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    chapter 12 aghicy ne PRICE OLICY at Introduction and Meaning The prices of agricultural products are more volatile as compared to the prices of industrial .ds. In India, during the the various Five Year Plans, the changes in the Agricultural Price Index have feen much greater as compared to changes in the Normal Price Index. For example, in the year 7009-10, Normal Price Index went up by 3.8 per cent, whereas Agricultural Price Index went up by 13.3 percent Inyear 2013-14, the normal price index went up by 9.5 per cent, whereas the agricultural price index went up by 9.87 per cent. In 2016-17, overall inflation rate was 3.9 per cent but agricultural price index increased by 5.3 per cent. The prices of agricultural products are influenced by various factors, such as fall in agricultural produce, natural calamities, increase in demand, speculative tendencies, hoarding, increase in supply of money, changes in Normal Price Index, policies of government, etc. Such changes have adverse effects on various sectors of agriculturists, consumers, industries, society and the government. So, it becomes neesary for the government to try and restrict such large fluctuations in the prices of agricultural products. The policy formulated by government in this regard is known as Agricultural Price Policy. The Agicaltural Price Policy is formulated with the aim of bringing stability in agricultural prices, encouraging agiculturists to invest in order to increase production, encouraging agriculturists to employ the latest tecmology and making agricultural products available to consumers in adequate quantities and at reasonable prices. "2. Objectives of Agricultural Price Policy (1) Stabilisation of Agricultural : One of the main aims of the agricultural price policy is the stabilisation of prices of agricultural products. It does not mean that there should be no change in the prices of agricultural products at all. It merely means that the changes in prices should be within certain limits. There should not be too many changes in the prices of agricultural products. (2) Encouragement to Farmers to Increase Production: The prices of agricultural products should be profitable for farmers so that they are encouraged to use the latest technology to increase their output. Minimum support prices for various agricultural products should be determined. (3) Protection of the Interest of Consumers: The agricultural price policy also aims at providing adequate quantities of agricultural products to consumers at reasonable prices. In this manner, the interest of the consumer is also protected. > i, | Indian Economy 166 Need for Agricultural Price Policy Agricultural price policy is needed because of following reasons: (i) The farmers should be sure that they will earn adequate profits for the additional | investment and labour put in by them in order to increase production. } \ (ii) Toensure constant usage of modern inputs in agriculture itisnecessary that thefarmers | # ate assured minimum price for their produce so that there are no chances of their incuring | loss (iii) Since agricultural production is dependent upon nature, there are wide fluctuations in it from vyear to year. If along with this, the prices of agricultural products also keep on changing, it will have an adverse effect on farmers and ultimate consumers. So to ensure some stability in the prices of agriculture products, there is need for agricultural price policy. (iv) Due to the special nature of agricultural products, there are many difficulties in agricultural marketing, such as perishability, problems of storage, short-term supplies, etc. An appropriate price policy is necessary in order to remove these difficulties. (v) The price policy is also necessary for proper crop planning. (vi) An appropriate price policy is necessary to prevent the exploitation of farmers from zamindars, mahajans, sahukars, etc. In the absence of Agricultural Price Policy, these persons may purchase the agricultural products from farmers at very low price. @ 4, Main Features of Agricultural Price Policy in India (1) Institutions: The government has set up two main institutions to implement the agricultural price policy: (i) The Agricultural Prices Commission was set up in 1965. This commission advises, the government as regards the agricultural price policy. The commission also determines the minimum support prices or the procurement prices of agricultural products. In 1985, the name of the commission was changed to Commission for Agricultural Costs and Prices. (ii) The Food Corporation of India was established in January 1985. This corporation organises the procurement of foodgrains at the prices determined by the government and their sale through the Public Distribution System. (2) Fixation of Minimum Support Price or Procurement Price: The government determines the minimum support/price of many agricultural products such as wheat, rice, maize, cotton, sugar cane, etc., every year based on the recommendations made by the Commission for Agricultural Cost and Prices. If the market prices are below the prices so determined, the Food Corporation of India (FCI) itself purchases the agricultural produce on behalf of Government of India. As a result of this, the prices of agricultural products do not fall below a specified limit. In year 2017-18, minimum support price of wheat was fixed at % 1,735 per quintal and of paddy was fixed at & 1,550 per quintal. (3) Maximum Price Fixation: The government also determines the maximum prices for certain agricultural products, The government sells many agricultural products such as grain, sugar, rice, oil, etc., at these prices through the fair price shops under the Public Distribution System. Atpresent, there are more than 5 lakh 35 thousand fair price shops operating in India. Le ‘agrcuture Price Policy 167 (4) Buffer Stock: To prevent changes in the prices of agricultural products beyond a certain limit, the government maintains a buffer stock of these goods. This is done by Food Corporation of India (FCI). When the prices of foodgrains start increasing, government starts selling foodgrains from the buffer stock at specific prices. As a result, the increase in the prices of foodgrains can be checked. = 5. Effects of Agricultural Price Policy (1) Increase in Production: As a result of the agricultural price policy, the farmers get appropriate prices for their produce. As a result of this, there is incentive for them to undertake agricultural modernisation. They have started using better seeds, chemical fertilizers and moder equipments because they are confident that prices will not fall even with an increase in production and the minimum prices will be determined by the government, keeping the increasing costs in mind. This sense of security encourages the farmers to try and increase their per hectare output. (2) Change in Cropping Pattern: The Agricultural price policy has also resulted in a change in the cropping pattern. The output of wheat, rice, etc. has gone up due to appropriate prices and usage of moder methods of production. On the other hand, there has been only a small increase in the output of pulses and oilseeds. (3) Advantage to the Farmers: The agricultural price policy has also resulted in considerable benefits to the farmers. The income of the farmers mainly depends upon the quantity of the produce and its price. The agricultural price policy encourages farmers to increase their produce, and they are also able to sell their produce at suitable prices. All these factors have resulted in an increase in the income of farmers and has uplifted their standards of living. (4) Advantage to the Consumers: Agricultural price policy has resulted in considerable benefits to the consumers. Agricultural products are made available to them at reasonable prices. Supply of agricultural products can be maintained even if there is fall in production due to famines and other causes. (5) Stability in Prices: As a result of the agricultural price policy, the prices have stabilised toa large extent, and have neither increased nor decreased too much. (6) Advantage to the Industries: Many industries in India, such as sugar, textile, vegetable oil, etc., depend upon agriculture for their raw materials. Asa result of stabilisation of agricultural prices, raw materials are now available to these industries in adequate quantities and at appropriate prices. It has favourable effect on these industries. ™ 6. Shortcomings of Agricultural Price Policy (1) Limited Coverage: Prices of only 25 agricultural commodities are fixed by the government. Agricultural price policy has not been extended to other commodities. (2) Less Remunerative Prices: Agricultural price policy has failed to provide remunerative prices for agro-products. Prices fixed under minimum support price policy were remunerative only in case of wheat and rice. But in case of other crops like jowar, bajra, cotton, jute, pulses etc., prices have been non-remunerative. (3) Failed to Achieve Price Stability: One of the objectives of this policy was to achieve price stability, But it has failed to attain this objective. In year 2016-17, agricultural price index went up by 5.3 per cent and thus badly affecting poor sections of society. 168 Indian Economy (4) Ineffective Public Distribution System: Stron: to poor sections. But in India, sufficient quanti provided, (5) Less Number of Regulated Markets: For effective implementation of agri Policy, more regulated markets are required. But in India, their number is less, (6) Distortions in Cropping Pattern: In agricultural price policy, remunerative support prices have been fixed for rice and wheat. But for other cereals, pulses, MSPs have not been much remunerative. It has distorted cropping patterns. Far grow rice and wheat. It has led to reduction in supply of pulses, oilseeds, oth: particularly in north India. It has badly affected self-sufficiency in all crops, (7) Inflationary Effect: Farmers often demand higher MSP for their croy ps. To please them, Government raises MSPs which leads to inflation in primary products and goods of daily needs. It further contributes to overall inflation in the economy. PDS is required for providing foodgraing ty of foodgrains under PDS is not being ‘cultural price minimum oilseeds, ete, mers mainly er cereals, etc, (8) Inappropriate Criteria for Fixing MSP: For determining MSP. cost of production is ‘the main criteria, while demand factor is totally ignored. For. ‘example, in case of pulses, the cost of Production is low, so low MSP is fixed bi y government. It does not induce the farmers to grow Pulses. But in reality, the demand for pulses is high. So higher MSP should have been fixed to. motivate the farmers to grow mote pulses and ensure their adequate supply. ™@ 7. Suggestions for Agricultural Price Policy (2) Extension of Price Policy: Nowadays the prices of 25 commodities are determined by the government. This should be extended to include other agricultural commodities, (2) Establishment of More Agencies: More agencies, India, should be established for the procurement of government has set up Cotton Corporation and Jute C be set up for buying and selling of perishable commodi Operational efficiency of these institutions should also (3) Proper Fixation of Prices: The apart from the Food Corporation of agricultural products. In this regard, ‘orporation. A separate agency should ties, such as fruits, vegetables, ete. The be increased, prices of agricultural products should be fixed properly. While fixing their prices, family labour should also be included in costs, The increasing costs of agricultural inputs should be kept in mind while determining the prices. (4) Increase in Productivity with Suitable Prices: agricultural products will be beneficial where the production of these products can also be increased side by side. Therefore, the Agricultural Price Policy should be designed in such a ‘way so that it can provide incentives to farmers for improving agriculture production and productivity, The fixation of appropriate prices for (6) Improvement in Agricultural Marketing: For the success of agricultural price policy, itis essential that the agricultural marketing system is made more efficient. The farmers should be protected from intermediaries and the collection and transportation of agricultural products should be improved. Agriculture a 8, Agricultural Prices Commission __ The Agricultural Prices Commission was set up in January, 1965 to advise the government on price policy of major agricultural products keeping in view the overall needs of the economy and with due regard to the interests of the farmers. The government determines the minimum support price of various agricultural products such as wheat, paddy, maize, jowar, bajra, pulses, oilseeds, cotton, jute, sugarcane, etc. every year based on the recommendations of Agricultural Prices Commission. In 1985, the name of this commission was changed to Commission for Agricultural Costs and Prices. Minimum Support Price (MSP) of agricultural products acts as an incentive mechanism for the farmers to adopt modern agricultural technology for enhancing agricultural production and productivity. MSP helps to achieve stable price policy for agricultural products in which the cultivators feel secure of getting a minimum guaranteed price for their bumper agricultural crops. In the absence of such system, traders can exploit the farmers by purchasing their crops at lower rates as small and marginal farmers do not have storage capacity (space for storing their crops). Commission for Agricultural Costs and Prices makes recommendations for minimum support price of major agricultural products to the government keeping in view the following factors: (i) Cost of cultivation and changes in input prices like price of HYV seeds, chemical fertilizers, pesticides, electric power, diesel, wage rate of agricultural labour, etc. (ii) Trends in market prices of non-agricultural goods. (ii) Demand and supply position in the economy regarding agricultural products. (iv) International price situation of agricultural products. (v) Effect of MSP on general price level, cost of living, industrial cost structure (as agricultural goods are inputs for many industries). * (vi) Amount of food subsidy and issue price of various foodgrains through fair price shops. (vii) Inter-crop price parity keeping in view their productivity so as to ensure production of all crops in the economy. (vii) Availability of buffer stocks of foodgrains with the government/public agencies. Cunently, 25 agricultural commodities are covered by Commission for Agricultural Costs and Prices. The Commission is required to convey its recommendations to the government well before the sowing season of the crop, so that farmers can select appropriate crop. The Commission interacts with the central ministries, state governments, traders, farmers, agricultural research institutions, etc., before finalising its recommendations regarding MSP of various crops. ® 9. Procurement Policy The government policy of procurement of foodgrains and other agricultural crops at Minimum ‘Support Price (MSP) which also acts as procurement price for various agricultural products is known as procurement policy. MSP is the guaranteed minimum price that the farmers will get for their agriculture produce from the government. If the market price falls below MSP, then the government is committed to buy the produce at MSP. So MSP is the safeguard mechanism for farmers, Before the sowing season, government announces MSP for various agricultural products such as wheat, rice, maize, cotton, sugarcane, etc. These prices are based on the recommendations made by the Agricultural Cost and Prices Commission. If the market prices are below the prices so determined, the Food Corporation of India (FCI) itself purchases the agricultural produce on behalf of Government of India. As a result of this, the prices of agricultural products do not fall below a specified limit. The main objective of procurement policy is to —s 170 Indian Economy ensure remunerative prices to the farmers and to ensure sufficient availability of foodgrains to maintain buffer stocks and to supply foodgrains to economically weaker sections through fair price shops. It also aims to ensure food security in the economy. Generally, the procurement price is same. as. ‘MSP butin some situations it may be higher than MSP. Such situation arises when the market price of agriculture produces higher than MSP. The farmers will not be ready to sell their produce to government at MSP which, in this situation, is below market price. The government will have to raise its procurement price above MSP so as | to maintain buffer stock and to ensure sufficient supply of foodgrains through fair price shops. Food Corporation of India (FCI) is the nodal agency of Government of India for procurement of wheat, paddy and rice. Wheat and paddy are procured through price support system while rice is procured through Statutory Levy Scheme, To facilitate procurement of foodgrains, FCI in coordination with state agencies, sets up procurement centres at various locations in the country. MSP/Levy Price is set by Agricultural Cost and Price Commission based on cost of cultivation and includes fair return to farmers. It is mandatory for FCI to buy alll the foodgrains that farmers offer to sell at prescribed procurement price aslongas foodgrains meet a certain quality standard. With regard torice, the rice millers are required to sell a fraction of their produce to FCl at the levy price fixed by Commission, Itis like a tax on rice-millers. This fraction is determined by state governments and may vary from one state to the other and also from time to time within the same state. The procurement policy of governments a safeguard mechanism for farmers. It provides incentive to the farmers to adopt modem technology for achieving higher agriculture production and productivity. In the lack of procurement policy the market price of agriculture production may fall down as a result ofits excessive supply due to use of modern technology. = 10. Buffer Stock of Foodgrains Buffer stock is a vital component of food security system is India. Buffer stock operations refer to purchase of foodgrains by the government from farmers, domestic markets or imports to maintain stocks to cope with acute shortage of foodgrains occuring during periods of drought, flood, famines, etc. Buffer stocks are maintained to moderate price fluctuations of foodgrains in the economy when production shows wide variations, Despite heavy subsidy on crop irrigation, nearly 52.3 percent of crop acreage still continues to be rainfed, so foodgrain output is susceptible to vagaries of weather. Maintenance of substantial buffer stocks of foodgrains in such situation is imperative. The government adds to foodgrains stocks during periods of surplus production and releases stocks in the market during periods of deficient Production, When theres excessive production of foodgrains in the economy, the prices of foodgrain may crash due to excessive supply thereby causing loss to farmers. To avoid such situation, government Purchases excess production at minimum support price (Minimum Support Price is the guaranteed minimum price that farmers will get for their agriculture produce from government.) The government purchases all unsold st tock at minimum support price and thereby adds to buffer ks. These stocks are released by government during the period of deficient production, drought, flood, famines, etc. The government distributes stocks of foodgrains in the affected areas among poor sections at a price lower than the market price. This lower s. elling price is called Issue Price, Thus, buffer stock grcalture Price Policy im (i) feed Targeted Public Distribution System (TPDS) and other welfare schemes, (ii) ensure food security during the periods when production is short of normal demand during bad agricultural years and (ii) to check excessive rise in prices of foodgrains during period of production shortfall through ‘open market sales and to check excessive fall in prices of foodgrains during period of excessive production through open market procurement. The buffer stock of foodgrains in the central pool is distributed over different quarters of the year depending upon the procurement patterns. The seasonality of production and procurement are thus decisive factors in determining the minimum norm of foodgrains stocks required in a particular quarter of the year. For working out buffer stocking norms and making recommendations for policy decisions, the government has formed various technical groups from time to time. Levels of buffer stock vary in different quarters of the year. FCI has defined buffer stock levels separately for wheat and rice for various quarters of the year. Lower levels of buffer stock are fixed for the quarters that fall near the harvesting time. When crop comes to market for sale, then levels of buffer stocks are raised to buy the excessive crop at MSP and to add to the levels of stock. For example, buffer stock for wheat is minimum in April as wheat is harvested in April, May and June, while buffer stock for wheat is maximum is July when harvesting season is over and wheat crop is stored for supply to fair price shops and for open market sale to achieve price stability. Details of buffer stock norms in India are given in Table 1. Table 1. Buffer Stock Norms in India (in million tonnes) Year Rice Wheat Total (Rice + Wheat) van | April | July | Oct | Jan | Aprit | July | Oct | Jan | Aprit | July | Oct rgor-1998 | 7.7 | 108] 92 | 60 | 77 | 37 | 13.1 | 106 | 15.4 | 14.5 | 22.3 [16 6 4999-2004 | 04 | 11.8[ 100] 65 | 84 | 40 | 14.3 | 116 | 168 | 15.8 | 24.3 | 18.1 2005-2014 | 118 | 122| 98 | 52 | 82 | 40 | 17.1] 11.0 | 200 | 162 | 269 | 162 2015 and onwards] 7.6 | 13.6 | 13.5] 10.3 | 13.8 | 7.5 | 276 | 205 | 21 4 [aia [ata | s08 In addition to buffer stock norms, government has prescribed Strategic Reserve of 30 lakh tonnes of wheat we.f. July 2008 and 20 lakh tonnes of rice w.e.f. January 2009. ™@ 11. Dual Pricing Policy The government follows dual pricing policy in the agriculture sector. In this dual pricing policy, two types of prices are determined for the foodgrains: (i) Procurement Price - The price at which government purchases foodgrain from the farmers. Generally this price is the minimum support price as decided by the Commission for Agricultural Costs and Prices. (ii) Issue Price~ the issue price is lower than the market price. It is the price at which government provides limited quantities of foodgrains to poor households through Fair Price Shops (FPS). This price is also called ration price. Dual pricing system of foodgrain is the best way to balance the conflicting interest of farmers (who want higher remunerative prices) and consumers (who want cheap foodgrains). In India, Government of India is pursuing dual price policy for foodgrains with strong commitment. Government has taken various: ‘measures for running dual pricing policy; viz. government has set up Food Corporation of India to procure foodgrains; Commission for Agricultural Costs and Prices has been set up for determining MSP. Government is also running public distribution system for providing foodgrains to poor consumers at fair price (Issue Price). FClis the nodal agency of the government which procures foodgrains from the farmers households through fair price shops, Dual price policy seeks to achieve twin objectives— (i) Providing incentive mechanism to farmers for promoting modern technology for increasing agricultural production and (ii) providing consumption, subsidy to consumers through the operations of public distribution system, Satisfying the conflicting objectives of farmers (who expect higher remunerative prices for their foodgrains) and of consumers (who expect cheap price of the foodgrains) is not an easy task. Government has been facing resource constraints in satisfying these conflicting objectives. Procurement price (Minimum ‘Support Price) of wheat and paddy is shown in Table 2. Table 2. Procurement Price (MSP) of Wheat and Paddy (® per Quintal) Crop 2012-43 2016-17 2017-18 Paddy Common 1,250 1.470 1,550 Paddy (Grade A) 1,280 1,510 1,590 Wheat 1,285 1,625 1,735 (Source: Website of Commission of Agricultural Costs and Prices) Issue price of wheat and rice to various targeted groups in year 2012-13 is shown in Table 3. Table 3. Issue Price of Wheat and Rice (2012-13) (® per quintal) Foodgrain Above Poverty Line Below Poverty Line | Antodya Anna Yojana (APL) (BPL) (aay) Rice (Grade A) 830 565, | 300 Wheat 610 415 | 200 (Source: Economic Survey, 2012-13) Tables 2 and 3 depict different procurement prices and issue prices of wheat and rice in India. It reflects dual pricing policy of the government through which efforts are made to provide remunerative Price to the farmers and subsidised prices to various targeted groups through public distribution system. For providing subsidised foodgrains, Government of India has enacted National Food Security Act 2013. Under this Act, subsidised foodgrains equal to 5 kg per person per month are provided to targeted households at the rate of & 3 per kg for rice, & 2 per kg for wheat and & 1 per kg for coarse grains. Thus, dual pricing policy ensures a reasonable support price to the farmers which induces them to adopt improved methods of cultivation for increasing agriculture production and also ensures the poor consumers that they will not have to pay higher prices for getting foodgrains for their consumption. This system helps in achieving food security in the nation. ™@ 12. Food Corporation of India (FCI) The Food Corporation of India (FCI) was set up in 1965 under the Food Corporation Act, 1964. Since its inception in 1965, FCI has played significantrole in establishing stable food security system in the country. Earlier, food security system was a type of crisis management oriented system in which government used to take food security measures only in crisis like situations ‘viz. famine, floods, drought, etc. FClhas successfully met the challenge of managing the complex task of providing strong food security system in the economy and has maintained regular supply of wheat and rice throughout the year. FCI has helped in transforming India from a chronically food deficit country to one that is self-sufficient in foodgrains. FCI has made the provision of scientific storage of millions of tonnes of foodgrains procured byt In order to provide easy physical access in case of food shortage in remote and inaccessible areas, FCI has established a network of storage godowns strategically located all over India. FCI also stores foodgrains by Cover and Plinth (CAP) method, In this method, foodgrains are stored in open with adequate precautions such as damp proof plinths and covering of foodgrains stacks with especially fabricated polythene covers. FCI aims to achieve the following objectives: (i) To provide remunerative prices to the farmers for their agricultural produce by implementing procurement policy of the government. (ii) To make foodgrains available throughout the country for the Public Distribution System. (iii) To maintain buffer stocks of foodgrains so as to achieve food security in the country. (iv) To intervene in the market for price stabilisation of foodgrains, i.e., in case of excessive price rise of foodgrains in the market, FCI starts selling foodgrains out of its stock to increase the market supply and thereby check their price rise in the economy. FCI procures the foodgrains in the form of wheat and paddy directly from the farmers and in the form of rice from rice millers. The price at which it procures foodgrains is called the procurement price. FCI is obligated to buy all the grains that farmers offer to sell at the prescribed procurement price (which is also called Minimum Support Price) as long as the grains meet the prescribed minimum quality standards. The gains procured by FCI are used to maintain buffer stock and to meet the needs of public distribution system. FCI is responsible for purchasing, storing, transporting and distributing the foodgrains to the fair price shops. In case of shortage, FCI also imports the foodgrains and can impose storage restrictions on private traders. FCI avoids excessive price fluctuations and reduces the disparity of prices of agricultural goods among various states. The foodgrain stocks with FCI are of two types: (i) Operational Stock, (ii) Buffer Stock. The operational stocks are used for distribution to public through public distribution system and for various welfare schemes of the government like foodgrains for food for work’ programme. The buffer stocks are maintained to ensure food security and to cope with acute shortage of foodgrains occurring during periods of drought, flood, famines, etc. These stocks are also used to moderate price fluctuations of foodgrains in the economy. As on 30th June, 2016, total foodgrains storage capacity of FCI was 362 lakh tonnes, actu Price Policy 173 In brief, all the major operations in the marketing of foodgrains, viz. procurement, storage, ‘transportation and distribution are performed by FCI. Questiens "I Essay Type Questions 1. Examine the agricultural price policy of India, What are its defects? Suggest some measures for its improvement. : 2. What is the need for an agricultural price policy? Discuss the main features of the agricultural Price policy of India. — Chapter 11 AGRICULTURAL MARKETING Green Revolution has accelerated the growth of commercial farming in India, Farming population has ‘become more responsive to changes in agricultural prices. Accordingly, agricultural marketing has assumed a Significant role in agricultural growth. Itwas rightly observed by Royal Commission on agriculture in 1928, ‘Problem of agricultural grouth cannot be fully solved unless agricultural marketing is improved,” Iti ighty said that a rational farmer keeps his one eye on the plough and the other on the market. @ 1. Meaning of Agricultural Marketing Agricultural marketing is a very wide term, It encompasses all such activities which are related to the Procurement, grading, storing, transporting and finally selling the agricultural produce. In the words of Faruque, ‘Agricultural marketing comprises all operations involved in the movement of farm produce from the producer to ultimate consumer.” Thus, agricultural marketing includes the following operations: (1) Collection, (2) Grading, (3) Processing, (4) Preservation, (5) ‘Transportation, and (6) Selling. ™@ 2. Marketable Surplus Marketable surplus is very important for an underdeveloped economy like India. It refers to the excess of produce above the ‘own consumption’ by the farming families. It is that part of agriculture production which a farmer is ready to sell in the market after meeting his family consumption needs. In Poor countries like India, agriculture was considered as a means of subsistence. However, owing to massive development programmes during the Five Year Plans, there has been increasing Commercialisation of farming in India. Yet, as regards food crops, marketable surplus continues to be rather low. According to an offic ial report, nearly half of foodgrain production in India fails to reach the market. However, marketable surplus of commercial crops is fairly high. It is 95 per cent in case of cotton, 90 per cent in case of sesame and around 80 per cent in case of sugarcane. Following points may be noted to highlight the significance of marketable surplus in India: (1) Itcaters to the growing food requirement of the ever increasing urban population including industrial labour migrating from rural to the urban areas. (2) Itraises monetary income of farmers which leads to an increase in the demand for the industrial products. It thus stimulates industrial development. (3) Increased marketable surplus of agricultural produce ensures increased availabilty of material for the industrial sector. This also contributes to the growth of industry. (4) Increased marketable surplus unfolds greater possibilities of exports, generating fori exchange which is badly needed by developing economy, agricultural Marketing 153 s 3. Present Agricultural Marketing System in India Following are some of the prevalent marketing systems in India (1) Sale in Villages: Farmers in India tend to sell the bulk of their produce in the unorganised tural markets, All India Rural Survey Committee observes that, on an average. Indian farmer sells nearly one-third of his produce in the village itself. Agricultural produce is sold in three different ways: (i) In the rural fares/bazars. (ii) Directly to the mahajans or moneylenders and (iii) to the mobile traders of the urban areas. By selling in the rural areas. the farmers do not get right price for their produce. Itis generally a distressed sale at low prices. This is because of the following reasons: (i) output of many farmers is so small that it is not worth while to transport it to the urban organised markets, (ii) means of transport are not affordable for most of marginal farmers, (iii) small farmers are generally indebted to the rural moneylenders who force them to sell their produce for the repayment of loans, (iv) farmers in India generally do not have enough of storage facility, (v) lack of knowledge on the part of marginal farmers regarding organised markets in the urban areas. (2) Sale in Markets: Second in importance is the sale in markets of small and large towns. Markets in India are of two types: (i) Unregulated Markets and (ii) Regulated Markets. In the unregulated markets, the bulk of the farmers’ produce is purchased by the commission agents themselves who also happen to be moneylenders. However, the number of unregulated markets is gradually declining. Most of the markets are being regulated so as to offer fair price to the farmers under the direct supervision of the market committee. (3) Other Methods: Other methods include: (i) Sale through cooperative societies and (@) Government purchase system, i.e., purchase of agricultural produce by government directly from farmers. In pursuance of its direct purchase system the government has established Food Corporation of India, Jute Corporation, Cotton Corporation of India and various such institutes. § 4. Conditions for Satisfactory Agricultural Marketing (1) Freedom from Moneylenders: Farmers must be freed from the clutches of moneylenders who often compel the farmer for distress sale. It requires provision of easy finance facility for the small and marginal farmers in particular. (2) Elimination of Middlemen: A fair marketing system pre-supposes the elimination of middlemen between the farmer and the final consumer. In India, there is a long chain of middlemen who appropriate the bulk of profit and the farmer gets very less amount out of the price paid by final consumer. (3) Bargaining Power and Storage Facility: Bargaining power of the farmers must be improved which at present is very low owing to their limited holding capacity. If their holding capacity is improved, the farmers can sell their produce at times when the price rules high in the market, Satisfactory agricultural marketing also requires improved storage facility. This will further help the holding capacity of the farmers. (4) Transport Facility: Cheaper means of transport is another essential requirement for satisfactory agricultural marketing, It enables the farmers to take their produce to the urban organised markets well in time at reasonable cost, sa Indian Economy (5) Regulated Markets: More and more regulated markets should be established so that the farmers are not exploited by the middlemen, particularly the commission agents. In these markets, weights and measures should also be standardised. | (6) Market Intelligence: Arrangement should be made for proper information to the farmers regarding marketing operations, market rates, etc. It can be through radio, television, local newspaper, etc. @ 5. Defects of Agricultural Marketing Agricultural marketing system in India suffers from various defects. So, farmers are often deprived of fair price for their produce. Some of the notable defects are as under: (1) Unorganised Farmers: Indian farmers are not organised. Small quantity of marketable ‘surplus is separately brought to the markets by the millions of small farmers. This causes high transport cost and low bargaining power. (2) Multiplicity of Intermediaries: Multiplicity of intermediaries is an equally serious defectin the marketing system in India. There is a long chain of intermediaries between the farmer and the final consumer, who appropriate the bulk of profit which otherwise would have accrued to the farmers. On an average, farmer receives just 60 per cent of the price paid by the final consumers, the rest 40 per cent is appropriated by the intermediaries. (3) Lack of Grading: Farmers in India do not understand the significance of grading the produce. Good and bad crops are not separated qualitatively. Mixed with poor quality grain, even the good quality grain fetches a low price. (4) Inconvenience of Transport: There is a general lack of economical and fast means of transport between the rural and urban areas. Transportation of crop is often done by means of bullock carts. This is a very slow means of transport and, it is dependent on weather conditions. Compared to other nations, development of railways has remained slow in India. Asa result of all this, transport cost comes to nearly 20 per cent of the value of. output which is very high. (5) Malpractices in Mandi: Malpractices in the markets is a common feature in the context of agricultural marketing in India. These relate to weights and measures, fraudulent and clandestine fixation of the price of the produce by the brokers and commission agents. (6) Lack of Market Intel conditions. They are solely Often they sell their produ agents and Mahajans. (7) Lack of Proper Storage Facili Crops are often dumped in the forces the farmer to sell his pro jence: Farmers usually lack knowledge of prevailing market dependent upon commission agents for the price of their produce. ce at low prices in the nearby markets dominated by commission ity: There is lack of proper storage facility in the rural areas. laces which are vulnerable to pests and insects, This often duce at the low price, rR ‘Agricultural Marketing 155 (9) Lack of Finance: Farmers need credit for financing agriculture operations. But small farmers, in the lack of security, cannot get loan from banks and cooperative societies. Small farmers depend upon the traders and moneylenders. The traders and moneylenders give loans on the condition that farmers will bring crop for sale only to them (the traders). In this process farmers get low price for their produce. m 6. Government Measures to Improve Agricultural Marketing After independence, the government has initiated various measures to improve agricultural marketing. The main measures taken by government to improve agricultural marketing are as follows: (1) Regulated Market: Regulated agriculture markets have been established in different parts of the country beginning with the one in Hyderabad in 1923. In Punjab, these markets were established in 1941. Some of the important features of these markets are as under: (i) A market Committee supervises the marketing operations. Producers, traders and representatives of the local self government are members of these committees. (ii) Traders and brokers are required to obtain licences for their work. (ii) Commission and brokerage are determined by the market committees only. (iv) Weights and measures are used under the strict supervision of the committees. (v) The committees disseminate information regarding the prevailing prices in the market. At the time of independence, there were only 286 regulated agriculture markets in India. Now, number of regulated markets stood at 7,320 as on March 31, 2016. Besides, there are 22,294 rural periodical agriculture markets, about 15 per cent of these rural markets are covered under some sort of regulation. Directorate of Marketing and inspection supervises the development of approach roads to the markets. For the coordination between the marketing committees, the governments of various states have established State Agricultural Marketing Boards. (2) Cooperative Marketing Societies: Cooperative Marketing Societies are proving to be extremely useful in the context of agricultural marketing. The farmers form these societies themselves. The societies organise collective sale of the produce of their members. The farmers are thus, freed from the clutches of the middlemen. These cooperative societies also have their own storage facilities. These also offer credit facilities to their members. A notable progress has been registered by these societies in the states of Punjab, Haryana, Uttar Pradesh, Maharashtra and Gujarat. These committees have registered perceptible growth from the Second Five Year Plan onwards. In the year 2002, there were 6,980 primary cooperative marketing societies; 186 central cooperative marketing societies; and 19 state cooperative marketing societies. National Agricultural Cooperative Marketing Federation was established in 1963. This was with a view to co-ordinating the activities of various societies as well as to encourage international trade. The societies also work for food corporations in different parts of the country. (3) Grading of Agricultural Produce: Agricultural Produce (Grading and Marketing), Act 1937 was passed with a view to improving the grading of agricultural produce. It was amended in 1986. Various Agmark centres were opened for the standardisation of agricultural products. On the recommendation of the Planning Commission in 1952, classification of the agricultural produce meant for exports was made compulsory. Central Agmark Laboratory as well as 16 Regional Agmark Labs have been established for the standardisation of agricultural products. The graded goods are stamped with the seal of ‘AGMARK. The ‘Agmark’ goods have a wider market and command better market price. 156 Indian Economy (4) Standardisation of Weights and Measures: To ensure uniform weights and measures, the government introduced metric system of weights and measures in 1958. In 1966, ol weights and measures were completely abolished. Weight inspectors were appointed to supervise the use of Metric weights. It has prevented exploitation of the farmers in markets to some extent. Now, government has enacted Legal Metrology Act, 2009 to achieve uniformity and transparency in the system of weighing and measuring. (5) Dissemination of Market Information: The government has arranged for the dissemination of market information for the benefit of the farmers. All India Market News Service has been established specifically for this purpose. The prevalent daily prices in different markets of the country are broadcasted everyday through All India Radio. (6) Storage Facilities: To improve storage facilities for the farmers, the government has accorded high priority to the construction of godowns. Presently, there are three main agencies engaged in storage viz., Food Corporation of India, Central Warehousing Corporation and State Warehousing Corporations. So far 17 State Warehousing Corporations have been established. Total storage capacity of Food Corporation of India, both owned and hired was 362 lakh tonnes as on 30th June 2016. It includes cover and plinth storage of 26.9 lakh tonnes. Besides total storage capacity available with state agencies as on 30th June 2016 was 450 lakh tonnes. Indian Grain Storage Institute has been established in Hapur. This institute offers a variety of scientific information related to grain saving. Rural Development Corporation has established 3,354 godowns in the rural areas. In 2014, there were 6,891 cold storage in India. A capital investment subsidy scheme named ‘Construction of Rural Godowns’ was started in 2001. In this scheme, till July 2013, 31,897 storage projects having capacity of 423.84 lakh tonnes had been sanctioned. Recently government has allowed 100 per cent FDI in the construction of warehousing infrastructure. On 30th June 2016, total storage capacity of foodgrains increased to 812 lakh tonnes. (7) Development of Means of Transport: Means of transport have been noticeably developed during the last three Five Year Plans. In year 2005-06, government has started Bharat Nirman Scheme to provide metalled roads to all villages by year 2012. Pradhan Mantri Gram Sadak Yojana has done commendable job in extending rural connectivity with toads. (8) Agricultural Marketing Organisation: Directorate of Marketing and Inspection has been established with a view to improving agricultural marketing. It focuses on three activities: (i) Research (ii) Development (iii) Grading. The directorate also supervises sale and purchase activities of agricultural produce. It has established Marketing Extension Cells. It publishes “Marketing Newsletter’, ‘Marketing Extension Newsletter’ and ‘Agricultural Marketing’ for the benefit of the farmers. It also offers marketing training to the farmers. (9) Training of Personnel in Agricultural Marketing: Many institutes have been established for imparting training in agricultural marketing, The Training institute in Nagpur offers training to the senior officials of marketing. Similarly, in Hyderabad, Mangli and Lucknow training is offered to the officials of regulated markets, (10) Administration of Fruit Products and Cold Storage: According to Fruit Products and Cold Storage Order (1955), licences for the establishment of cold storage (for storing fruits, vegetables and dairy products) are issued by the Advisor Agricultural Marketing. He also ‘Agricultural Marketing 187 (a) (12) (13) (14) (15) (16) (17) (18) offers guidelines related to the sale of fruits and vegetables in the domestic as well as international markets. Price Support: The government offers price supports to the farmers with a view to ensuring them the minimum price for their produce. The government offers to buy any quantity of the produce at the stipulated price fixed by the Commission for Agricultural Costs and Prices. Price support policy is adopted to protect the farmers against fluctuations in agricultural prices. In year 2017-18, minimum support price announced for paddy was € 1,550 per uintal and for wheat it was & 1,735 per quintal. National Institute of Agricultural Marketing: This institute started functioning in 1988. Its main purpose is development of agricultural markets. It conducts programmes in agri-business, agri-warehousing, and cold storage management, It also provides specialised training and undertakes research in agricultural marketing. It has also started Post Graduate Programme in agri-business management so as to make efficient business managers for domestic and global agri-business. Setting up Marketing Information Network: During 2005-06, a scheme for agriculture marketing information network, AGMARKNET was implemented to provide electronic connectivity to important wholesale agriculture markets. 3,245 agricultural markets all over the country have been linked under this scheme by 31st March 2015. Setting up National Level Commodity Exchange: For introducing future trading in commodities, the government established National Level ‘Multi-Commodity Exchange of India Limited’ (MAX) in 2003-04. The major agricultural commodities traded at this exchange are wheat, cotton, oil, jute, rubber, spices, etc. At present, six national level commodity exchanges are operating in India. Model Law on Agricultural Marketing: The Ministry of Agriculture has formulated a model law on agriculture marketing for guidance of state governments. This model law provides rules regarding establishment of private markets/yards, direct purchase centres, farmer’s market for direct sale to consumers. It also has provisions for promoting public-private partnership in the management and development of agricultural markets in India. Strengthening Agricultural Marketing Infrastructure: For strengthening agricultural marketing infrastructure, government has started an investment subsidy scheme. In this scheme, subsidy is provided @ 25 per cent of capital cost of agricultural marketing infrastructure project subject to maximum of 50 lakh for each project. Till 31st March, 2009, 3,265 agricultural marketing infrastructure projects were sanctioned for investment subsidy. Direct Marketing: Government has introduced the concept of Kisan Mandi (farmer's markets) to eliminate middlemen. Government is providing a place and arranging facilities for the farmers to sell their produce directly to consumers. It will benefit both farmers and consumers. National Agriculture Market (NAM): National Agriculture Marketis a national electronic trading portal which connects the existing mandis of Agriculture Produce Marketing Committee (APMC). It creates a unified national market for purchase and sale of agricultural commodities. The NAM portal provides a single window facility for all APMC related information and services. This electronic national agriculture market increases the choice of NN ma 158 Indian Economy former when he brings his agriculture produce to the mandi for sale Local traders as well ag online traders (siting even in other states) can bid for he produce. The farmer may choose accept either the local offeror the online offer. In either case, the transaction willbe carries through the books of local mandi and mandi-traders will ear revenue in the form of transaction fee. ™ 7. Cooperative Marketing Agricultural Marketing occupies an important place in the context of agricultural development in India. Any policy related to the growth of agriculture is not likely to succeed in the absence of an efficient system of marketing. The cooperative agricultural marketing system has particular significance in this respect. In the words of Prof. V. Jesons, “Cooperative marketing means working together for mutual benefit in solving marketing problems.” Cooperative marketing societies are those societies which are formed on the basis of mutual trust and cooperation of the farmers for their own common good telating to the sale of their produce and purchase of various inputs. Cooperative marketing helps the farmers to avail the benefits of collective representation. © (1) Objectives of Cooperative Marketing Main objectives of cooperative farming are as follows: (i) these societies sell the produce of their members at the appropriate prices and at appropriate time, (ii) these offer storage facility to the members, (iii) loans are offered to the member farmers in times of need, (iv) information related to market prices is offered to the members, (v) the societies see to it that there are no volatile fluctuations in the markets, (vi) the Societies purchase and procure alll the necessary inputs (seeds, fertilizers, etc.) for their members, (vii) the societies help the members in export of selected agricultural commodities. © (2) Organisation of Cooperative Marketing in India Prior to 1954, Cooperative marketing societies in India confined themselves solely to the activity of marketing the produce of the member farmers. These were separate from the credit societies, The marketing societies became multipurpose societies after the All India Rural Credit Survey Report. Presently, following types of cooperative marketing societies operate in India: (i) Primary Cooperative Marketing Societies: These societies operate at the village level. These societies handle the marketing problems of their members and also take care of their credit needs as well as their need for seeds, fertilizers and other inputs. There are nearly 6,980 such societies in India. (ii) Central Cooperative Marketing Societies: Central cooperative societies are formed asa federation of various primary societies of a Particular area. These render help in solving the common problems of primary societies. These are based both in the rural as well as urban areas. There are nearly 186 such societies in India. (iii) State Cooperative Marketing Societies: These are the apex cooperative institutions of the states concerned. These help the primary societies through the central cooperative societies. There are 19 such societies in India. (iv) National Cooperative Marketing Organisation: National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) is the apex cooperative marketing institution. It works at the national level to coordinate the activities of various state marketing societies in India, as well as to stimulate domestic and international trade related to agricultural products. Besides it, National Cooperative Development Corporation has been making systematic ‘Agricultural Marketing ° efforts in facilitati ne agricultural te cooperative marketing of agriculture produce and distribution of e (3) a ioe of Cooperative Marketing Societies fae Sara eats marketing society sell their marketable surplus through the society only. one i aa ured by the society, it offers some advance payment to the members to meet ee eee oka ercurement, the crops ae processed for final sale in the market. The sale i done without the ae of middlemen. In case the prevailing prices are not remunerative, crops are stored ees the final sale is effected, the society pays its members the balance amount, adjusting for the advance payment already made. The society employs workers to handle its routine affairs, but the overall management vests with the committee of elected members. ¢ (4) Progress of Cooperative Marketing in India Cooperative Marketing Societies have made a noticeable progress over time. In 2002, there were 6,980 primary marketing societies, 186 central cooperative societies and 19 state cooperative societies, besides the national federation of cooperative societies working at the national level. Progress of these societies has been particularly significant in the states of Maharashtra, Gujarat, Andhra Pradesh, Tamil Nadu, Punjab, Haryana and Bihar. These societies render useful services in the process of procurement and marketing of wheat, rice and commercial crops like cotton and jute. © (5) Achievements or Advantages of Cooperative Marketing Societies @ imination of Middlemen: Due to effective operations of cooperative societies, chain of middlemen between farmer and the consumers has been eliminated. This has helped the farmers to get remunerative price for their produce. (ii) Reduction in Marketing Cost: Because of collective sale, marketing expenses have been considerably reduced. Also the farmer is saved of various customary-deductions such as of weighing, donations and vigilance. (iii) Advantages of Collective Bargaining: Cooperative societies have succeeded in reaping the advantages of collective bargaining because of the collective sale of the farmer’s produce. Individually, the farmer has very poor bargaining power. Collectively, they gain in terms of fair price for their produce. Relief from Moneylenders: By offering periodic loans to the members, the cooperative societies have saved the small and marginal farmers from the clutches of rural moneylenders. Remunerative Price: The societies offer advance paymentto the members and also ensure remunerative price for their crops. These societies can better bargain as these sell the crop in bulk. Facility for Grading: Facility of grading offered by the society helps in standardisation of the produce, fetching high price in the market. Facility for Storage: The societies provide for storage capacity that enhances the holding capacity of the farmers who are thus, saved from distress-sale of their produce. wn: To facilitate the sale of the member's produce, cooperative at the convenient junctions. Heavy cost of transportation by there is less stress on the scarce means of (iv) (wv) (vi) (vii) Facility for Collect societies open collection centres the individual farmers is thus avoided. Also, transport. 160 Indian Economy (ix) Control over Supply: The societies regulate the supply of marketable surplus for final sale the market. The volatile fluctuations in the market are thus avoided. (x) Supply of Essential Inputs: The societies ensure the supply of essential inputs (seods, fertilizers, etc.) to the members at reasonable prices. © (6) Weaknesses of Cooperative Marketing (i) Inactive Societies: There are many inactive societies in the country. Inactive societies are nearly one third ofthe total, Nearly 40 per cent of the societies do not handle trade worth even 5 lakh in a year. Thus, cooperative societies are not placed on strong footing. (ii) Lack of Linkages among Various Cooperative Marketing Societies: There is a lackof proper coordination among the primary, central and state cooperative societies. As a consequence the programmes are not effectively executed. (iii) Lack of Confidence of Farmers: The cooperative societies have not much succeeded in winning over the confidence of the farmers. Very often, the farmers make independent sale of their produce directly in the markets. This is partly because the traders and commission agents continue to be a very convenient source of credit for the farmers, (iv) Wrong Practices: Cooperative societies also indulge in certain wrong practices. For instance, the societies tend to grab certain commissions even without rendering services. This tamishes the image of the societies in the minds of farmers. (v) Less Capital Base: Usually small farmers are members of cooperative societies. Their capital contribution is very small, thus because of weak capital base cooperative marketing societies remain weak, (wi) Limited Area: Most of the cooperative societies operate at local or regional level. The membership of these societies is not wide spread, Limited geographic area acts asa constraint in the growth of cooperative marketing societies, © (7) Suggestions to Improve Cooperative Marketing () Multipurpose Societies: Cooperative marketin, ig societies should function in coordination with other societies such as primary, state and central cooperative societies. Thus multipurpose societies would be more successful than merely the marketing societies, These societies should also perform other activities related with agriculture, besides marketing of agriculture produce. (ii) Direct Relation with Consumers: Cooperative marketing societies should establish direct relation with the consumers, This will fetch the farmer the maximum possible price for his produce and the consumer will have to Pay the minimum possible, in the absence of all middlemen, (iii) More Processing Activities: Cooperative societies should . pursue processing activity more ing higher pro fits for the farmers, For example, if cotton and cotton-seeds are separated an . it will certainly fetch the farmer higher gains. (iv) Establishment of God. areas as well as in the urb: gical Marketing 161 (w) Wider Area: Cooperative societies should widen the area of their operation. Cooperative | centres should be set up in far off villages covering the whole tehsil area, This will enable the farmers to be in greater touch with the societies facilitating their functioning. '’ (vi) Grading: Grading should be vigorously pursued by the societies. This helps in getting remunerative price for the crops, A (vii) Supply of Inputs: The societies should ensure that the member farmers get essential inputs like good quality seeds, fertilizers, pesticides, etc., at competitive price and well in time. Government Agency: The societies should function asa government agency. For instance, the societies should ensure that the Food Corporation of India procures foodgrains only through cooperative centres and not. directly from markets, Farmers will thys get appropriate. price for their produce and it will also help these so s to develop. ° : export Marketing. of agricultural products n inata 1s not auequate. ® 12. Agricultural Marketing Reforms Regulated agricultural markets established by government farmers. There was no direct contact between farmers and actual buyers a me ae el agricultural marketing system did not provide any market related information to farmers. Soa strong eo felt. In this regard, inter-ministerial task force need for strengthening agricultural marketing system was could not protect the interest of small rea Indian Economy was set up by Agriculture Ministry in year 2002. This task force gave padage as svanestione 0 make 2aricultural marketing svstem more efficient. Central government prepared a Be ol ct peed State Agricultural Produce Marketing (Development and Regulation) Acts 008, cE directed the state governments to implement i, 18 state governments have accepted this Model Act with mines modifications, Following are the main features of this Act: (i) The farmer is under no compulsion to sell his crop in existing regulated markets, (i) Promoting direct marketing and establishing such markets where farmers can directly sell thei crop to consumers. (iii) Developing agricultural markets through private participation. (iv) Developing separate markets for fruits, vegetables, flowers and onions, (v) Prohibiting commission agency system in selling agriculture produce. (i) Establishing State Marketing Standard Bureau in each state for grading agricultural produce. (

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