop to crop. 3. which affect rural food requirements. Defects of Agricultural Marketing 1. Lack of organization among producers Forced Sale Superfluous Middlemen Multiplicity of Market Charges Malpractices of Middlemen Absence of Grading and Standardization 50 . 4. market facilities and the price at the time of sales. in calculating marketable surplus usually subjective methods are employed. Further. marketable surplus is not a free variant but a forced surplus.

Adulteration A SPICY TALE 1. The producers have little or no place to store. Also almost all small farmers are neck deep in debt and need cash reasonable fast due to the unusual structure of agriculturism in India. Multiplicity of Weights and Measures 12.7. Forced Sale: In a scenario wherein the farmer producer is disorganized. The produced moreover is small per farmer. An organizational attempt at the grass root level usually fails. The farmers of India are small and scattered all across the country. Causes of Heavy Sales in the Villages The following are chief causes leading to heavy sales in the villages: - 51 . Many a times the endrocities of the moneylenders are almost hedging on the farmers to sell their produce at lower than reasonable rates. Lack of organization among producers: Lack of organization among producers is one of the basic and fundamental problems in the Indian Agricultural Marketing scenario. Cooperative movement in India seems to have failed and thus the small farmers lack organization 2. Inadequate storage facilities Underdeveloped Transport System Lack of Marketing Information 10. 8. High Cost of Borrowing 11. The forced sale phenomenon is one of the major reasons responsible for the pathetic condition of the rural farmer. he is forced to sell at a lower price. requires cash at double speed and has no storage facilities at the local level. 9.

Due to the sales methods adopted by the middlemen the farmer seldom know what price they are to receive for their sale. Infact due to inadequate new facilities most of the time farmers don’t even know the prevailing prices/rates in the market. there are very few buyers for agricultural produce. 52 . which is responsible for the high percentage of village sales. many farmers prefer to sell these in the local village market. 3. as they are the reason behind the malpractices in agricultural marketing in India. The most important cause for the high percentage of produce sold in the village is without doubt the indebtedness of' the producer.  The element of time is an important factor and this for double reason. Sometimes there is only one buyer. The Middlemen intervention is uncalled for. Due to the various barriers in taking the produce to the urban market.  The second important factor. they have usually no other alternative but to market the produce immediately in order to meet their urgent liabilities. They dominate every activity in the markets. nature of communication with the nearest market. The marketing possibilities of perishable commodities depend very largely on the rapidity with which they can be transported to the marketplace. They ignore the interest of the farmer-producers who are the sellers. Most of the cultivators are hard-pressed for cash to meet the claims of their creditors and to pay off rent and other charges. is the unsatisfactory. Even when they know fully well that by holding up the crop for a few months they would be able to secure a better net return. Moreover he further exploits (resorts to monopoly) by selling consumer goods and agricultural inputs to the farmers at a very high price. Due to this the Indian farmer is not getting good returns. This buyer resorts to monsoly and buys at a very low rate. Superfluous Middlemen: Traders are the main functionaries in a market. as these village markets are small and distant.

nor are based on any service consideration and are recovered either in cash or in kind. Multiplicity of Market Charges: Market charges are “Those charges that are incurred by the seller or the buyer or both from the time a commodity enters the market for sale till the time the title of ownership of the goods is transferred from the seller to the buyer”.” In the absence of statutory regulations these charges are neither defined. For their services he has to pay some 53 . According to the findings of the Marketing Surveys. They are always introduced in favor of the traders and the functionaries. On a sale of produce worth Rs. The existence of a long chain of middlemen reduces the. These necessarily have to be done by the respective functionaries. share of the consumer's price received by the actual cultivator. in case of linseed it is 62Paise. kutcha and pucca arhatiya. market charges are collected from growers or buyers at prescribed rates. itinerant merchant or beopari. These charges have no sanctions except usage or customs prevailing.100. One of the main problems is “The multiplicity of market charges and their heavy incidence on the producer-seller. and often both. In order to pay these functionaries.5% of the income of the producer goes to meet the various expenses: In the market the cultivator has to arrange with a kachcha arhatiya for the sale of his produce and in the larger markets he has to employ a broker or Dalal to get into contact with the kachcha arhatiya. dalai. 4. or a purchase a number of operations involved which cannot be attended to by sellers or the buyers. In the course of transacting sale.It will thus be noted that there exist as many as 10 to 12 intermediaries comprising of the village bania. cooperative commission agents and wholesale merchants and the retailers. in case potato 50Paise and in case of groundnuts 45Paise. as much as 21. They function at various stages in the process of assembling and distribution of the produce. the share of producers in a rupee paid by the consumers ranges from 52Paise in the case of rice to 57Paise in case of wheat.

6. the sweeper. 3. but the munim (arhatiya's clerk). the waterman. Tulai has to be paid for the weighing of the produce. preparing the produce. During the measurement and in almost all the markets deductions are made from the amount due to the seller for dharmada or charity. As the Report on the Marketing of Wheat in India points out. 2.commission. filling the scale-pans. and even beggars. only small volume of business to offer to the arhatiya.” Some of these charges and deductions existing in the markets are: 1. watermen. 4. The objectionable feature about the market charges is that they are not only high but are also not clearly defined and specified. palledari to cover the cost of the labourers who help in unloading the cart. dispensary. “not only the arhatiya and dalal. Arhat (Commission) Dallali (Brokerage) Hamali (Handling Charges) Tulai/Dharwari (Weighment) Chalani (Sewing) Borioto (charges for holding the gunny bags while filling) 54 . the seller has also to submit to deduction known as garda for impurities in the produce. therefore. The charges vary from market to market and there is also no uniform practice as to charges that are borne by the seller and those that are borne by the buyer. To make things worse many of the market charges are taken in kind and in taking their shares the persons concerned are liable to be generous to themselves. gaushalas. etc. the arhatiya's cook and a horde of beggars of every description all regard themselves as entitled to a share of his produce. 5. holding the bag open where the produce is being measured. and dalta for possible loss of weight and dana given to sweepers. In addition to the arhat paid to the arhatiya and the dalal. Even within the same market the kachcha arhatiyas may charge lower rates to the village beoparis who visit the market often and have regular trade connections than to the farmer who visits market only occasionally and has. pathshalas. the chaukidar. a number of other charges have to be incurred.

Rent for storage in godowns Charities     Muthi (to be paid in kind for temples in the market yard) Darwada (cowsheds or Balaji’s fund) Pathshala (funds for schools in the area) Doodh Khawa (fund to pay for milk for the buyers children) Some of these charges are highly outlandish like the farmer has to pay for various charities. Patti (cost of sale slip) 16. Dhanak (charges for pushing the grain in the gunny bag on to a scale pan) Charity Karad (Deductions in kind for the quality difference) 10. Baisari (charges for supervision of weighment to be paid in kind) 13. 9. Munim (clerks allowance) 14. Valta/Wata (refraction allowance) 15. Rent for cart park 18. which he would be otherwise not inclined to pay for. 8. Also charges such as ‘Shagirdi’ where the seller is supposed to pay fro the Arhatiya’s sweepers and water carriers are uncalled for. Bardana (rent for gunny bags supplied) 17. Dhalta/Jhukta (leaving the balance in favor of the buyer) 11. 55 . Similarly payments to the muneem or the apprentice of the Arhatya are uncalled for. Only some of these charges are justifiable. Namuna (sample)(is shared by the commission agent and the buyers) 12. Among these are     Arhat or Commission Hamali Tulai Charges for sewing Any deductions in the name of charity in any kind are unwarranted.7.

5. d. Hence in the light of numerous unwanted deduction and high market charges. Moreover the unorganized producers and the market machinery are no match to the powerful trader legally. Even in regulated government markets middlemen resort to malpractices. c. They have bent the rules in such a way that it is possible for them to cheat and get away. This tendency becomes all the more 56 . Large quantities are taken away from the produce of the cultivator as bangi or sample. Bargains between the agent who acts for the seller and the one who negotiates on behalf of the buyers are made secretly under a cloth so that the seller remains ignorant of what actually takes place. Again there is no case for claming allowances for quality and weight where the produce is subject to thorough examination by the buyer before it is offered for sale. The burden falls entirely on the seller and he has no effective means of protest against such practice. The broker whom the cultivator employs is more likely to favour the purchaser with whom he comes into contact almost daily than the seller whom he only sees very occasionally.Especially when the principle arhatya gets full commission for the services performed by him. Malpractices of Middlemen Due to improper market structure traders or middlemen have become all powerful. This practice is rendered easier by the fact that there are no standardised weights and measures nor any provision for regular inspection. e. There are all kinds of arbitrary deductions for religious and charitable purposes and for other objects. it is suggested that markets be regulated. Some of the malpractices commonly resorted to by middlemen are as follows: a. b. Scales and weights are manipulated against the seller.

In fact the present practice of dara sales. If sales of agricultural produce at a higher price are to be augmented without personal physical inspection of every lot by open auction in the regulated markets. In the absence of certain standard grades accepted by the whole trade as the basis for commercial transaction. reputation of Indian agricultural producers in the world’s market is low. j. g. f. which can be understood by the lay farmer. attempt of individual producers merely secures the ordinary market rate. i. wherein heaps of both good and bad produce are sold together as one lot common The 57 . Also if lots are to bulked through cheap and efficient warehousing and transport. When disputes arise the cultivator has no means of safeguarding his interest. as it frequently happens.e. commercial standardization and grading are essential. Absence of Grading and Standardization: Although the agricultural produce (grading and marketing) act was passed in 1937 even today in most unregulated markets the practice of grading is unheard of. h. is almost completely absent. There are no standard grades commonly accepted throughout India even for such important commodities as rice and wheat. Whatever limited grading is accomplished is technical in character i. Differential prices for the same grade of produce Levying unfair charges for basic services Restrictive trade practices Arbitrary deductions on account of alleged adulteration and inferior quality Some of the practices obtaining in the market amount to nothing less than common theft 6..pronounced when. standardization and grading becomes imperative. Absence of grading and standardising agricultural produce is another defect. the same works for both parties. commercial grading.

grain merchants and even by farmers are not kept in proper conditions. oilseeds. gives a premium to the inefficient producer as the good produce is made to carry along with it the poor stuff also. kallis or thekkas. The indigenous methods of storage adopted in the villages as well as in most of the upcountry markets do not adequately protect the produce from dampness. Even at 5% the loss of cereals. millets. Inadequate storage facilities: In most of the villages ryots store their produce in pits or receptacles variously known as kudurus. rodents and birds. But that there is a general inadequacy of good storage facilities both in rural and urban areas can hardly be denied.in most markets. The practice of selling un-graded products of mixed quality has naturally reduced the reputation of Indian agricultural produce in the world markets. 4. insects. tobacco would come to over Rs. Baljeet Singh). With the change of temperature. grains loose weight. This in turn is due to moisture absorption. jute. The losses due to inadequate storage have been estimated to range from 1. which evaporates in summer and is regained during the monsoon month. The damage is greater when the grain is stored in kachacha underground pits where the sub-soil water table ranges from 8 to 10 feet below the surface. spices. cotton. In the upcountry markets produce is stored in kothis or kuthalas (earthen cylinders) and khattis (pits in ground lined with mud and straw) and in a few centres in pakka khattis made of concrete.000 million every year in India. 58 . A recent estimate puts the loss at from 5 to 15% by weight of the production and it is due to defective stage.5% (Food grains Investigation Committee) to 2% to 2. Dampness raises the moisture content of the grain thereby making it soft and therefore susceptible to insects. It is quite obvious that the food grains stocks held by co-operative societies. excessive heat.5% (The Prices SubCommittee) to 5% (as estimated by Dr. mites. When wheat is harvested. 7. weevils and other vermin’s. it contains some moisture.

(iv) In Bombay as many as 9. The insects form inside the kernel and are visible until the threshed grains are put in storage. Calculating on this basis of a tonne of grain being consumed by 100 rats per year. tons. Deoras is as follows:(i) It has been noticed that apart from damaging crops and food grains in storage. By the time the infection is detected. 750 per tonne. pulses and maize. P. the losses are substantially larger. On a gross estimate this would mean that rats are spoiling at least one fifth of the grain produced. and further contaminate grain by shedding thousands of hair from their bodies. (iii) They void 1½ gallons of urine during the year. Deoras. which would get mixed up with foodgrains. In addition there are crops like jawar. rats carry food grains to their nests in burrows. In terms of money this would come to about Rs. They would execrate about 86 faecal pellets in 24 hours. Losses due to rodents are also very great. As much as 15 kgs. (ii) The rats damage 10 times the quantity of food material they eat. 59 .Therefore. which are infested by stored grain pests even before harvest. J.000 bags of foodgrains are auctioned as they are unfit for human consumption because they are damaged by rats in yards and godowns.000 million when calculated at the rate of Rs. internal damage to grain becomes very great.400 rnillions would amount to about 24 in. of grain have been recovered while digging out nests from about 30 rats burrows. He has estimated that about 20 rats could consume the quantity of food sufficient for one person. the total consumption by the rat population of 2. The nature of damage studied by Dr. According to Dr. The rats start damaging the grain right from the field to the time it is consumed. 18. there are approximately 2400 million rats in India.

“Communications from the field to the village and from village to the mandi are often extremely poor and defective. The railways established by the British have not been developed further and hence are inadequate by today’s standards. The bullock carts do most of the transport in rural areas. but also lead to the multiplication of small dealers and intermediaries. beetles and moths are prolific and each couple lay anywhere between 100 to 400 eggs and their lifecycle is completed in 4 to 6 months.(v) The small mice in the paddy fields have been found to climb up to the paddy plant and eat every grain while the big field rat usually cuts the whole plant. Some of the agricultural produce needs special storage systems even while being transported. “Insects. A smooth and efficient system of transport from the farmer’s village to the consumer door goes a long way in not only helping the agriculturalist to bring his produce to the market without much difficulty but also helping the consumer in securing his needs with a reasonable time and cost. lanes and tracts connecting villages with the markets not only add to the loss of transportation and aggravate the strain on bullocks and other pack animals. Bad roads. peas one to 5% or more and arhar upto 2%.” 8. Bad roads lead to delay in supply and also due to the time lag the produce may be damaged. the existing means of transport are woefully inadequate. In India with her vast distances. Underdeveloped Transport System: Transport plays a very important role in the marketing of the agricultural produce.” Thus the rural transport network is very bad. Carts both pulled by bullocks or tractors cannot provide these kinds of facilities. It has been estimated that weevilled grain in the case of wheat varies from 1 to 2% or more. Hence it is very much needed that an initiative be taken to improve transportation facilities. They also restrict market by hindering cheap and rapid movement of agricultural produce. Besides rats. 9. Lack of Marketing Information: 60 .

The price information if available grade wise helps him to know the approximate returns he is likely to get for his produce. It also induces him to produce better quality crops and thus raise the standard of farming. (iii) inaccuracy of information supplied by various agencies concerned. ruling prices and market trends etc. (iv) variation in the price quotations give by the local and Central government. that reach them through village sahukar or commission agent or their own neighbors. Absence of market intelligence as to prices is another defect. Generally the producer-sellers have to depend upon oral information about market conditions. market arrivals. The villagers have practically no contact with the outside world nor are they in touch with the trend of market prices and they mostly depend on hearsay reports received from the village bane who is not at all interested in supplying them the correct information as to prices obtaining in the wholesale market. Cost of Borrowing: The most important requirement of growers to facilitate their production activities is credit. Though cooperative credit has been increasingly spreading its fold in the agricultural sector it is still far from occupying a pre-dominant position. Even in cases where information as to prices is available prices are not comparable on account of (i) the lack of standard grades acceptable to the whole country. (ii) Variation in the amount of refractions allowed and the terms of standard contracts obtaining in different markets. (v) the considerable variations in weights and measures used in several markets in the absence of standardisation of weights and measures.The importance of an efficient marketing new service particularly for the producer-seller in regulated markets hardly needs any emphasis. The cultivator is financed by the village sahukar-cum-trader who is in his own turn financed by arhatiya and the indigenous banker. In the absence of 61 . 10. demand conditions. This news service acquaints him with the ruling price and thereby strengthens his bargaining power and position.

The various marketing agents borrow funds at a high rate of interest. The case for borrowing private finance and the flexibility in the repayment make it attractive despite many malpractices. Multiplicity of Weights and Measures Till recently. This naturally leads to a rise in the cost of marketing with the ultimate result that the share of the price received by the producer is correspondingly reduced. 62 . stones and bits of old iron are common feature in the markets and villages.warehouses and the lack of facilities for making advances against the security of warehouse receipts there cannot be any system of cheap finance against security of goods. Firstly. Through various surveys it has been proved that though government has taken active measures to provide cheap institutional finance a large majority of farmers are dependent on private moneylenders and commission agents in obtaining credit. 11. There is at present no proper link between indigenous bankers or commercial bankers and The Reserve Bank of India. there had been an absurd multiplicity of weights and measures in India. It may be noted here that the activities of traders and commission agents through money lending curtail the freedom of the grower-seller to dispose off their produce profitability in market yards and make them permanently indebted. Weights made of sticks. This multiplicity of weights and measures employed in India has deplorable effects in several ways. The official machinery has to realize the gravity of the situation and take effective steps to realize the poor and innocent agriculturist from the clutches of the oneylenders cum commission agents. it affords greater opportunities for cheating the ignorant cultivator and unscrupulous dealers readily avail themselves of such opportunities. The chaotic state of weights and measures in India has been more clearly brought out in all the reports published by the Central marketing staff.

creates an element of uncertainty in trade and renders fraud on the part of retailers as easy as it is profitable. Such as: Damping of cotton is done by the middlemen on the contention that the kapas comes in so very hot that if one puts one's hands into it they would grass while 63 . which is by no means conducive to the interests of trade and commerce. a producer offering.e. Naturally when this is the case the seller whether he be the middlemen or the farmer takes care to see that the produce is adulterated to the maximum limit allowed in the market. ignorance and carelessness have all combined to make the consumer in India pay an unnecessarily high price for many goods of different quality. lack of standard weights and measures is bound to be a great handicap and seriously affects the accuracy of statistical calculation. i.” 12 Adulteration Adulteration is often resorted to while marketing crops and one of the most important reasons for such deliberate adulteration of agricultural produce is the high amount of refraction (khad) allowed in most markets and the non-mutual terms. Adulteration Of Commercial Crops Various devices of adulteration are in vogue. “Deliberate malpractices. cleaner produce which has only 1 % of impurities receives the same price as the producer offering produce containing 5% impurities. the volume of agricultural production. etc. In most of the wholesale markets in the producing areas a fixed deduction is made for impurities (say 5%) and the terms are non-mutual. The report of the Marketing Sub-Committee has rightly observed that. it gives rise to needless complications in practice as between one market and another. Thirdly.Secondly. The multiplicity of weights and measures make supervision difficult and afford greater opportunities for cheating the producers. for the collection of data on price movements the relative level of prices in different regions..

curry powder in several cases has been found to be heavily adulterated with horse dung. “Most of the common salt contains large-quantities of white chalk. In red chillies. while turmeric is adulterated with lead chromate which has a deep Yellow colour. Mr. Vinegar in some cases has been found to be acetic acid.” On these finds. Small chippings of white stone have been found in rice in some localities. H. many unscrupulous traders use lead oxide to brighten the colour and add weight. which may be reproduced here for the information of the readers. “Tomato sauce is often only a mashed pumpkin with a small percentage of tomato. the traders succeed in manipulating 64 . Poem – A Spicy Tale Lines of Improvement Due to various defects in the agriculture market of India the traders (middlemen) occupy a unique position and due to such a unique position. Chattopadhyaya has so wittily composed a Poem.

the market scenario and to take home a major proportion of the price paid by the consumer. This may be done by creating a situation where the cultivation has greater confidence in being able to sell his produce in the market. The value of such regulated markets thus can be exaggerated but it is yet to catch on in India. Further maximum share of the consumer’s routine can be had by the producer if the conditions of orderly marketing are created. and if the large scale industries are to secure a steady and reliable supply of raw material of uniform quality. Any program of getting the farmer-producer out of this situation necessarily envolves the breaking up of the monopolistic powers of the trader. it would be equally futile to setup optimum standards of nutrition. which represents a fair remuneration to the producer and is within the consumer’s ability to pay. Thus a need is felt to tackle the emerging problems of agricultural marketing more resolutely and efficiently than ever before by regulating the markets. A very small proportion of the consumers paid up price actually goes to the producer-seller. In some cases like rice nearly 48% of the prices charged to the final consumer is siphoned away by the middlemen. unless means could be found to move food from the producer to the consumer at a price. Such a scenario provide for a mood where the farmer is willing to accept new ideas and strives to increase his agricultural produce. If the agriculturalist in India is to receive a higher price for his produce. Measures to make the producers directly connected with the marketing of the produce are the need of the hour. Similar considerations also apply to other 65 . It has been observed that well regulated markets create in the minds of cultivators a feeling of confidence. obviously the defects in machinery for marketing of agricultured produce should be remedied as quickly as possible. For this it is important to protect the producer’s interest. if the needs and preferences of the consumer are to be conveyed to the producer with a minimum amount of delay and friction. It would be useless to increase the output of food. The producers believe that they get a fare deal in these regulated markets.

As a result of the rationalisation of market charges alone. Development of Co-operative Marketing 1. Markets may be regulated either by local bodies or under State legislation. Establishment of Regulated Markets: (What is Regulated Markets) Most of the defects and malpractices to the disadvantage of Producer-seller can be removed by the exercise of proper control over markets and this could be done by the establishment of Regulated Markets in the country. there has been the reduction in the market charges varying from 66 . Remunerative Prices for Farmers 10.agricultural products and to fish and forest products. which will secure for the cultivator a larger proportion of consumer’s price is a ‘sin qua non’ for agricultural improvement in India. Improvement in Grading and Standardization 9. Increased Provision of Storage and Warehousing facilities 5. The following are the various Lines of Improvements: 1. Use of Standard weights and measures 4. An improved system of agricultural marketing. Standardization of contracts and payments of sales proceed 8. the producer-seller is benefited to the tune of 3 to 5 rupees for every 100 rupees worth of produce marketed by him in these markets. Provision of marketing news 7. Improvement of transportation facilities 6. Establishment of Regulated Markets 2. It is therefore necessary to remove the defects in the machinery for marketing of agricultural produce. amenities and facilities 3. The market yard. Besides.

corporations function to regulate and develop marketing. Indian producers find it most convenient and least troublesome to sell agricultural produce in the unregulated primary village market. middlemen and buyer. What are Regulated Markets? Markets that have rules and regulations with respect to the price of the product sold. Added to this cooperative marketing has also made good progress in some developed countries. If the farmer comes to the assembling center for sale. In India the situation is however different. the producer. Nearly 2/3rd of the marketable surplus of all agricultural commodities are disposed off (sold) in such markets. commissions or corporations or producer-controlled boards are set up under various acts. This is done by eliminating the malpractices at the grass root level. There has also been an increase in the number of sellers bringing their produce to these markets. Until 1944 less than 40% of the produce was taken to the markets by the producers themselves.28% to 69% in various markets. These boards. The regulated markets provide a unique system of marketing that is only beneficial to developing countries like India. Establishment and Regulation of Markets in India The most effective and direct measures to improve the conditions of the markets as taken by the government through regulating the markets and the market practices by legislation. the method and the produce in which the transactions take place are other similar market operations are said to be regulated markets. in non- 67 . commissions. In developed countries besides government legislation semi-independent commodities. These regulated markets ensure a fair and level playing field for all viz. the commission agent and the buyer to the same level of advantage by eliminating malpractices and rationalizing market charges. The common objective of the various acts for straight agricultural produce markets is to bring all the parties that is the producer. The average percentage has now gone to 70%.

Today market legislation in India covers almost all agricultural as well as horticultural produce. it was the first law in the country which attempted the regulations of markets with a view of evolving sound market practices which are fare to the producer as well as the trader Since then further act have extended the scope of agricultural legislation to the commodities other than cotton. livestocks and these products and forest produce. It was situated in the then Hydrebad residency. these are some variations in the state legislations. Karanja was the 1st regulated market in India. Most of the regulated markets now functioning are. which deal in simple commodity.regulated markets. In pursuance of this recommendation. However since the regulation of markets is a state subject. like tobacco. vegetables or livestock. There is however some markets. by and large. the then government of Bombay was the first to enact the Bombay Cotton markets act in 1927. he is liable to be deceived by the commission agents or broker or traders. Regulated markets in India The first attempt to regulate the Indian agricultural market was made as early as 1886. The process of regulation received wider acceptance in 1918 when the General Cotton Committee appointed by the government of India recommended ‘regulation of market’ as a solution to agricultural marketing problems. 68 . At the same time the marketing methods followed in advance countries like the establishment of producer controlled marketing boards are not possible in our country as it is difficult to organize such boards on account of small and scattered producers thus the only option left is the regulation market practices in existing unregulated wholesale and retail markets. multi commodity markets. Infact. Sale through the cooperative society has not been possible because of the failure of the cooperative movement in India.

the producer. adulteration of produce and the absence of machinery to settle disputes between the seller and buyers were recognized as the main hindrances in agricultural marketing as early as 1928 by the Royal Commission on agriculture on a national scale. which are commonly grown in notified areas and for which there is a fare marketable surplus. It is. the methods or the procedure in which the transactions take place and other similar market operations are said to be regulated markets. A regulated market is a market that has rules and regulations with respect to the price of the product sold. the prevalence of various malpractices such as short weights. which by observed that “these can only be removed by the establishment of regulated markets”. Several committees have also recommended this from time to time. excessive market charges. The poor standard of primary and secondary commodity markets where producers convert their produce into cash. Progress of regulation in India Regulation of markets in India is today a state subject. however. be advantageous to the producer-seller if all the commodities are grown in the market are brought within the orbit of regulation. should be included amongst the notified commodities for the markets. middlemen and the buyer. The directorate of marketing and inspection at the central level render advice in farming market legislation and its 69 . This enables the producerseller to dispose off their entire marketable surplus in one and the same market.Although legislation provides for the regulation of all types of products in actual practice only some important commodities have been so far brought within the preview of enact. These regulated markets ensure a fair and level playing field for all viz. unauthorized deductions and allowances made by commission agents. therefore highly desirable that all agricultural commodities. It would. This is done by eliminating the malpractices at the grass root level.

But despite this the progress is not very satisfactory. In 1938 a model bill was prepared by the central agricultural department (now known as Directorate of marketing information). A further expansion of the regulated market system in terms of both market and commodities to be brought within the scope of regulation. b. Quite a sizeable size of markets remains unregulated even in this day and time. On the lines of this bill several states drafted and passed their own bills.enforcement. The number of the markets increased from 432 in 1950 to 3631 in 1976. At the central level financial assistance is being provided to select regulated markets for establishment of grading facility for some important items at the producers level. Benefits or advantages of regulated markets: 70 . A number of steps have been taken in the last 50 years to regulate markets. Strengthening the arrangement of enforcement and inspection to ensure a regulated system of open auction. Some schemes are also assisting the development of infrastructure facilities in selected regulated markets both primary and wholesale levels. Though the legal framework has been provided in those state the progress is uneven hence it’s suggested time and again that: a. standardizing weight and measures. The progress of regulation was very slow due to the 122 markets were regulated till the end of the war. developing certain infrastructure facilities in assembling markets and introducing quality standards AGMARK certificate. Development of rural markets and shandies and establishment of rural markets in areas where such facilities are not available. After independence the planning commission in its 1st and subsequent 5 years plan emphasis the vital role played by regulated markets. c. trading practices and margins of intermediaries. Due to this the number of regulated markets grew rapidly after independence. These are aimed at regulating marketing practices.

The average percentage has now gone up to 70%. Besides there has been a reduction in the market charges which varies between 28&69 % inn various markets. as a result of the regulation of markets may be briefly enumerated as below: 1. Socially it profits the producer as he is now directly involved in the management of the market communities. This provides him with a platform where he can discuss matters concerning his interest and give bent to his grievances. Markets charges are clearly defined and specified. Market the social and economic benefits accruing to the cultivators. Market practices are regulated and the undesirable activities of the market functionaries are brought under control so that a fair dealing is assured 5. As a result of the rationalization of market charges alone. Correct weighment is ensured by periodical inspection and verifications of scales and weights. the producers themselves took less than 40% of the produce to the markets.Regulated markets have many advantages over unregulated ones. There has been an increase in the number of sellers bringing their produce to these markets. the producer-seller is benefited to the time of 3-5Rs for every hundred Rupees worth of produce marketed by him in the regulated markets. This is no small benefit to the tiller of the soil. 2. Only correct and stamped beam scales and weights are allowed to be used in the market. 71 . It works out to be 15-25lakhs on rupees in respect of markets with an annual turnover of 5crores of rupees. Until 1944. Excessive charges are reduced and unwarranted ones are prohibited 4. 3. Psychologically the producer occupies a dominant position in the market community and faces the trader with greater confidence. Economically the producers gains by way of reduction of unwarranted multiple market charges and unauthorized market deductions.

batta namuna etc are eliminated. protected cultivators from authorized deductions and unduly low quotations but has also developed a machinery for serving impartial settlements of disputes between the practices. Besides reliable statistics of arrivals. rationalized market charges. 7. A machinery for the settlement of disputes between traders and sellers is setup this machinery provides suitable arrangements for the settlement of disputes regarding quality. helped to eradicate undesirable malpractices. Steps have to be taken in the future not only to bring the remaining assembling and terminal markets but also the primary markets under regulations. It has not only introduced a system of competitive buying. weighment and deduction prevent litigation. Thus regulation of markets has been a boon to the agriculturalists. Reliable and up to date market news are available to the sellers. Taking the overall picture. 11. 2. standardized weights and measures. 8. amenities and facilities: A market yard is “A statutory declared area situated within the market proper where all sellers of the notified commodities are supposed to bring them and 72 . dalta. stock and prices are easily available. The market yard.6. cart parking place. Open auction methods are strictly followed and unjustified trade deductions like karda. 10. safeguard the interest of the seller and smoothens business by creating good relation between sellers and buyers. regulated markets have produced a wholesome effect on marketing structure and have generally raised the efficiency of marketing at the primary level. Proper market yards with full facilities like sheds for the sale of produce. In these markets suitable quality standards and standard terms for buying and selling are conveniently enforced. 9. better grading and warehousing facilities for accommodation of agricultural produce are duly provided by the market committees.

rest houses. The lack of any fixed procedure of supervisors over the actual weighing process is also responsible for the situation. Then there is a problem of conventional and marginally over weighment. There is also a complete absence of uniform weighing charges or weighment. Some of the traders resort to using unauthorized and faulty weights and scales. internal pucca roads. The buyers demand access weight allowances and insist on arbitrary deduction for counter balance. drinking water. All such malpractices rampantly co-exist due to the absence of an impartial and independent agency for weighing.affect transaction with licensed traders directly through the other license intermediaries under the supervision of the employees of the committee. space for parking carts. The traders take full advantage of the situation and cheat the ignorant cultivator on every available or possible occasion. godowns. There are many malpractices connected with weighing and weighment. cattle shed. A well laid out market yard includes the provisions of certain basic amenities and facilities. The market yard is the nerve center for the performance of the activities of a regulated market. They also resort to very unethical practice of free taking away of excess left in the lot after weighing. market office. However no market yard can actually claim to have provided all amenities and facilities laid in the standards for regulated markets formulated by the Indian Standard Institute (ISI). post offices. lighting facilities. etc. Further the multiplicity of 73 . The multiplicity of weights and measures has deplorable effect on the market scenario. canteen. It influences the actual earnings of producer-seller and also their perception of the transaction fairness. Normally a market yard acquired amenities and facilities such as auction halls or platforms. Use of Standard weights and measures: The weighing of agriculture produce is an important aspect in the working of a regulated market. banking facilities. sanitary arrangements. 3.

This shortage of weighmen in all the markets is due to the fact that the market committees are averse to issue more and more licenses to weighmen. It creates an element of uncertainty in trade and renders scope for fraud. The produce is weighed by different licensed weighmen simultaneously at different spots in the yard. Their logic is that if more weighmen are given licenses the earning of the existing set of weighmen would be adversely affected. The use of standard weights and measures safeguards the interest of parties against cheating by false or under-weight. Mostly weighing of agricultural produce in most regulated markets is done wholly within the premises of the market yard. Many suggestions to the improvement in the scenario have been given by various national level committees. the frequency. It is even now more urgently needed 74 .weights and measures makes supervision difficult. It is suggested that the market committees should expedite the process of issuing license to weighmen in the interest of the producer-seller. Depending upon the nature of the commodity the procedure of weighing differs. the scale of the commodity arrivals and the possibility of earning sufficient daily income by way of charges collected. It is also suggested that the market committees should themselves provide weighing and measuring equipment as against the present practice of traders using their own equipment. It is however observed that in many regulated markets across the country the number of licensed weighmen was small. Mostly it is done lot by lot by the same weighmen. the number of licensed weighmen. in turn it is determined by the size of the market. The system adopted however depends on the availability of sufficient number of weighmen. sometimes if a seller has a high amount of produce to be weighed he engages the service of more than one weighmen. Many times it so happens that though the sale transaction are over in the morning the growers have to wait for getting their produce weighed till late in the evening and may be even overnight.

in rural areas in regard to transactions in which the farmer is concerned. The grower should be diligent and meticulous with respect to the procedure of the weighing laid down by the authorities. Also the employees appointed as inspection staff by the government are far too inadequate in number. Also this inspection staff (agricultural supervisors) are in the habit of taking bribes from the commission agents and traders for conniving at improper weighing. easier to learn and remember. The Planning Commission has recommended to adopt the metric weights and measures throughout the country because it is simple. According to a survey it is estimated that 80% of the transactions were deemed to be proper and fair as 20% is not a small figure. Further it is suggested that the weighing work among the licensed weighmen should be given on a rotation basis. This will minimize the collusionary group affiliations and thus reduce the malpractices in weighing agricultural produce. and its use would save time and labour in calculations. The Standards of Weight and Measures Act has been passed in 1958 and enforced in all the states with a view to check fraudulent views of weights and measures. Thus here again it is suggested that market committees take the punitive actions against offenders and check these malpractices. Besides the check from the authorities the grower can also do a lot to eliminate weighing related malpractices. 75 . The grower should also take the trouble of weighing the produce at their own end before bringing it to the markets. This 20% of malpractices can be eradicated if there is an efficient supervision by authorities of the market at time of weighing. It is observed that the grower seldom do this and thus the loss on this account is sizeable. It has been observed that the “surprise inspection” weapon provided to the market committees with respect to weighing provisions is a failure. This is because most market committee member is honorary and thus indifferent to pay such visits and invite trouble. The surprise visits made by the market securities are rendered ineffective as a result of before hand knowledge of the visit to the supervisors and licensed weighmen.

This point was fully realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry Committee and later on by the Agricultural Finance Subcommittee. This point was realised by the Royal Commission on Agriculture and subsequently supported by the Central Banking Enquiry 76 . before they are sold is an important part of marketing. preserving them safely and then distributing them in times of scarcity is necessarily a part of production and equal in importance and dignity. As mentioned in the previous section. Grains in bags can also be protected by damage. dampness and partly to insects etc. These losses in temperature can be reduced by making provision for efficient ventilation in the godowns and by closing them during the monsoons and keeping them open during the dry season. the Rural Banking Enquiry Committee and by the Rural Credit Survey Committee. they check the rise and bring about some stability in market prices which benefits the consumer immensely. therefore. a very important part of marketing. All these bodies recommended that storage and warehousing facilities should be made available at all nuclear points of trade in agricultural produce. Storing goods. Committee. losses in storage are due partly to the change in temperature.4. It is necessary that sufficient space be kept between the bags while preparing a stackplan." Storing is. Increased Provision of Storage and Warehousing facilities: It has been well said that the business of accumulating and storing perishable as well as non-perishable products in times of flush production. By holding back a part of the surplus at harvest time the middlemen prevent a sharp fall in prices of commodities so that the producer's share in the benefit is increased and by letting out produce from the store in seasons when prices are normally likely to rise sharply.

It is necessary at various levels to varying degrees. The state government and the SWC made warehousing and provided for storage facilities at centers of state or district level of importance. Further the government of various states has issued private operators licenses to build and run scientifically designed warehousing and other storage facilities. These efforts have had a mixed impact but definitely the storage capacity over all has gone up considerably. Accordingly the national co-operative development corporation. Due to the lack of storage facilities that are adequately and efficient the losses are great. Over and above all this villages / Rural storage needs are been looked after by the co-operatives. Village and Rural level In accordance with these suggestions. 77 . State and District level c. The National Level b. value and the retaining capacity of the commodities to be store. the availability of facilities for storage and the waiting capacity of the producer-seller. the food corporation of India and the CWC created storage facilities at centers of all India importance. Realising the need for good storage and warehousing facilities the Indian parliament in acted the agricultural produce (development and warehousing) Corporations act in June 1956 in order to accelerate the efforts of building warehousing. The method of storage at the primary market level depends upon the prevailing traditions. the government subsequently passed the warehousing corporations act in 1962. A 3 tier storage system was suggested by various committees viz.Storage of farm produce is one of the essential elements of orderly agricultural marketing. the central warehousing corporation (CWC) and the SWC in each state came into existence. a.

.e. Hence the market committees should help coordinate 2-3 farmers to pool their producer together so that an entire truckload is completed. They should organize some trucks or lorries for the transport of the produce of small farmers from village assembly centers to urban secondary markets. The fact is that the produce of just one farmer may not be enough to fill in an entire truck. Here is where it is suggested that the market committees take upon them some responsibility. the farmer. 78 . Improvement of transportation facilities: Right means of transport at the right time is essential for the smooth functioning of any market. The market committees are under no statutory obligation to provide for transportation but the nature of the problem is such that it is suggested that they step in. It has been observed that the cost of transport directly affects the price of the agricultural produce. This kind of a facility at reasonable rates will influence substantially the working of market mechanisms. It is the fact that most farmers due to regulated markets would like to sell their product directly at secondary markets but not at village assemblies centers. The private warehousing also provide for insurance cover against fire. The cost of such facilities provided could be recovered from the sale of the produce.The licensed warehousing offers other distinctive benefits. trader and the consumer are affected by the shortage of transport facilities. 5. They also help the grading and standardization of various commodities. All involved in agricultural marketing i. The scientific storage eliminates lose from spoilage. flood and theft. The private warehousing storage receipts are transferable and thus the ownership of the goods can be transferred without the actual movement of produce. However due to bad transportation facilities the farmers are not willing to take the risk of transportation.

the committee officials may contact transporters as well as railway authorities in obtaining the required number of lorries or wagons.The method suggested above can be executed as follows: a. 6. the government of India through its 5 year plans has allocated some budget for this 79 . The individual grower-seller may record their transport requirements with the market committee. b. The markets will also function continuously without the need for closure for want of transport. Prices do not move in harmony even in markets. Now having realized the need for a good agricultural marketing news service. which are not far from each other. The committee after receiving such requisition pools them and contract lorry supply offices. thus arranging for the transportation. As mentioned earlier the cost of coordinating and transporting can be deducted from the sales proceed. We often find a market glutted with a produce which is scarce in another perhaps only a few miles off.” The problem of lack of marketing information was discussed earlier. c. Similarly to assess the traders in having adequate transport facilities. The marketing surveys conducted under the direction of the Central marketing staff have shown that “there is at present a surprising lack of co-ordination as between different markets. This would reduce substantially the transport bottlenecks thus benefiting both the farmers as well as the traders. Provision of marketing news: The Agricultural Commission had recommended that steps should be taken for a better dissemination of the marketing news.

However in India the farmers are very poor and 80 . Collection and compilation Information dissemination Since then the government has given a lot of importance to improving the quality of agricultural marketing news services. 7.activity. Hence the farmer world over stock their produce in anticipation of a price rise. the closing of agricultural commodities and gives information regarding prices. as initially almost all the news relayed from these centers was agricultural in nature and market oriented. b. In 1957. This mainly benefited the farmers. a. Standardization of contracts and payments of sales proceed: Business practices worldwide show that the best time to sell ones produce is when the prices are high. the integrated scheme for the improvement of market intelligence was launched in Bombay. Thus the objective of an efficient market news service should be to aid towards more intelligent production with the ultimate object of achieving effective distribution and fair pricing of farm produce both for the producers and the consumers. The main objective of this was to give upto–date information to the producers with regards to the wholesale prices of agricultural commodities ruling in various markets. The government of India in collaboration with the various state government help. All India radiobroadcasts daily. setup of an all India market news service in the 2nd 5year plan. The penetration level of the radio set is almost 90% hence the broadcasts are very useful. This scheme covered two aspects viz.

This happens usually after the delivery of the entire purchase lot.  Almost all marketing charges of transport. The market legislations have clearly provided for insuring prompt payments. With the setting up of regulated markets all such irregularities can be eliminated to a large extend. ignorant and illiterate seldom understand such adjustments. The mode of actual payment of sales proceed differ from region to region.small.  In cases where the moneylenders are the buyer it is seen that they make direct adjustments in the debt accounts of the sellers who have earlier borrowed funds from them. The buyer behaves as if these are traditional practices and if changed will result in some thing un toward happening. The farmers being uneducated. If they cannot convince the seller for a credit transaction they deduct exorbitant amount for cash payment. Some of these methods are:  Instead of prompt payment of the total value of the produce purchased. payment by installments is forced on the seller. Most of these modes are exploitative. They have no waiting capacity to store the harvest produce for a favourable selling time. It is 81 . market to market and within the same market from transaction to transaction. The traders take advantage of this situation. storage and weighment are pushed on manipulatively to the seller. Thus the seller is forced to follow such rules of thumb. If is recommended that market committees play an active role in implementing such legislations. When they bring the produce to the market their immediate goal is to sell and obtain cash. But the problem is of implementation.  Most traders insist that all transactions should be on credit and make the seller agree to this.

However in the case of indirect sale the system of payment by the buyer to the commission agents is more governed by trade convictions. groundnut oil. the lender should supply a copy of the agreement to the borrower and 82 . Further it is seen that the commission agents in most of the markets follow the practice of calling on to get their payments. In order to stop unhealthy speculation. The buyers of these commodities are generally the processing factories. As a policy measures the commission has sort to eradicate monopoly of any kind. forward training of agricultural commodities is regulated under the forward contract regulation act 1952 for enforcing the act the forward market commission was set up in 1953.expected that at least this will make direct sales in the markets free and fair. The rules state that licensed general commission agents or brokers could give advances either in cash or in kind to the agriculturalist on the condition that 1. “If an agreement was entered into between the moneylender and the borrower. Due to the cash crunch in Indian markets such deferred payments or forward training cannot be avoided. which generally varies. The commission agent may not necessarily recover the amount from the buyer immediately on delivery of goods. This is particularly so in the case of certain commodities like cotton and groundnuts. which make payments at their own premises. coconut oil. It may be noted that due to this practice of deferred payments the commission agents demand a higher rate of commission from the producer-seller for prompt payments or result to a system of deferred payments to the farmer. This commission identified forward markets in raw cotton. black pepper and other oil seeds. As far as the operations of moneylenders are concerned they are governed by the Bombay Agricultural Produce Market Rules of 1941. There may be a time lag between the delivery of goods and the payment by the buyer.

8. Thereby making the price reporting mechanism more meaningful.  Secondly it serves as a mean of describing the quality of commodities to be purchased or sold by buyers and sellers all over the country.  Firstly it protects the consumers and the producers through the establishment of standards of quality. under his signature. Improvement in Grading and Standardization: Grading of commodities has 3 main purposes.2. In India grades.  Thirdly it provides a basis for the payment of premium on the quality of commodities. general commission agents and the brokers. entering therein every load transaction and its recovery” However the committees have practically no direct control over the credit activities of the traders. Further trading on the basis of accepted quality standards makes pricing more precise and equitable. The agricultural produce is graded under the trademark ‘AGMARK’. 83 . This is done in order to ensure good quality both for export as well as the domestic market. standards and appropriate trademarks have been developed under the agricultural produce (grading and marketing) act 1937. The lender should keep an account book. As coordination between the working of the market committees and the administration of the moneylenders act should be attempted. to the borrower. recording all advances made by him to an agriculturalist and repayments affected in the manner specified by the committee in its byelaws and should supply a copy of an account book.

This will (it is hope) fetch a competitive price to the grower in the markets compared to the ungraded produce. The grading practices of produce at the farmers level need to be emphasized and widely canvassed. the cultivator would not gain much. if there is no proper arrangement for the marketing of his produce as the benefits of better farming would probably be reaped by middlemen intervening between them and the ultimate consumer. How to ensure an economic and remunerative return to the producer. The income of the farmer depends to a great extent on the ability with which he is able to market his produce for a fair price. Even if the production side is strengthened and cultivation improved. how to establish a relationship between the price return and the quality of a produce. 9. It has.The act provided for the fixation of grade designations. The grading for other commodities is voluntary. Remunerative Prices for Farmers: It has been increasingly realised that mere increased production could be of little avail so long as the excess production failed to reflect itself in the shape of some extra income to the producer. which indicate the quality of scheduled commodities of agricultural produce. how to keep him informed of market trends and prices. how to grade and differentiate – how to pack and transport. Development of Co-operative Marketing: With the commercialisation of agricultural products efficient marketing is as necessary as scientific agricultural operation and so side by side with the progress in cultivation methods of suitable machinery for the efficient sale of farm produce should also be made. what security and what facilities the producer should get in the market. therefore been recognised that defects of agricultural marketing may be 84 . how to provide a self-propelling incentive for the maintenance of a standard which will bring the maximum return: how to prepare the produce for the market. how to keep him abreast of consumer preferences – these have been some of the questions which demanded close attention of those concerned with the agricultural marketing 10.

agriculture contributes nearly 49% of the national income and provides purchasing power for over 70% of the population engaged in the production of crops. which involves all the processes in the movement of goods from the farm to the consumer. It is. The conditions under which the farmers dispose of their marketable surplus in the villages and nearby mandis will. Technical inputs can be purchased and used by farmer only if he has money (funds). the marketing of farm produce.removed by organising the work through co-operative societies. his due share of the price paid by the consumer to sub-serve the need of planned development. Conclusion In a country like India where. But 85 . therefore. This progress in the country as a whole has been rather slow and it needs acceleration Agricultural Marketing Finance in India INTRODUCTION Finance in agriculture is as important as development of technologies. advocated that the primary consideration for the development of agricultural marketing is to reorganise the existing system so as to secure for the farmer. have a significant influence on the national production programme as low farm incomes discourage the use of fertilizers and improved seeds and push marginal lands out of cultivation and thus mar the very incentive to produce more. has obviously a significant influence on production activities and is patently as vital as the latter. therefore.

farmers were heavily burdened with debts and many of them perpetuated debts.his own money is always inadequate and he needs outside finance or credit. Since independence India has made substantial progress in respect of agricultural finance. He could asses credit worthiness of not only borrower but his entire family. Moneylender was the most convenient and easiest source of credit. Agricultural credit in early years was characterised by the growth of cooperative credit and there was decline in the share of moneylenders. bank credit to agriculture made phenomenal progress by opening branches in rural areas and attracting deposits. Professional moneylenders were the only source of credit to agriculture till 1935. Moneylender did not make difference between production and consumption credit. His administration was simple and quite flexible. The social thinkers in India were confined to freedom movement and other religious evils and had little time for 86 However occasional moneylenders like landlords and traders have come up as a important . As a result. There were widespread discontents among farmers against these practices and there were instances of riots also. Reports of all India rural credit survey committee and all India rural credit review that farmers were fully dependent of various sources of credit. Although the co-operative banks started financing agriculture with their establishments in 1930’s real impetons was received only after Independence when suitable legislation were passed and policies were formulated. There after. His credit was available at the time needed by. The most important advantage to money lender was the absence of any worthwhile formal source of credit and illiteracy and ignorance of rural community as whole. suppliers of rural credit. the farmer. Moneylenders were the main sources of credit during 1951-52. They use to charge unduly high rates of interest and follow serious practices while giving loans and recovering them.

It should be kept in mind that the informal sources haven’t totally disappeared. the only productive asset of that poor man. have helped in a major way to institutionalise agricultural credit. This need was associated with green revolution.assessing the damage done by moneylenders who were essentially Indians during two centuries proceeding independence. Further the short lived social control of commercial banks and their subsequent nationalisation. the establishment of low cost regional rural banks and restructuring of apex. The moneylenders depending upon their own fund could not entertain term lending. Charging exorbitant interest rates. There are certain important positive factors for this. non-issue of receipts for repayments were the main reasons of malpractice for moneylenders decline. The factors accounting for decline of moneylenders apart from malpractice could be their inability to provide term loans. but have only declined in relative terms. AGRICULTURAL CREDIT Needs and types: Finance had a very limited role in traditional settings as the transactions were 87 . The development of agricultural sector called forth medium and long-term credit large scale. cheating the illiterate borrowers by inserting larger amounts than borrowed. This let to official patronage for co-operative credit societies by way of extending and liberalising refinance facilities. Most important positive factor on the part of authorities was the realisation of needs for institutional credit in agriculture. Growth of literacy education and communication network has also helped to reduce the importance of indigenous moneylenders in a big way. All these activities aimed at grabbing the farmers land.

like capital. If the producer has adequate owned funds he does not have to bother about credit. But if he does not have adequate funds he has to depend upon others for credit. fuel. Farmer’s dependence on others for input requirement was marginal. were supplied by the households. land. etc.undertaken within the limits of village. Frequent crop failures were another reason for growth of cash transactions. Some factors are owned by him but for other factors he has to depend on respective markets. Inputs such as cowdungs composts. Need for crop loan comes from considerable increase in current cost of production. The need for finance grew with modernisation. Short term loans are granted to purchase seed. pesticides and other input requirements. Production credit Short term: The producer requires various factors of production. Payment of wages. 88 . electricity charges. Credit repayable within a period of 15 to 18 months is short term credit. The other factors either have to be purchased or hired if they are durable. Due to this the self-sufficient communities were exposed to credit gap. A gap of over one year implies a perpetual time and over a time spreads to the entire village community. Agricultural Credit is classified into two: I. Cash was only needed to pay land revenue or to purchase consumption goods. etc. 1. insecticides. hire charges of agricultural machinery and tools. labourer for production purpose. The important form of short-term credit is the crop loan. Crop failure forced farmers to borrow from moneylenders for meeting consumptions requirements. fertilisers. are other things for which short term loans can be needed. land revenue and other taxes. These loans are granted to meet the daily working capital requirements of farmers.

Crop loans help the farmers to enable the productivity function with the use of modern inputs. Part of cash loans can be used for consumption purpose. The advantage of short-term credit loan is that it minimises the possibility of misuse of loans by the farmers. As the assets are available for many years. They may also be used for purchasing livestock. insecticides. Medium term loans: Productivity can be improved by improving quality of assets or by creating new assets. Medium term loans are required mainly for creating capital assets. Crop loans have two components   a. They should be restricted upto marginal requirements only. It is possible to grant loans in the form of chemical fertilizers. etc. After the establishment of NABARD medium term period is increased between 18months to 7 years. pesticides. improved seeds. Cash component: It is made to meet the cash requirements by the farmers during the time of production. Medium term loans defined by survey committee is one. medium term loans are granted. One for meeting current cash outlays and Another. which is repayable over a period of 15months to 5 years. 1. It cannot be a repaid fully with one or two cropping seasons. Kind component: Financial agencies may make necessary arrangements with co-operative marketing societies to supply needed inputs by the farmers instead of giving cash loans which are ultimately meant for purchasing various inputs. agricultural machinery and equipment 89 .Capital intensity has increased the land productivity upto come extent. b. Availability of working capital only cannot make much significance on productivity. which can be distributed in kind. For production purpose. cost is spread over those years.

It is the one.such as diesel engine. Mechanisation is another important factor determining long-term finance. 90 . Land fencing also needs long term finance. are the purposes for which medium term loans are granted. Long term finance is needed by farmers for intensifying the agricultural operations on existing holding by making permanent improvements on land. In the same way construction of farmhouses. als consume a lot of funds. II. which is repayable between the period of 5 or 7 years to 20 or 25 years. etc. Certain loans are considered as medium term or long term loans. The term structure is relative and is determined by the repaying capacity of the borrower. etc. are some of the important items for which farmer requires cheaper term loans. development of activities like dairy. etc. Long term loans: Long-term loan is granted basically for permanent improvement or for acquiring new assets. poultry. rites. etc. storage facilities. The remaining loan is carried forward and can be paid over the period of 7 years. Only a part of medium term loan is expected to return in current production. Farmer has to wait for next harvest for receipts because there is no continuous daily. piggery. 2. A farmer uses his marketed surplus to pay off previous loans and very little to meet family consumption. Loan is also required due to crop failures. electric motors. Therefore he is forced to borrow both in cash and kind for his consumption requirements. marriages. Festivals. weekly or monthly receipts. In the same way deepening and repairing of wells for improving irrigation. Variety of machinery is needed by the farmer. Consumption loans: Industrial credit is wholly meant for production but a part of it goes for meeting consumption requirements of farm families. religious. green revolution is associated with intensive use of capital.

Even now for many reasons lending agencies insist on security. Local moneylenders never made any distinction between production and consumption loans therefore they were successful in their lending. SECURITY: Safe lending is widely accepted principle. To direct a larger share of credit to weaker sections of society. To improve the recovery of loans to ensure continues recycling of credit and 5. Indian agriculture continues to be a gamble in monsoon. 3. 91 . They could be considered as production loans. Consumption loan is basically for survival of farm families. problem is regarding the size and nature of security and whether small and marginal farmers have anything to do with it. MAJOR OBJECTIVES OF INSTITUTIONAL CREDIT IN INDIA: 1. activities during the first 2 decades after independence. 4. There is no dispute about the need for security. To reduce the regional imbalance in availability of credit. 2. To bring about greater co-ordination between credit institutions under the multi agency approach. It is difficult to differentiate between production and consumption loans. Good rainfall leads to good crop failure of monsoon damages the crop. but its. Crop failures reduce the necessary goods for selfconsumption and also reduce the prospective returns. Now lending has been made more objective in priority areas. Security is now been replaced by purpose.In India agriculture is dependent upon nature. Farmers have to borrow for survival. Both the loans have same importance. To secure an increase in the total volume of institutional credit for agricultural and rural development.

Non-institutional sources were of great importance during 1950's and 1960’s. It is necessary to spread risk for liberalising security conditions by introducing credit guarantee schemes and refinancing. third party guarantees or gold ornaments. Production oriented credit is extended against anticipated crops (crop loans). (i) Primary co-operative credit: Primary co-operative credit cater to short term 92 .There are different agencies in India extending short term credit such as primary credit societies. are accepted as security. regional rural banks. commercial banks. The different sources of agriculture are as follows: (A) CO-OPERATIVE CREDIT: Co-operative credit consists of two parts. In case of non-repayment the whole loss is borne by the local lending agency. consumption credit is provided on personal security. Some times. SOURCES OF AGRICULTURAL CREDIT: Sources of agricultural credit are divided into institutional and non-institutional. One engaged in short and medium term. Responsibility and accountability make them adopt security minded approach. etc. Land mortgage conditions come in the way of tenants who have no right on land. Loans meant for purchasing equipments machinery are issued on the basis of hypothecation of relevant machinery. However land mortgage is still insisted upon medium and long term loans. etc. Lending agencies are responsible to the depositors on one hand and being public institutions are expected to be responsible to the society. now due to the growth in institutional sources their importance is declining. Similarly it is also a fact that a large variety of small/marginal farmers are unable to furnish the necessary as security for loans. It is more important due to high risk and uncertainty of agriculture in India.

Primary credit societies. Each loan is limited to 50% value of land offered for mortgage. At the top of the co-operative credit stricture are state cooperative banks.and land development banks cater to medium and long term credit. on co-operative lines. obtain funds by the way of share capital reserves. The loans are granted to meet the specified long term requirements for a period of 5 to 20years. All loans are issued against mortgaging of land. the state co-operative banks control the central co-operative banks. They also keep and lend the funds to central co-operative banks. Farmers in reed of long term credit have to approach the primary land development bank or the branches of central land development banks. They provide short and medium term loans to farmers through central and primary societies. Just as the central co-operative banks control the primary societies. Most crucial problem faced by land development bank is the increasing rate of over dues. In other words. Primary societies are located in villages and their activities are co-ordinated with central co-operative banks. For meeting such requirements. Usually land development banks do not accept farmers valuation of land. (ii) Co-operative land development banks: Farmers also require medium term and long term finance. Land development bank. They have their own values. LIMITATIONS: 93 . It is seen that primary societies dependence is extensive on central co-operative banks. which is about 55%. deposits and debentures and bonds issued and refinance now from NABARD. which cater to short-term credit requirements lie at the bottom of co-operative institutional structure. the fund flow is mostly one way and no banking system can survive for long with over dues despite the best refinance facilities. the government has encouraged the growth of land development banks.

Madhya Pradesh. They need finance. The liability to repay loans may be due to poor crops or non and unproductive use of credit. Hence the societies go around the large and medium farmers. Small and marginal farmers: Majority of farmers in India are small and marginal. In other states like U. Tamil Nadu. Lastly certain degree of politicalisation of co-operative movement. Bihar. In absence of such surplus they cannot repay loans. But actually in India credit societies are overburdened with huge over dues.1. Andhra Pradesh. Linked with ownership landholding: The co-operative credit societies appear to be linked with ownership holding of land. Inconvenience in borrowing: Large farmers find it convenient to borrow from commercial banks and other institutions for such institutions do no face any shortage of' funds and have certain targets to be fulfilled. This stops continuous activities. Gujarat have not made any head way. Karnataka. West Bengal. Thus the basic purpose of self credit is defeated. Huge overdues: Banking activity is a two way process. Societies will be able to lend only when loan and advances are regularly repaid. Whereas cooperative societies are forced to depend on central and state co-operative banks and ultimately on government apex body like RBI and NABARD for financial requirements. 5. 3. 2. Limited geographic coverage: The spread of credit societies has been limited only upto certain states like Himachal Pradesh. That stops tenant cultivators from the purview of co-operative credit. for their needs but they are unable to obtain it and even societies find it difficult to lend them. Similarly small and marginal farmers also would not get adequate credit. These farmers invariably cultivate for self consumption leaving very little marketable surplus. 4.P. lack of 94 . Punjab and Maharashtra.

(C) STATE BANK OF INDIA AND RURAL CREDIT: 95 .training and professional attitude of staff. guarantee of one or two solvent parties crops. growth of commercial and regional banks in rural areas are also responsible for the retarded growth of co-operative credit in India. after harvest time. Recovery and default: Banks should develop habits of punctual and thrift payments on part of farmers. Schedule of recovery should coincide with cash realisation i. The national agricultural credit (long term operations) fund.e. besides helping the co-operative sector and taking lead in the establishment of financial institutions to help the agriculturist. II. etc. (B) RESERVE BANK OF INDIA AND RURAL CREDTI: RBI has taken initiative to appoint the all India rural credit survey committee to solve the problem of rural credit by suggesting ways and means to improve the existing structure. The bank has to check whether the kind component is lifted by farmers. RBI has issued the following guidelines: I. II. Margins and security: Production oriented loans are given against the hypothecation of title documents of land owned. They are: I. III. The RBI has set up two funds on the recommendations of AIRCSC. Credit norms finance: In ratio 30:70 the short term loans are divided into cash and kind components. The national agricultural credit (stabilisation fund) RBI also keeps an eye on the policies and working of other financial institutions providing agricultural finance.

SBI came into existence in 1951. It popularises their debentures by giving advances on security of debentures. Nearly 19. SBI assists land development banks also by subscribing their debentures. Commercial banks are extending support. The whole group of SBI has a network of branches and sub offices. etc. Indirect finance is 96 . to agriculture in direct as well as indirect way. SBI has been providing financial assistance to marketing and processing co-operative societies as well as for co-operative sugar factories. SBI has opened branches in small towns and mandis to generate banking habits in farmers. land development banks.As a solution to the Problems of cooperative finance in India the all India rural credit survey committee recommended the integrated scheme of rural credit. Special Activities: Special and innovative schemes are adopted by SBI. It caters to the needs of large scale organised industries and its activities are concentrated on urban areas. which leads to rural development. Remittances provided to central and state banks are in a liberal way besides granting them with short term loan facilities against government securities at a low rate of interest. industrial cooperatives. Direct finance is granted for agricultural operations for short and medium periods.400 villages come under the "village adoption scheme". (D) COMMERCIAL BANKS AND RURAL FINANCE: For the development of trade and commerce in India banking system is been developed. SBI provides credit to all potentially viable farmers. SBI has taken broader view through co-operatives in leading the development of rural India. ASSISTANCE GIVEN BY SBI TO CO-OPERATIVE SECTOR: SBI is providing assistance to co-operative sector also. After the nationalisation of imperial bank of India.

Failure in filling the geographical gap: Availability of' credit is not covered geographically by the co-operatives. in 1994-95 the disbursement of total credit in southern regions stood 51.3%.6%. 4. 5. while in northern. inadequate business potential.4 and 0. Profitability affected: Rise in establishment expenses. Neglected supervision: There is lack of supervision in rural branches because of which the banks have found sanctioning and monitoring a time consuming and of high cost. These banks also finance for the operation of Food Corporation of India. 3. 97 . but their operations have got some criticisms. eastern and western regions was just 11.5 % respectively during the same period.granted by providing advances for distribution of fertilisers and other inputs. For e. State Government and their agencies for food procurement. 2.g. 6. The yield on advances his been decreasing. In the absence of proper geographical spread of bank branches it is found that more than on bank operates in same area. ACRC has also found out that there is lack of adequate staff in rural branches of commercial banks. which results in unhealthy competition between 2 or more commercial banks. Regional Imbalances: The banks have disbursed regional imbalances in the credit. reducing the margins available to banks. and increase in non performing. One of the problems of deterioration is quality under the anti-poverty programme. advances affect the profitability of banks. average cost of deposits and borrowings is increasing. Critical review of operations of commercial banks: In the case of rural credit commercial banks have made achievements. Rapid expansion and diversification: Due to rapid expansion and diversification the quality of scheme has been deteriorated. They are as follows: 1.

Absence of proper records: It becomes difficult to ascertain the total indebtness of some farmers because of the absence of proper records of land rights.6. wells or deep tube-wells or sinking shallows.g. 3. This creates difficulty in verifying the actual utilisation of funds. Farmer would get additional cash to serve his short. 7. in case of pump sets the dealer would sell an old set instead of new one for which bank would sanction him the loan. Lack of co-ordination: There is lack of co-ordination not only between two commercial banks but also between banks and government departments. This alarming situation calls for a corrective action. Lack of sufficient supervision: There is no sufficient supervisory staff in the bank as a result there is misuse of loans. which plugs in loopholes. PROBLEMS FACED BY COMMERCIAL BANKS: 1. 98 . Problem of recovery: The recovery position of commercial banks create a problem. Difficulty in verifying actual utilisation of loans: There is often misuse of funds in case of medium term loans. Digging. Difficulty in judging the creditworthiness: Due to lack of intimate knowledge of the character of the borrower it is difficult to judge their creditworthiness. (E) AGRICULTURAL REFINANCE DEVELOPMENT CORPORATION: Indian farmers take long term loans for following purposes: I. There is lead bank in every district but in many cases number of branches belonging to commercial banks. 2. 4.term needs. which creates problem of over financing or problem of recovery. For e.

it was recognised that India needed a refinancing body with adequate resources of money and an expert coordinator to guide and assist the long term finance lending institution. improvements in lands were financed by moneylenders and by government. Terracing hilly and undulating land. Land development banks. So. IV. The parliament established the agricultural refinance and development corporation in 1963 with view of above objectives. Reshaping. They are as follows: I. levelling or dressing his land. These banks operated statewise with assistance provided by the state government. Apart from the primarily being a refinancing agency the corporation has certain promotional and developmental functions. Installing weirs on small streams. etc. II. 99 . Emphasising on economic upliftment of weaker section of community. With the adoption of new strategy of agricultural development. Mechanisation of water lifter.II. co-operatives came in existence. Diversifying the lending by identification of new activities. V. Subsequently. III. Reduction in the regional imbalances of agricultural development by focussing more attention on less developed regions. Mechanisation of seasonal operations and for laying out orchards or for traditional plantation of crops. But their financial position was weak enough to provide finance for agricultural development schemes. In the past. III. VI. long term financial assistance became significant.

PERFORMANCE OF CORPORATION: a. Purpose wise disbursement of refinance: There is highest mean of growth rate in favour of farm mechanism followed by dairy development and fisheries. Decreasing trends have been noticed in rest of the purposes. Increasing share of farm mechanism, dairy development and fisheries are favourable development. b. Helping in reduction of regional imbalances: The agricultural refinance and development corporation has been helping in reducing the regional imbalances in the agricultural development. c. Reduction in regional disparities within states: ARDC has taken special care in reducing regional disparities within states by allocating schemes and resources to larger parts of the states. d. Economic upliftment of weaker sections: ARDC has provided 100% refinance. It has laid more emphasis for economic upliftment of weaker sections. It has also disbursed loans to IDA and IBRD for projects selected by for financial assistance. (F) REGIONAL RURAL BANKS: The establishment of regional rural banks (RRB) was recommended by the working group on rural banks to provide a helping Land in the effort of commercial banks and co-operatives in extending credit to small and marginal farmers, landless labourers artisans and other rural residents. With a view to reach the rural people more extensively, these banks were started combining the local feel and familiarity with rural problems, which the co-operatives possessed and the degree of business organisation and modernised outlook, which commercial banks had. The staff of RRB's is recruited from neighbouring areas 100 them

because they have better understandings of local problems, local peoples needs and their constraints. FEATURES: 1. Rural based: Primarily the RRB's are rural based. They supplement the co-operative credit societies. national commercial bank. 2. Cater the need of backward areas: The areas where cooperative and commercial banks have not been established, RRB's are established there. They cater to the needs of tribal and backward areas. Their working procedures are understood by the local people. They provide productive credit and their interest rate changed is also low. 3. Authorised capital structure: RRB's authorised capital is 1 crore and paid up capital 25lakhs. Share capital ratio is 50:15:35 from which 50% is raised by government, 15% is it own deposits and 35% from sponsoring commercial banks. PROBLEMS OF RRB'S: I. Problem in organisation: Government contributes 50% capital to RRB. Therefore there is multi-agency control over it. This brings lack of uniformity in their functioning. Besides there is lack of monitoring by the sponsoring banks. RRB operates in a restricted area. Within the institution of RRB there has been lack of proper system and procedure. The process of recruitment and training of RRB staff does not received adequate attention. There is unplanned and unwieldy growth of these banks and branches are opened tinder the pressure of state government. II. Increasing losses: A number of factors are responsible for the 101 These banks are to be sponsored by any

increasing losses, which lead to non-viability. They are: a. RRB's are confined only to lend to weaker sections where interest earned on loans is very low in the banking system. b. c. There are low margins with high cost of servicing. RRB's do not have any scope of cross subsidization in the absence of loans yielding higher returns. d. Opening branches of RRB's year after year has added to the overhead costs without proportionate increase in income. e. III. Economic environment of RRB's is not satisfactory. Recovery problem: The high incidence of overdues is due of number of internal and external factors. Internal factors include defective loaning policy, weak supervising and monitoring, failure in recovery. The external factors include political interference, wilful default, droughts and floods, lack of legal and administrative support from state government. IV. Problems in management: RRB's staff finds it difficult to take independent decisions in new environment because the sponsor banks have been deputing middle management staff to run them. Meetings of Board of directors are not held regularly. A number of problems come up due to multi agency control of RRB's (G) NATIONAL BANK FOR AGRICULTURE AND RURAL

DEVELOPMENT (NABARD): NABARD is a specialised financial institution in the field of agriculture and rural development. It has been designed specifically as an organisational device for providing undivided attention, forceful direction and pointed focus, to the

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credit problems of rural sector. Half of NABARD's capital was contributed by RBI and other half by the government. It has enough financial resources to support agricultural and rural development programmes. Function of NABARD: a. It works as an apex body which looks after the financial needs of agriculture and rural development. b. It provides short term loans (upto 18 months) to state co-operatives for seasonal agricultural operations. c. It provides medium term credit (18 months to 7 years) to state cooperatives and RRB's for approved agricultural purposes. d. It maintains research and development fund to be used of promote research in agriculture and rural development. e. It has authority to oversee the functioning of co-operative sector through agricultural credit development. f. It is entrusted with the responsibility of inspecting central and state cooperative banks and RRB'S. g. It provides long term and medium term credit (not exceeding 25 years) for investment in agriculture to state co-operative banks, RRB's and commercial banks. h. It provides long term assistance in form of loans to state government not exceeding 20 years for contribution to share capital of co-operative credit institutions. NABARD and Rural Credit:

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Agency Commerical Banks

Types of Refinance Facilities Credit facilities  Long term credit for investment purposes  Financing requirements of Societies(WCS) the & working State capital Handloom

Weavers’

Cooperative

Short term Cooperative Structure(State Cooperative District Cooperative Primary Credit Societies) Banks, Central Banks, Agricultural

   

Development Corporations Short term (crop and other loans) Medium term (conversion) loans Term loans for investment purposes Financing WCS for production and marketing purposes

Financing State Handloom Development Corpoartions for working capital by State Cooperative Banks Term loans for investment purposes

Long term Cooperative Structure Cooperative Banks, Cooperative Banks) Regional (RRBs) State Governments (State Agriculture Primary Agriculture

and Rural Development

and Rural Development Rural Banks    Short term (crop and other loans) Term loans for investment purposes Long term loans for equity participation in cooperatives  Rural Infrastructue Development Fund

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c. 105 . handicrafts. Period of Credit: Up to 12 months: Rate of Interest (as at December 1998): (1)  Seasonal Agricultural Operations For SCBs at 4% to 6. farmer co-operatives etc.5% per annum depending on the SCBs' own involvement in the total eligible loans disbursed. Marketing and distribution of iilptlts like fertilisers. handlooms. industries. Production and marketing activities of village and cottage industries. Agricultural production operation and marketing of crops by farmers.Non-governmental Organisations (NGOs) – Informal Credit Delivery System (RIDF) loans for infrastructure projects  Revolving Fund Assistance for various micro-credit promotional delivery projects innovations under Credit and and Financial Service Fund (CFSF) and Rural Promotion Corpus Fund (RPCF) respectively PRODUCTION CREDIT (SHORT-TERM) REFINANCE: Eligible Institutions: (a) State Co-operative Banks(SCBs) (b) Regional Rural Banks (RRBS) Eligible Purposes: a. seeds.  At 4% per annum for financing tribals and Cooperative in North Eastern Region. handicraft. artisans. pesticide etc. small-scale and tiny industries and other rural non-farm enterprises. b.

It has been essentially distributed to relieve distress cost by droughts. the need for increase in agricultural production in general 106 . floods and other natural calamities and to assist the farmers to over come emergencies and restart his agricultural operations in the following years. The nature of security usually for these loans was immovable property and the rate of interest charged were relatively low.5% per annum Weavers' Finance by Co-operatives 8. (H) COVEIZNMEN-I'FINANCE FOR AGRICUL'I'URE: Takkavi is the ancient and traditional form of government assistance to the agriculturist.5% per annum Short-term finance to RRBs for other than Seasonal Agriciiltural Operations  7. these loans became regular loans for productive purposes. Starting as "Distress loans". The land improvement loans act of 1883 and the agriculturist loans act of 1884 were the two legislative measures passed to put the Takkavi operations on regular basis. (2)  (3) For RRBs at 5.5% per annum Other Facilities:  The short term credit for 12 months can be converted to medium term credit for 3 to 7 years subject to certain conditions when farm productions are affected by natural calamities. After independence. Takkavi loans had to be distributed in substantial years. The state revenues department after the disbursement and recovery of the loans. The former is concerned with long-term loans and the latter with the short-term loans.

there was over financing for the same group of influential agriculturists. With lack of supervision there was considerable misutilisation of loans resulting in mounting over dues. The main reason was the condition laid down that land had to be provided as a security. The Rural Credit Survey Committee characterised Takkavi. With the coming in of co-operative credit societies and land mortgage banks. which resulted in inadequacy of amount. rehabilitation of a large number of refugees from Pakistan was to be carried out on a war footing.and food grains in particulars became urgent. inequality of distribution and inappropriateness of the basis of security. Besides. grow more food campaign and similar other schemes were undertaken. keeping the needy farmers high and dry. as they were unable to furnish the security as required under the rules. and recommended that the Government finance should be strictly 107 . Due to overlapping of functions. Therefore. "To be little else then the ill-performed disbursement of inadequate moneys by an ill-suited agency". Thus the system suffered from defects. or supervising the use of credit when granted. The Government had therefore to disburse large amount by way of loans and advance to agriculturists. It was observed that the average amount per cultivator was very small in respect of small cultivators. Further the medium and big farmers were able to secure a large share of the available takkavi finance. CRITICAL EXAMINATION: A critical examination of the working of the takkavi finance was made by Rural Credit Survey Committee. inadequate supervision and lack of coordination between different departments there was too much disbursement of loans. The officials concern were burdened with many responsibilities and were not well equipped to deal either with the task of assessment of credit requirements. The small landholders and tenants could not avail of takkavi loans.

VI. Internal factors are those on which lending institutions have some control. Misutilisation of credit. But they have no 1 Some of the external factors are is follows: I. operational or administrative control over external factors. III. IV. VIII. sugar and processing factories etc. Infructious investments. VII. IX. Increased cost of living due to inflation. power tillers purchased with the help of credit. Delay in getting phones connection to weak points. II. Failure in projects like societies. 108 . Defective credit policies and procedures are responsible for the creation of overdues. Lack of proper marketing facilities. Changing cropping pattern. V. Natural calamities.limited. CAUSES OF OVERDUES: There are certain internal as well as external factors responsible in the growth of overdues. X. Unforeseen social and religious expenses. Disposal of assets like tractors.

Legal actions should be resorted to. These were some of the factors on which the lending agencies have very little control.XI. Credit and marketing of agricultural produce should be linked. III. XIV. This can be done by associating non-officials. Inadequate or over financing. IV. 109 . Death of principal borrower and consequent disputes among heirs. SUGGESTIONS: All the committees and sub groups have made certain suggestions some of which are listed below: I. XIII. V. Very old dues may be written off. Alienation of land through sales gift or mortgage. XV. Inability of financial institution to provide credit to defaulting units to bail them out from old debts. II. Uneconomic holdings. Lending agencies should take strict action by speeding the arbitration references to execution of awards. Political and governmental interference. It is possible to improve the situation by educating the borrowers. Non-wilful defaulters should be extended rehabilitation credit after careful study of each case. XVI. voluntary agencies etc. XII.

X.VI. There should be more closer and effective supervision of credit. VIII. Chronic overdue areas may be identified and remedial measures takes. Prosecute rich wilful defaulters. VII. loans should be rescheduled and overdues postponed. There should be full coordination with government. Besides. XV. Stabilisation fund should be given importance. IX. Loan policies and procedures should be reoriented. XVI. The lending agencies should set up their own recovery cells. XII. The mortgaged property should be sold to reveal the intentions of the bank. XIV. XIII. Publicity campaign may be undertaken to impress the need for recycling of funds. Loans may be issued by way of non transferable cheques. XI. money lenders combine farming with money lending. Primarily they may be interested in farming but they carry on money lending as a side business. drawn in the favour of borrowers and payable at bank branches. Money Lenders: There are two types of money lenders in the rural areas. PRIVATE SOURCES OF AGRICULTURAL FINANCE: I. The agriculturist money lenders and the village shopkeepers. When repayment problem is genuine. there are professional The agriculturist moneylenders whose only occupation is money lending. 110 .

The money lenders have been responsible for many of the ills of Indian agriculture because their main interest has been to exploit the farmers to their benefits and grab their lands. C.The cultivators depend upon the money lender for their requirements. They obtain bonds and promissory notes on false pretences from their debtors and enter in them amounts larger than actually lent. These loans from landlords are taken by farmers for consumption 111 . III. which takes the form of advance payment of a part of purchase price. of cash. This source of finance is not very desirable as it leaves scope for deprivation of weaker farmers by powerful interests. specially the tenant farmers. The importance of money lenders is declining but they are still preferred by some of the farmers who do not have approach to institutional finance and whose requirement of credit is urgent and mostly for meeting the consumption need. B. Commission Agents and Traders: Finance provided by commission agents and traders is a sort of production finance. They give no receipts for repayment and often they deny such repayments. thus depriving them of profits. Malpractices of Money Lenders: II. (3) Landlords: Landlords are the important source of finance for farmers. The farmer is compelled by trader and commission agents to sell his produce at a low price. They deduct exorbitant premiums. They charge high rate of interest often 24% and above. A.

Relatives provide finance in smaller amounts. III. VI. IV. (4) Relatives: For tiding over temporary difficulties farmers borrow from their relatives. No procedural delays are involved in granting loans to the farmers by the money lenders. This amount is given to meet the emergency needs of farmers. Non-institutional agencies provide credit both for productive and consumption purposes. DEFECTS OF NON-INSTITUTIONAL AGENCIES: 112 . Non-institutional agencies can provide fresh loans even when no security is offered by the borrowers. II. Commercial banks and cooperative societies are generally reluctant to lend for consumption needs. Non-institutional agencies can provide fresh loans even when no security is offered by the borrower. Moneylenders do not press the borrowers for repayment of the principal if they keep on paying the interest regularly.purposes. Farmers need not enter into very many formalities while borrowing from the money lenders. These conditions are also very soft. V. IMPORTANCE OF NON-INSTITUTIONAL SERVICES: The following factors account for the continued significance of non-institutional agencies in agricultural marketing finance: I. A village money lender is always easily accessible to the borrowers.

IV. Besides. III.The various defects of non-institutional sources of agricultural marketing finance are as under: I. The RBI has made several attempts to bring the indigenous banker under its control. The lead bank of a particular districts makes an assessment of credit needs of the area. They are unorganised and do not have any contact with that sections of the banking world. The government has tried to regulate the activities of non-institutional agencies like money lenders and established more institutional agencies for agricultural credit with a view to stop malpractices followed by them. They follow vernacular method of keeping accounts and do not give receipts in most cases. They do not distinguish between short-term and long-term finance and also between the purposes of finances. II. Lead role means taking initiative for catering banking needs in its area. the interest. GENESIS OF INCEPTION OF THE SCHEME: 113 . coordinates banking activities of various banks including cooperative banks and then makes provision of sanction and disbursement of the loan. They combine banking with trading and commission business and thus have introduced trade risks in the banking business. which they charge is out of proportion to the rates of interest charged by the other banking institutions in the country. LEAD BANK SCHEME: It is the scheme under which a particular commercial bank is entrusted to play a leading role in a particular district rehiring to rural development.

D. look after and plan out branch expansion.e. cottage industries of the area and identify among those. which have no link with banking sector.R. commercial banks just had a marginal role in the process of rural development. Another committee. Lead bank were entrusted to perform a leading role in their respective area before surveying the needs of farmers. Goa. II. In essence lead banks were required to perform following functions: I. make available the banking facilities in non-banking area and other function aiming at providing better and coordinated banking facilities all over its jurisdiction. Gadgil stated this idea. coordinated and rapid development of banking activities in the rural areas. After nationalisation many commercial banks were opened in the rural areas. Chandigarh and metropolitan cities of Mumbai. and assess specially 114 . 1969. In the same year i. To survey the number of small-scale. The National Credit Council Study Group (NCCSG) under the chairmanship of Prof. RBI accepted the idea of lead bank scheme and resolved to implement this scheme in all the 380 districts across the country leaving just a few totally urbanised areas such as union territory of Delhi. Kolkata. and Chennai. The group strongly recommended for ‘area approach’. But after nationalisation of 14 major commercial banks in 1969 government took necessary steps to expand banking services in the rural areas. Encourage such units to open their accounts in banks. But this expansion was neither planned nor coordinated. To survey the facilities for stocking and warehousing.Before the nationalisation. Hence many economists criticised such unruly expansion and put forward an idea of ‘area’ or ‘micro approach’ for smooth. known as committee of bankers or Nariman committee appointed by the Reserve Bank of India also expressed its support to the idea of ‘area approach’ and christened it as ‘lead bank scheme’.

seeds. To examine inability of primary lending agencies and in case they are potentially viable. insecticides etc.the facilities for storing inputs such as fertilisers. To ensure coordination of banking activities with government and semigovernment agencies. To examine facilities for small-scale and cottage industry production 115 . IV. VII. then to encourage and strengthen them. III.

they render. In such circumstances co-operative marketing society can largely help the farmers reduce the malpractices and offer honest and correct services. For example. Those are 1. The promotional and development role of NCDC had lead to continuous diversification and expansion of co-operative programs under its preview. The Co-operative is a unique institution in the country catering to the development of the rural economy and agriculture sector through co-operative. itinerant trader. collusion between the broker and the buyer while fixing the prices.moneylender. such society is called as cooperative marketing society. There exists a chain of intermediaries between the producer and the final consumer. delay in payment of amounts due to farmers.Cooperative Marketing The Co-operative Development Corporation The National Co-operative Development Corporation has been promoting and financing a wide range of economic activities in rural areas through co-operatives. They include village merchant. commission agent. The result is the farmers are indebted to trader . But these margins are generally ex-orbitant. Co-operative Marketing Society When producers of agricultural commodities or any other product form a society with an objective of carrying out marketing of their produce. arbitrary deductions from the produce. NCDC has been playing special attention to weaker sections co-operatives in various part of the country. There is no other institution in the country which is exclusively for meeting the requirement of co-operatives. The need for co-operative marketing arose due to many defects observed and experienced in the private and open marketing system. They take their own margins for the services. making the commodities costly 116 . 2. wholesaler. manipulation of weights and measures and cheating the farmers. etc. Several malpractices prevail in the marketing of agricultural produce. preharvest contractor and retailer.

Besides marketing society can act as an agent of credit co-operative society and help to recover loans advanced by credit societies. if there is co-operative marketing society. pomegranate. storage. grading. At present. most of the financial needs of the farmers are fulfilled by trader moneylenders at very high rates of interest and with the condition that they will sell their produce through them. 3. loading/unloading which are carried out by some private functionaries who charge high rates for these services. Membership : 117 . The commodity-based societies related to grapes. etc. This can be avoided. organized on co-operative basis. The area of operation of marketing society is usually fixed with reference to local conditions .area based or commodity based. Organization: Under the system of co-operative marketing whole responsibility of marketing is taken up by the farmers themselves. financing. banana. have wider jurisdiction covering the major areas growing each crop.for the consumers and reducing the producer's share in the consumer's price. oranges. This will make commodities cheaper to the consumers and also ensure good quality of produce to them because much of the handling is avoided. There are some services such as transport. 4. A co-operative marketing society performs these services efficiently and at cheaper rates. There are societies at the producer's level and they federate at state or national level to deal with bigger markets including foreign markets for export of their produce. A co-operative marketing society provides market finance to farmers and ensures better returns to their produce. A cooperative marketing society can eliminate some or all of the intermediaries and can reach to the consumers and establish direct trade relations with them. packing.

Grants or subsides from the Govt. Short-term capital is needed for financial advances to members for production. Share capital Deposits. for godowns. Resources: The sources of fund of the society are as under: 1. Functions : 1. pooling and procurement of produce of the members. etc. to meet contingent expenses.Membership of a co-operative marketing society is open to individual farmer who produces the crop for which the society is formed. 3. Loans from higher financial institutions including NABARD. 4. The marketing societies require short-term. medium-term and long-term capital 1. Long-term loan is required for installation of machinery. construction of building for godown. storage. 5. Medium. Reserve funds. etc. etc. packing. transport. 2.term capital is required for purchasing motor trucks. 118 . To arrange for the sale of members produce to the best possible advantage. 2. 2. Other co-operative societies in the area can also become institutional members. 3. etc. To undertake activities in connection with grading.

000 credit societies in Maharashtra. many advantages are envisaged in the co-operative marketing the structure has remained relatively weak as compared to credit co-operatives. farmer . To provide storage facilitates to their members by renting or owning the godowns and thereby facilitate to grant advances against pledge of produce.producers have expressed that marketing co-operative societies should be formed. There are only about 1000 marketing societies as against 20. Marketing societies are also encouraged to undertake export trade so that they can give better prices to their members. etc. It teaches business methods to farmers and serves them as agency for supply market information. Weak Co-op. To protect members from all types of malpractices eliminates the middleman in the chain of marketing. 7. For want of these managerial aspects. Marketing of perishable is still more different. to keep watch on demand . 6. Arranging quick transport. co-operative channel has offered greater share of consumer's prices to the producers. 4. Marketing : Although. The society is able to stabilize prices over a long period by adjusting the supply with the demand. 5. arranging storage to avoid losses. Their marketing is more difficult involving many technical and commercial aspects. Several marketing surveys/studies at farmer's levels have revealed that among several marketing channels. Whichever.This was particularly reported in the cases of marketing of perishables. marketing is unorganized.3. 8. desired number of cooperative marketing societies have not come up and those which were started could not succeed. Co-operative marketing society ensures grading. and supply of good quality material to consumers. 119 .supply position to ensure good prices to members are all matters need for good marketing.

1. 4.E. Milk co-operatives in Maharashtra and Gujarat. 6. thus. Benefits of State Trading 120 . State trading enables the private trading countries to negotiate with equal bargaining power and.” The main objective of state trading is to facilitate development of trade with countries where trade is in government hand.A. it includes purchases from abroad for governmental use and disposal of surplus stores originally purchased for governmental use. there are few examples of good success. safeguard against exploitations. milk.Few Successes: Inspite of the difficulties encountered in the marketing of perishables like fruits. A Report prepared by the E.F. 3. Co-operative cotton marketing societies. are confronted with monopolistic trading agency. Secretariat defines state trading as “Direct participation by the government (or its agent) in foreign trade including those trading activities in which the government (or its agent) holds title to export before transactions and acquires titles to import.C. Co-operatives marketing banana in Jalgaon district. State Trading State trading in its narrow sense means import and export transactions of a state-owned or state controlled agency involving purchase of goods on commercial sale. Vegetables co-operatives in Thane District. which a large number of private importers and exporters competing with each other. 5. 2. In a broader sense. Co-operatives marketing pomegranate. etc.co-operative federation marketing grapes in Maharashtra. Maha-grape . and to assist the government in solving difficulties and problems for which private trading channels are found to be inadequate. vegetables.

it helps in building reputation of the country's exports. Objectives of State Trading State trading has the following objectives: a. shipping and insurance for encouraging the development of these services. it is an important instrument in regulating exports and imports for various reasons. 121 . Fourthly. c. dispenses with the services of middlemen and thereby eliminates their commissions. by removing malpractices of the private exporters. To stimulate production of essential agricultural and industrial commodities by means of price and other incentives. Seventhly. it tries to develop new markets for exports and new sources of supply of imports and also promotes exports of non-traditional items. to rectify disequilibrium in balance of payments. Thirdly. It can charge maximum price.buying and so lowers the cost of imports. b. and to provide protection to domestic industries. Sixthly. To effect exports and imports at more favourable prices through increased bargaining power. viz. to restrict imports of nonessential goods. it is an important instrument of export promotion. which the consumers abroad are ready to pay for such commodities.State trading has various advantages as compared with private trading. it can be directed to patronize national banking. with its vast initial investment. Fifthly. Secondly. it can be used to take advantage of monopoly power in respect of commodities for which the country holds a world monopoly. To ensure adequate and regular supplies at reasonable and stable prices of essential commodities to meet local demand. Firstly. it undertakes bulk.. state trading helps the state in honouring its bilateral agreements.

To facilitate the implementation of trade agreements and barter deals. As per its Memorandum of Association the objectives of the S. other important objectives are: 1. 122 . To influence changes in the distribution of income derived from foreign trade transactions. To explore new markets for traditional items of export and develop new items with a view to diversifying and expanding the export trade.d. Besides. are. l. g. e. h. To raise revenue for the treasury. f. has been constituted as a limited liability company under the Indian Company's Act. T. 1956. To transfer trade from the control of non-nationals. j.” Functions: With the passage of time. “to organise and effect exports from and imports in to India of all such goods and commodities as may be determined by the Company from time to time. To obtain advantage of bulk transactions. To facilitate trade with centrally planned economics. State Trading Of India The S. k. and to undertake the purchase. It normally has 10 Directors. C. i. T. To facilitate the import of goods financed under foreign aid programmes. To explore export markets for products and to dispose of exportable surpluses of commodities. the above objective. To stabilize the domestic prices of specified products by controlling their production and marketing. the role and activities of the Corporation have widened. To facilitate sanitary and public health controls. C. To direct trade in accordance with development policies. and n. sale and transport of and the general trade in such goods and commodities in India or anywhere else in the world. m.

7. which may be required for the purpose of any business of the company. To organise product to meet export demands and to help product units in overcoming difficulties of procuring raw materials and other essential 123 . To manufacture. deoiled linseed cake. prepare and deal in merchandise. to introduce non traditional items in the world markets and to find out new markets for Indian exports. To barter. To facilitate and organise exports of difficult-to-sell items (such as manure.) by linking essential imports with additional exports and under special trade promotion agreements. To generally implement such arrangements for import. To promote long-term export operations and "difficult to-sell" items. cement etc. and deal in all kinds of articles and things. 3. treat. c.2. sodium. 4. b. a. import. exchange. export trade. Exports To promote export of traditional items. dichromate. The Committee on Public Undertakings has classified the above functions of the S T C under the following six main heads:' 1. 6. 5. export. and/or distribution of particular commodities as the Union government may specify in the public interest. To undertake import and/or internal distribution of commodities in short supply with a view to stabilizing prices and rationalising distribution. store. pledge. commodities and articles of all kinds and to carry on any kind of commercial and/or financial business as the company may determine from time to time. manipulate. To hold or assist in holding exhibitions in India and elsewhere of the products and articles in which the company is interested. meal.

g. thus. a. b. To undertake price support and buffer stock operations with a view to 124 . f. e. To ensure the implementation of trade plans with the East European countries and other special agreements. To import commodities. To import speculative and high profit margin items with a view. d. e. c. f. which is in short supply in the country. To import items which are canalised by the Government through this Corporation so as to ensure that adequate supplies at the right time and at the economical prices are made and are distributed to the industries and other users in a co-ordinated manner. 3. Imports To import capital goods.requirements. To participate in fairs and exhibition abroad so as to create atmosphere for expansion of exports and for introducing new products in foreign markets. To help local producers by procuring reasonable prices and to hold stocks to maintain ultimate production at optimum level of commodities with high export potential. To develop new lines of exports. maintaining adequate availability for export and ensuring a fair price to local producers. avoiding dislocation in production. To undertake import of commodities where bulk purchase would give better terms. d. a. industrial raw materials and certain scarce commodities required for the economic development of the country. To ensure implementation of trade plans with East European countries. Internal Trade To undertake internal trade in certain commodities like imported cars. To undertake imports from state trading countries or from where monopolies are involved. to stabilise the prices and to do distribution of such commodities in an organised manner at fair prices. g. b. 2.

S T C had also undertaken price support operations (at the instance of the Central Government) for natural rubber in 1970 and tobacco in 1972. mopped up by the S.T.ensure fair prices to the growers of certain agricultural commodities. 5.C. 4. providing credit facilities. Participation in Export-Oriented Corporation To lend increasing support in the form of financial and organisational assistance to specialised export agencies like the Handi-crafts and Handloom Export Corporation. were exported. Trade Promotion Agreements To arrange for essential imports against additional exports of traditional and non-traditional items which are specified in special agreements. Besides these. to stabilize internal production and sustain foreign demand. helping them in matters of shipping and exploring possibilities of exporting their products in various countries. Export Aid to Small Industries To assist the small-scale manufacturers in exporting their products by giving wide publicity to their products abroad and by arranging attractive packing. Media Living in Media Darkness 125 . Growers were assured of remunerative prices and surplus quantities.. 6.

555. and visuals of animals all woven together in loud colorful messages. without access to TV. O&M’s rural arm. putting tiles in village wells. Widespread illiteracy allied with the multitude of languages and dialects puts the most of these people beyond the reach of conventional media planning. Tapping the rural market calls for new insights into what helps consumers remember and understand brand messages. A survey by India’s National Centre for Applied Economics and Research revealed double-digit rural growth rates in a cross section of products ranging from scooters to confectionery between 1995 and 1999.000 supervisors plus another 5. Today it has a team of 1. Bose. K. and beyond the reach of newspapers and magazines. 40% of teas and 60% of watches sold in rural India. and putting up scarecrows. some 260 million live in almost complete media darkness. plus occasionally painting the horns of cows. selling in rural India is no longer restricted to using mobile vans with television sets screening Hindi film songs interspersed with messages about a product. These findings appear supported by the high recall levels enjoyed by brands like Lifebuoy (popularly known as the lal sabun). Ogilvy Outreach’s president. door-to-door sales. radio. Now that penetration for many consumer products in urban areas is high. 126 . For companies such as Unilever. and even putting up shoe racks in temples. and Monkey brand tooth powder. (roughly 670 million) of India’s teeming masses live in rural areas. New avenues include games (with the product being given as a prize).There’s no surprise in learning that over 70%. About 45% of soaps. numbers. Glaxo.000 people who work on a project basis According to D. Research carried out by Ogilvy Outreach discovered that the rural audience identifies more with colours. Nestle. Of these. Ogilvy Outreach. Yet the villagers are increasingly important as consumers. wall paintings. started with one employee supported by the head of the media division in 1994. Lucky Goldstar rural consumers are a huge market opportunity. folk dances. the rural markets are growing in importance for both marketers and their agencies.

given the language and cultural diversity of rural India. emotive and impactful tool. Their strategy for the rural market is built on two key planks.eh ??? There is a wide gap between urban and rural segments in terms of purchasing power.6 31.4 12.6 8. is working for TERI (Tata Energy Research Institute) on a World Bank funded project for Farmer education on Farm Forestry in the rural areas.9 14. The knowledge gained from rural marketing in India is already being applied in Bangladesh.5 Hindi Publications 23.5 58.4 1.9 26. literacy.McCann Erickson are also developing rural initiatives in India. A Table for understanding the media penetration in India Table 1: Macro Indicators . which is McCann India's integrated Communications Company.7 7.4 Urban'99 Rural'99 50 26 35 5 16.7 Any Publication 55. The purchasing power of the rural Rural'95 21 3 1.4 Local Language Publications 29.2 127 . Consumer Insight which will helps understand rural consumers from their own perspective and Experiential marketing.A Comparison Media Penetration (%) Urban'95 Radio 25 Satellite 19 English Publications 14.1 20. and part of China and may yet prove the pathway that extends the franchise of many brands to Asia’s rural billions beyond the reach of television and the internet.0 Source: IRS-95 and 99 Did U SAY Couch potato ….5 23. and readership habits and media exposure. Currently ResultMcCann. Africa. which executives say will be the most relevant. Cambodia.

Marketing companies had initially turned to rural India on a look out for newer markets.homping.consumer has been increasing in the recent years with the rise in income levels due to agricultural prosperity. The regional language is becoming an important medium of communication for the booming rural market. The seriousness of the efforts is evident from an in-house study conducted by ORG-MARG that revealed that 75% of both Indian and the multinational companies are taking the help of the rural marketing organisations to establish distribution links across the length and breadth of the country.. Last year. Developing the right Marketing strategy ……. But. The trends in media penetration show that the penetration of print media (barring regional publications). Also gone are the days when advertisements could be conceived in English and then dubbed in regional languages. Arvind Mills did not think so. Introduce their brands and develop marketing strategies specific to the rural consumers. Clearly. to create demand for its products in 128 . In the first two months the demand for its Ruf & Tuf kits crossed a million pieces as against a production capacity of 0. The existence of the divide between the urban and rural consumer triggered these. shampoo lathering consumers has galvanised the industry.  The rural thrust was a part of HLL’s “Operations Bharat”. radio. and cinema is on the decline in both urban and rural areas. apart from increasing the geographical width of their product distribution is to capture the television-savvy rural consumer.25 million kits. the only media that is growing is Television through Satellite Channels. the possibility of converting approximately 700 million innocents into voracious Cadbury. The focus of the companies. Some of the recent success stories are: An Indian farmer working in jeans sounds improbable. HLL perhaps conducted the most extensive exercise of its kind.

salt. washing cakes and blades. toothpaste and a fairness cream in 20. The key to the gateway of the rural segment emerged as expansion in distribution and growing media penetration leading to increased usage. antiseptic cream. digestive. standard of living. consumption patterns. tea. motorcycles. They peddled 15-rupee packs containing soap. Hindustan Motor signs joint venture with OKA Motors of Australia to launch special rural transport vehicle. Approximately. 40% of the washing powder. tooth powder.  DCW Home products are test–marketing Captain Cook Super White Salt for non – urban areas. Factors like cultural diversity. with the products not very different. 50% of the toilet soaps. pressure 129 .000 villages.  Britannia launched Tiger Biscuits especially for rural markets thus increasing its share of the Glucose market from 7% to 15%  HLL A1 tea became a INR 1000 million brand in less than a year after it was introduced in the rural market   BPL sells B & W TVs under Ajit brand name. The consumption baskets of the rural and urban markets also show a similar constitution. literacy levels. half of the market for black & white TVs. Several surveys on rural marketing have pointed out that segmenting urban and rural consumers on the basis of income alone will not help in formulating a correct rural marketing strategy. which resulted in an incredible 30% conversion. including lifestyles in the area. The key to the success of most of these products was that these products were designed keeping the rural consumer in mind and recognising the fact that the two consumer sets are different.the rural market. types of communication facilities and above all the size of the rural market need to be considered in formulating an appropriate marketing strategy.

fans. Products and Markets The sources of data for this paper include the ORG–MARG’s Retail Store Audit. Similarly in Assam and Orissa satellite TV reaches only 4 per cent of the population. It's reach is the highest in the 14 to 19 age group with 62 per cent. It reaches 76 per cent in urban Kerala and 65 per cent in rural parts of the state. Rural Consumer Panel. In contrast satellite TV reaches only 13 per cent of India. 130 . MEDIA REACH "The medium is the message" acquires critical importance for advertisers and marketers in India as different media have varying penetration levels. cassette recorders. The medium's highest penetration of 52 per cent is in urban Maharashtra. NCAER. etc. and blades are purchased by the rural market This paper will analyse the urban and rural markets in the above context. The rural market's potential for growth is the cynosure of marketers' eyes. For example terrestrial TV has the highest penetration among all types of media with 78 per cent penetration in urban India and 36 per cent in rural India. The objective of this paper is to answer whether a divide exists between the two markets and to measure the magnitude and the flavour of the divide in terms of key marketing parameters like Distribution. Print media has the lowest reach in Assam with 11 per cent. Indian Readership Survey and other secondary sources like reports of CMIE. It has an astonishing 91 per cent penetration in urban Himachal Pradesh.cookers. Identifying where the divide exists and how to capitalise on it is the need of the day for FMCGs and consumer durables as the urban market is showing signs of saturation. Given the high literacy levels it is natural that print media has the highest penetration in Kerala. But in the rural parts of the state it has a penetration of a mere 4 per cent.

Cinema has a high penetration in the southern states of India. It varies from 40 . This segment is very difficult to catch and hence innovative media solutions are the order of the day.25 across the country. Music in India is as rich as can be. Exotic forests and national parks in India are un-comparable in the world. Travel in India constitutes a major component of Indian leisure and entertainment industry. 131 . entertainment encompasses a wide plethora of options. In urban Kerala the reach of cinema is 61 per cent. a path of realisation. Music in India is a means for spiritual exploration. palaces and temples to beautiful deserts. in addition to deriving aesthetic entertainment. which offers such a dazzling array of Entertainment choices as India does! In India. Right from cinema (the largest of its kind in the world) to television (amongst the fastest growing in the world) to soothing music (the most diverse in the world) to awesome festivals (richest in culture) and richest-possible food and finally its fanatical devotion to sports like cricket. India offers mind-boggling variety for travel from highest mountain ranges of the world to serene beaches to historical forts. Brand building is the order of the day as it is important to synergise media with brand objectives Definition of Rural Marketing : No other country exists on earth. Cinema reaches more than 30 per cent of the population in the age group of 15.45 percent in other southern states. Scenic hillstations (mountain resorts) still remain popular Indian travel hot spots. The emergence of new media options like   DTH & Internet more relevant for the upper SEC class of the population.

discipline one's body. songs. The basic tenets of classical music have been laid down by numerous ancient texts. dances and musical instruments are used to mark every occasion. Besides this villagers are more conservative buyers then their urban counterparts. The purpose of Indian music is to refine one's soul. While the underlying notes are prewritten. The music of India is a mosaic of different genres and levels of sophistication. from birth to death. and. 132 . classes. At one extreme. the musician has complete freedom to exercise full imagination and creativity. within the framework of the rules governing the raaga.Be it classical or the folk or the modern Indian pop-bhangra. but even touch. at the other. classical music is performed in the urban concert halls for purely artistic reasons. their life-styles. The origins of classical music are also traced back to tribal tunes and songs. and their languages The Indian society is a complex social system with different castes. The high rate of illiteracy added to the inadequacy of mass media impedes reach almost to 80% of India's population who reside in village. interpersonal and unreliable in contrast with the familiar performance of traditional artist whom the villager could not only see and hear. reflecting the diversity of its peoples. to make one aware of the infinite within one. Indian music reflects Indian life. Mass media is too glamorous. creeds and tribes. The classical music is not pre-conceived but pre-written. having no predetermined beginning or end. many kinds of functional rural music accompanies life cycle and agricultural rites. In tribal societies. Their desire to innovate with new product is restricted. to unite one's breath with that of space and one's vibrations with that of the cosmos. In between are many other musical genres of different regions of the country. but flowing uninterrupted through the composer-performer.

Prithviraj Chouhan. Agricultural Games. 6. It is an inexpensive activity. Manas.Traditional media can be used to reach these people in the marketing of new concept. Posters. Demonstration. avenue for entertainment and creative expression which is ritually sacred and meaningful as a means of social communication and vehicle of social transformation. 5. Madras and Andhra): -Contents Kathakali Shadow puppets of (a) Orissa (b) Kerala (c) Andhra (d) Karnataka: .Contents Ramayana. government. Thus in rural India puppetry is a source of livelihood. The traditional media with its effective reach. Radha-Krishna String and Rod puppets of the south (Tanjavur.Contents -Mahabharat. 2. and Amar Singh Rathore String puppets of Orissa – Contents . powerful input and personalized communication system will help in realizing the goal. and Post Cards etc.Radha-Krishna Rod puppets from Bengal: . Few of the available options in the traditional media are Puppetry. Several other organizations. String puppets or Kathputlis of Rajasthan – Contents . From time immortal it has been the most popular form and well-appreciated form of entertainment available to the village people. 133 . Song and Drama Division of the Government Of India make wide use of puppets in its campaigns to promote various government projects. Folk Theater & Song. The manipulator uses the puppets as a medium to express and communicate ideas. Puppetry Puppetry is the indigenous theatre of India. values and social messages. 4. Besides this when the advertisement is couched in entertainment it goes down easily with the villager. semi-government and private. Types of Puppet theatre in India: 1. 3. Wall Painting.Heroic deeds of Vikramaditya. have also used puppets in support of individual schemes.

exploitation and oppression. Ras.Life Insurance Corporation of India used puppets to educate rural masses about Life Insurance. Lalit Bharud. & MP. enlisting the help of the literacy house in Luck now. People in both the villages responded more favorably to the puppet shows then the films. Mangal Ras. Kuchupudi. N. Vetal Dhamali Karnataka: Yakshagan. Folk Theater Folk theaters are mainly short and rhythmic in form. Therayattam. Harnatra Haran or Harin. Sanata. Chakiyar Kooth. The field staff of the corporation also reported a definite impact on the business. Kirtania Natak. Folk Theater / Songs Forms In India Andhra Pradesh: Veethi Natakam. in two villages near Delhi.Delhi made a study of comparative impact of puppetry and documentary films. Bhagat. The simple tunes help in informing and educating the people in informal and interesting manner. Kerala: Kodiyattam. Jhanki. Chavittu Natakam. Jammu & Kashmir: Bhand Pathar or Bhand Jashna. Nacha Maharashtra: Tamasha. Mudiattam. Bihar. Ojapali Bihar: Bidesia. Sowang. Jat-Jatni Bidpada. Radhna. Tala Maddle or Prasang. Gondha. Indian Institute of mass communication. Dashavatar Orissa: Pala Jatra. Dasarata. The number of inquires at local Life Insurance Companies during the period immediately following the performance was compared with normal frequency and found to be considerable higher. Naqqal Himachal Pradesh: Kariyala. It has been used as an effective medium for social protest against injustice. Daskathia. Ramkhelia Gujarat: Bhavai Haryana: Swang. 134 . Chhau Mayurbhanj. Serikela Chhau. These plays were shown to the audience in villages in UP. Doddata-Bayalata. Burratatha Assam: Ankiya Nat. Kathakali Madhya Pradesh: Maanch.

A) Balliye Kanak Biye . Punjab Agricultural University produced Two Audio Cassettes. agricultural implements. Both were well received by farmers. BBLIL used Magician quite effectively for launch of Kadak Chhap Tea in Etawah. Pagal Vasham. Kavadi Chindu Uttar Pradesh: Ram Leela. Daman & Diu : Dashavatar.Cotton Cultivation. Rammat. Nautanki. fertilizer etc. Folk songs have been effectively used during revolts of Telangana and Naxalbari and now a days it's best exploiters are Political Parties. Turra Kilangi. Bhagwat Mela Natakam. Naqaal. B. Demonstration: "Direct Contact" is a face-to-face relationship with people individually and with groups such as the Panchayats and other village groups. Method demonstration ii. Naqqual Goa. Nautanki. Tiyatra. Demonstration may be A. Rasdhari. Ras Leela.Wheat Cultivation. Government has used this media for popularizing improved variety of seeds. Jhamtara Tamilnadu: Therukuttu. Bhagat. Veethi Natakam. Sang-Swang. B) Khiran Kepah Narme . Result demonstration i. i. Such contact helps in arousing the villager's interest in their own problem and motivating them towards self-development.Punjab: Nautanki. Kurvaanji. 135 . Simple Demonstration ii. Gauri. Swang Rajasthan: Khyal. Composite Demonstration The five steps to make any demonstration effective are below: Information about people Objectives to be accomplished Demonstration plan & Execution of the plan Evaluation of the demonstration Reconsideration after evaluation.

Nearly half the outlets at melas are for manufactured goods.500 crore. The mobile supermarkets of rural India.000 melas are held annually. which he will be ready to spend. help of audio -visual media can add value. The average daily sale at a Haat is about Rs. Their shops look alluring and stand out among other outlets.In result demonstration. but wall painting stays as long as the weather allows it to. Wall Paintings Wall Paintings are an effective and economical medium for advertising in rural areas. They are silent unlike traditional theatre . The images used have 136 . walls. Asian Paints launched Utsav range by painting Mukhiya's house or Post office to demonstrate that paint does not peel off. Demonstration at Haat is essential to convert customers at haats since their atitude is far more utilitarian than that of visitors to a fair. and name boards. More than 10.2.25 Lacs Annual sales at melas amount to Rs. for their wall to be painted with product messages. Over half the shoppers at haats have shopping lists.000 haats and 25. Melas are organized after harvest season. Since it makes the shop look cleaner and better. Haats is a better opportunity for promotion after brand building has been done at Mela. Haats & Melas The countries oldest tradition holds the key to solving these problems. Besides rural households shopkeepers and panchayats do not except any payment. The greatest advantage of the medium is the power of the picture completed with its local touch.000 melas draw visitors from all over India.3. To get one's wall painted with the product messages is seemed as a status symbol. so the villager has enough money.A speech or film comes to an end. Retailer normally welcomes paintings of their shops. Facts & Figures: Over 47.

The most frequented shops can be painted from inside also one feet above the ground level. However by taking the permission of the rural retailers or house owners. To derive maximum mileage their usage needs to be planned meticulously. For the rural market. A good wall painting must meet some criteria to generate awareness and remind consumer about the brand. It is courteous to take the verbal permission of owner . one gets the owner morally committed to taking care of wall painting. a feet impossible for even a moving visual medium like television.The permission is normally given. strategies for the 4P’s of the marketing mix would be an ideal one. which must use general image to cater to greatest number of viewers. direct and clear. sand and rainstorms for about three years. A good paint will survive the ravages of dust. The message should be simple. Paintings must be taken after rainfall. It should be peaked up during the festival and post harvest season. (A) Product Strategies 137 .a strong emotional association with the surrounding.` Rural Marketing Strategies Creation Is A Tradition And Technology A Way Of Life An appropriate segmentation of highly heterogeneous rural market and identification of the needs and wants of different segments will form the very basis for rural marketing strategies. A definite way of arresting is to use bright colors and these do not fade away easily.

New product designs: Keeping in view the rural life style the manufacturer and the marketing men can think in terms of new product designs. This is because it is very affordable for the lower income group with the deepest market reach making easy access to the end user satisfying him. 3. heavier weight meant that it has more over and durability. Sturdy products: Sturdiness of a product is an important factor for rural consumers. Also the Red Label Rs. etc. 3. PVC shoes and chappals can be considered sited ideally for rural consumers due to the adverse working conditions.00 pack has more sales as compared to the large pack. 138 . For e. Small packings stand a good chance of acceptance in rural markets. Sturdiness of a product either or appearance is an important for the rural consumers.C items is also low and affordable. The small unit packings will definitely attract a large number of rural consumers. The advantage is that the price is low and the rural consumer can easily afford it.(B) Pricing Strategies (C) Distribution Strategies (D) Promotional Strategies A) Product Strategies The following are the product strategies for the rural market and rural consumers: 1.V. biscuits. The experience of torch light dry battery cell manufacturers support this because the rural consumers preferred dry battery cells which are headier than the lighter ones. Small unit packing: This method has been tested by products life shampoos. pickles. The price of P. tooth paste. 2.g. Vicks cough drops in single tablets. For them.

etc. shampoo sachets. vicks 5 grams tin. the rural consumers do give their own brand name on the name of an item. this is a common strategy widely adopted by many manufacturing and marketing concerns. 2. A brand name or a logo is very important for a rural consumer for it can be easily remembered. Utility oriented products: The rural consumers are more concerned with utility of the product and its appearance Philips India Ltd. Nirma made a peeli tikki specially for those peeli tikki users who might have experienced better cleanliness with the yellow colored bar as compared to the blue one although the actual difference is only of the color. 139 . Low cost/ cheap products: the price can be kept low by low unit packings like paisa pack of tea. B) Pricing Strategies Pricing strategies are linked to the product strategies. Developed and introduced a low cost medium wave receiver named BAHADUR during the early seventies. The fertilizers companies normally use a logo on the fertilizer bags though fertilizers have to be sold only on generic names.4. Many a times rural consumers ask for peeli tikki in case of conventional and detergent washing soap. The containers can be put to multipurpose uses. Refill packs / Reusable packaging: in urban areas most of the health drinks are available. Some of the pricing strategies are discussed below: 1. Initially the sales were good but declined subsequently. Brand name: For identification. Such measures can a significant impact in the rural market. 5. The product packaging and presentation also keeps the price low to suit the rural consumer. On investigation it was found that the rural consumer bought radios not only for information and news but also for entertainment.

Application of value engineering: in food industry. the characteristic of the product – whether it is consumable or durable. the rural people can efficiently reuse the plastic bottle of hair oil. Ariel Super Compact. By doing so the percentage of villages covered comes to only 10% of all the rural population covered will b substantial. With improved communication facilities it is possible to reach distribution vas to these villages. thus. coffee. 3. Soya protein is being used instead of milk protein. farmers service cooperatives and other multipurpose cooperatives. tea. Such state level federation can be motivated to procure and distribute consumables items and low value durable items to the members to the 140 . Similarly the packages of edible oil. 1. but the nutrition content of both is the same. The basic aim is to reduce the value of the product.For example. The following strategies formulated for the rural category. coverage of villages with up to 2000 and above population could be the break-even point for a distribution setup. Use of co-operative societies: There are over 3 lacks co-operative societies operating in rural areas for different purposes like marketing cooperatives. so that a larger segment can afford it. Milk protein is expensive while Soya protein is cheaper. 2. Pet jars free with the Hasmukhrai and Co Tea. These cooperatives have an arrangement for centralized procurement and distribution through their respective state level federation. Coverage of villages with 2000 and above population: Ideally. ghee etc can be reused. the life of the product and other factors have to kept in mind. expanding the market C) Distribution Strategies While it is necessary to formulate specific strategies for distribution in rural areas.

sugar. Here again there is an arrangement for centralised procurement and distribution. 4. depending upon the township. kerosene. pesticides and seeds. lubricants.society for serving to the rural consumers. the feeder markets and mandi towns offer excellent scope for distribution. The purpose of PDS is to make available essential commodities like food grains. From the feeder markets and mandi towns the stockist or wholesaler can arrange for distribution to the village shops in the interior places. The manufacturing and marketing men should explore effective utilisation of PDS. 5. these outlets also stock consumables agricultural inputs like fertilizers. bullock-carts. Many of the societies extend credit to the members for purchases. jewelry. camelbacks etc. oil-engine pump sets and mopeds frequent these outlets for their requirement. This distribution can be done by mopeds. cycles. Utilisation of multipurpose distribution centres by petroleum/oil companies: In order to cater to the rural areas the petroleum/oil companies have evolved a concept of multipurpose distribution centres in rural areas. Utilization of public distributory system: The PDS in the country is fairly well organised. radios. In addition to petrol/diesel. These shops are run by the state civil Supplies Corporation. Distribution upto feeder markets/mandi towns: Keeping in view the hierarchy of markets for the rural consumers. The shops that distribute these commodities are called fair price shops. co-operatives as well as private entrepreneurs. torch cells and other durables and consumer products. edible oils and others to the consumers at a reasonable price. The revamped PDS places more emphasis on reaching remote rural areas like the hills and tribals. The rural consumer who have tractors. 3. hardware. It is estimated that there are about 450 such outlets in operation in the country. These outlets can be profitably utilised for selling consumables and durable items also. The rural customers visit these towns at regular intervals not only for selling the agricultural produce but also for purchasing cloth. 141 .

There are 50 such big rural fairs held in various parts of country.6. Promotion can be taken. It can be beneficial for companies to organize sales of their product at such places. Shandies/Haaths/Jathras/Melas: These are places where the rural consumers congregate as a rule. Similarly a co-operative supermarket called ‘Chintamani’ in Coimbatore (T. It is estimated that over 5. Example of Varana Nagar in Maharashtra proved an eye opener in this regard where the sugar and milk co-operatives have totally changed the life style of people. There are other attributes in the promotion strategy which are explained as under: 142 . which attract urbanite also like ‘Mankanavillaku’ in Malappara in Kerela.000 fairs are held in the country and the estimated attendance is about 100 million rural consumers.P. Word of mouth is an important message carrier in the rural areas and “opinion leader” play a significant role in influencing the prospective rural consumers about accepting or rejecting a product or a brand.N) arranges free transit of rural consumers to the supermarket of their purchases. This is why there are about 2 lakh fertilizer dealers in the country. ‘Periya Kirthigai’ at Tiruparunkunaram in Tamil Nadu. as there will be ready captive audience. Kumbh Mela at Hardwar in U. Jathras and melas are held once or twice a year for longer durations. as per the essential commodities act. Only temporary shops come up selling goods of all kinds. both in cooperative & private sector. 7. While shandies/heaths are held a particular day every week. D) Promotional Strategies The promotion measure should be cost effective due to the low literacy rate of the rural population. Such places attract large number of itinerant merchants. For convincing the manufacturing and marketing man with regard to the importance of these places from rural marketing point of view a visit to such places is necessary. The supermarket in Varana Nagar caters exclusively to rural consumers. Biggest fair ‘Pushkar Mela’ is estimated to attract over 10 million people. They are normally timed with religious festivals. Agricultural Input Dealers: Fertilizers should be made available to the farmers within the range of 4-5 km from their residence.

its features. stickers. This can be achieved only by personal selling by highly motivated sales person. posters. uses and benefits. 2. In fact the word of mouth information holds lot validity in rural areas even today. Tractor owners (tonee) conducted by MRF Limited is one such example. The opinion leaders may be big landlords or politicians or progressive farmers. An opinion leader in rural areas can be defined as a person who is considered to be knowledgeable and is consulted by others and his advice is normally followed. Cinema Radio Print media: Handbills and Booklets. banners. Personal selling and opinion leaders: In personal selling it is required that the potential users are identified and awareness is created among them about the product.1. This is the reason why opinion leaders and word of mouth are thriving among rural consumers. Brooks Bond carries out marches in rural areas with band. The following are the mass media generally used: • • • • Television. Mass media: In the present world mass media is a powerful medium of communication. etc. 3. Super Star Show Philips India was among the first consumer durables companies to hit the rural 143 . music and caparisoned elephants to promote their brand of tea. Special campaigns: During crop harvest and marketing seasons it is beneficial to take up special promotion campaigns in rural areas.

The Chennai-based Anugrah-Mandison was roped in to help. van promotions. They were also asked to copy the brands “Lets Make Things Better” line English so that Philips name is recognised irrespective of language. Even cine idol Rajnikant is popularly known as a “Superstar”. The word “Super” is an integral part of the Tamil. in villages with populations of about 5000. the rural focus was gone. Philips felt the need to improve its market share in upcountry markets. merchandising etc. Interactive sessions such as “sit and draw” contests for children to create brand recognition were held. In Andra Pradesh. The campaign became a major hit. In a karaoke contest villagers had to sing along with the catchy Philips jingles and win prizes. So Philips held road shows. These were executed in cinemas. 4 ad campaigns. Popular cine actor Chiranjeevi is referred to as the “megastar” in the state. promotions revolving around the word “super” were kicked off. Philips general manager (distribution & rural marketing) at its consumer electronics department division. theatres and through video vans (68% of people in 144 . Philips painted 1 lakh square ft of wall area in Tamil Nadu and Andhra Pradesh. During the exercise.2 for B&W (Black &White) TV and 1 each of C (Colour) TV and audio systems. It decided to launch a special project in Tamil Nadu and Andra Pradesh at a total cost of Rs. but somewhere down the line. the campaign was redrafted in Telgu as “Maa inti megastar”. Back in Tamil Nadu.”says V. However. in the mid-1998. 5 Crore. Rural consumers need to be seen as ‘different’ and ‘not inferior’.Swaminathan.market with its Bahadur brand of Transistors in the 1950s. “the idea was to present Philips in a relevant manner to the rural consumer. Together they created a special campaign “Enga veettu superstar” (the super star of our house) for the Tamil Nadu market.were created in Tamil and Telugu. Exhibitions of Philips products titled “Supershows” were organized. It is with this belief that Philips approached rural buyers in Tamil Nadu and Andra Pradesh. The participants were asked to copy the Philips logo. the way a rural buyer would understand it. position it as a truly International brand.

In the ad film for Andhra Pradesh. The storyboard was created keeping in mind the way of life. The results of the entire exercise: sales rose by between 25% and 30% in these states in the last 6 months. Predictably. Philips used popular singer S P Balasubramanyam. It is pointed out that the commission agents pay the sales proceeds to producer sellers out of their pocket at first and realize the amt at a later date from the buyers. Philips did not compromise on the production values. Hence it can be concluded that till such time as this function of prompt payment is taken over by another institution. Conclusion Marketing according to a leading management theorists Peter Druker can be put 145 . Philips is extending the exercise to Uttar Pradesh and Maharashtra. It is observed that the commission agents in the markets are functioning not so much to the advantages of the sellers as to those commission agents that the payments to the sellers on behalf of the buyers are done on the very same day or atleast promptly. Now. it is not advisable to eliminate the services of the commission agent in the regulated markets. The ad showed star complementing his son for buying a worldclass Philips TV. Of course he does not bring the C TV and explains that Philips makes world-class TVs in India. The ad shows one such girl spreading the embroidered cloth waiting for her in Dubai to return with a C TV. a Philips TV is brought home and lovingly covered could easily relate to the story. Girls in small towns and villages often embroided the cloth which covers the television sets in the house.Tamil Nadu watch films and 81% in Andhra). Essence or need for middlemen Middlemen are considered as an unnecessary link in the chain of intermediaries and it is felt that these middlemen/commission agents must be eliminated. The electronic media ads were slickly used.

in this way " There will be always." Through this we feel that the gist of marketing in rural & urban is the same.g. But the market for a product may vary in rural & urban area and the marketing strategies to market the product is also different in urban and rural area. But the aim of marketing is to make selling superfluous. expectations & playing with their physiology. (E. Dil Chahta Hai) It is also found that people in cities spend more on entertainment than people in rural areas. It is nothing but teasing the minds of people. needs. Lagaan. 146 . In rural area we find more of a stereotype because of similar socio-economic background. The aim of marketing is to know and understand the customer so well that the product or service fits him and sell itself. Gadar) But movies. It was found that the movies. which are hit in urban areas (metros). marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available. were doing as well in the rural areas. Ideally. background & lifestyle. their desires. But in an urban area it is a multitude of people & personalities & variance in income.g. one can assume. need for some selling. We can see that the purchasing power of the people in a city like Mumbai is more than a semi rural area like Ambernath and willingness of the people in the rural area to spend towards movies or any other mode of entertainment is quite less than that of the people residing in urban area. (E. which were hit in cities. may not be successful in rural areas.

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