MAM-054

Marketing Management
Indira Gandhi National Open University for Agribusiness
School of Agriculture

Block

2
Agricultural Marketing: An Overview
Unit 4
Introduction to Agricultural Marketing 75
Unit 5
Agricultural Produce Markets 96
Unit 6
Institutional Interventions 119
Unit 7
Global Trade Documentation 139
PROGRAMME DESIGN COMMITTEE
Prof. R. P. Das, PVC, IGNOU
Prof. S.K. Yadav, Director, SoA,
IGNOU
Dr. B.K. Sikka, Former Dean, College
of Agribusiness Management, GBPUAT
Dr. V.C. Mathur, Former Professor and
Head, Div. of Agri. Econ. IARI
Dr. Pramod Kumar, Principal Scientist
(Agri. Econ.) IARI
Prof. M. K. Salooja, School of
Agriculture, IGNOU
Dr. Anjali Ramtake, Associate Professor,
SOMS, IGNOU
Dr. Leena Singh, Assistant Professor,
SOMS, IGNOU
Prof. Sunil Gupta, SOMS, IGNOU
Dr. V. Vijayakumar, Associate Professor,
SoA
Dr. Mita Sinhamahapatra, Associate
Professor, SoA
Dr. Mukesh Kumar, Assistant Professor,
SoA
Dr. P. K. Jain, Associate Professor and
Programme Coordinator, SoA

Programme Coordinator: Dr. Praveen Kumar Jain

Block Preparation Team

Unit Writers
Units 4 and 5: Dr. S K Goyal, CCSHAU,
Hisar, (Haryana)
Unit 6:
Dr. S K Goyal, CCSHAU, Hisar, (Haryana)
Prof. S.K. Singh, New Delhi
Dr. Praveen K. Jain, IGNOU
Unit 7: Prof. Atul Dhingra, CCSHAU,
Hisar (Haryana)
Editors
Dr. Sapana A. Narula,
Professor and Dean,
School of Management Studies,
Nalanda University, Rajgir, Bihar
Dr. Praveen Kumar Jain, SoA, IGNOU

Course Coordinator: Dr. Praveen Kumar Jain

Print Production
Mr. Tilak Raj
Assistant Registrar
MPDD, IGNOU, New Delhi

April, 2022
© Indira Gandhi National Open University, 2022
ISBN : ________________
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from the University’s office at Maidan Garhi, New Delhi-110068 or visit University’s
Website http://www.ignou.ac.in
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BLOCK 2 AGRICULTURAL MARKETING: AN
OVERVIEW
It refers to the marketing that supports agricultural products and services, it
also includes the marketing of agri-inputs such as pesticides, seeds, fertilizers,
machinery, tools, and other parts. Agricultural marketing takes place in
various ways, the big companies either market their services or products
directly or the involvement of agents takes place. The other important
aspect of agricultural product marketing is education, the users/farmers
should have the awareness of the product they decide to buy any particular
product, the companies willing to market their product must educate their
audience as well. Agricultural marketing also covers the services involved
in moving an agricultural product from the farm to the consumers. The
primary purpose of this Block is to help students develop analytical tools
thinking about agricultural marketing. The block is covered in 4 units.
Unit 4: Introduction to Agricultural Marketing: This Unit includes the
evolution, meaning, and scope of agricultural marketing and its relation
to economic development; its functions, activities, and objectives, the
importance of marketing in agricultural development and growth. Marketed
and Marketable surplus, ratios of agricultural commodities, e-marketing are
also covered in this block.
Unit 5: Agricultural Produce Markets: In this unit, the topics that are covered
include: The influence of socio-economic and micro-macro environmental
forces on agricultural marketing system, the policies related to development
and regulation of agricultural produce markets and their influence on
marketing functionaries, marketing costs, price spread, margins efficiency,
market integration, and marketing infrastructure.
Unit 6: Institutional Interventions: In this unit, the topics that will deepen
the understanding of students include the interventions by institutions that
govern agricultural marketing. It is important to have an understanding of
topics like state trading, Market intervention, Market-led extension, market
intelligence and AGMARK NET Portal, e-NAM, etc. The unit also covers
price intervention and policies.
Unit 7: Global Trade Documentation: With the augmentation of
globalization, the world is becoming a common market. Overseas companies
are making a mark in India while Indian companies are going abroad, there
is a requirement of import-export transitions and understanding the global
trade policies. This Unit prepares the students to handle all the aspects
of actual transactions and covers the topics on types of documents: types
of imports documents and export documents and its requirement for all
the stakeholders, Role of Export Promotion Credit Guarantee scheme,
Institutions in agricultural exports (APEDA, MPEDA).

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 The material provided in this block is supplemented with various examples
and activities to make the learning process simple and interesting. We have
also provided check your progress questions for self-test at a few places of
these units which invariably lead to possible answers to the questions set in
those exercises. What perhaps you ought to do, is to go through units and
jot down important points as you read, in the space provided in the margin.
This will help you in assimilating the content. A list of reference books has
been provided at the end of each unit for further detailed reading.

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UNIT 4 INTRODUCTION TO
AGRICULTURAL MARKETING
Structure
4.0 Objectives
4.1 Introduction
4.2 Meaning and Scope of Agricultural Marketing
4.2.1 Scope of agricultural marketing
4.2.2 Evolution of agricultural marketing
4.3 Role of Agricultural Marketing in Economic Development
4.4 Marketing Functions
4.5 Activities and Objectives of Agricultural Marketing System
4.6 Importance of Marketing in Agricultural Development & Growth
4.7 Marketed & Marketable Surplus of Agricultural Commodities
4.7.1 Marketable surplus
4.7.2 Marketed Surplus
4.7.3 Factors affecting marketable surplus
4.8 e -Marketing
4.8.1 Importance
4.8.2 Benefits of e-marketing
4.9 Let Us Sum Up
4.10 Keywords
4.11 Suggested Readings/ References
4.12 Answers to Check Your Progress

4.0 OBJECTIVES
After studying this unit, you should be able:
●● explain the meaning and scope of agricultural Marketing and its role
in economic development;
●● identify the various functions of agricultural marketing;
●● discuss the meaning of marketed and marketable surplus; and
●● explain the concept of e-marketing, its importance, and benefits.

4.1 INTRODUCTION
In India, Agriculture was practiced formerly on a subsistence basis; the
villages were self-sufficient, people exchanged their goods, and services
within the village on a barter basis. With the development of means of
transport and storage facilities, agriculture has become commercial in
character; the farmer grows those crops that fetch a better price. Marketing
of agricultural produce is considered an integral part of agriculture since
an agriculturist is encouraged to make more investments and to increase
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Agricultural Marketing: production. Thus there is an increasing awareness that it is not enough to
An Overview produce a crop or animal product; it must be marketed as well. The increasing
trend of agricultural production has brought, in its wake, new challenges in
terms of finding a market for the marketed surplus.

4.2 MEANING AND SCOPE OF

AGRICULTURAL MARKETING
The term agricultural marketing is composed of two words-agriculture and
marketing. Agriculture, in the broadest sense, means activities aimed at the
use of natural resources for human welfare, i.e., it includes all the primary
activities of production. But, generally, it is used to mean growing and/
or raising crops and livestock. Marketing connotes a series of activities
involved in moving the goods from the point of production to the point
of consumption. It includes all activities involved in the creation of time,
place, form, and possession utility.
According to Thomsen, the study of agricultural marketing comprises all the
operations, and the agencies conducting them, involved in the movement of
farm-produced foods, raw materials and their derivatives, such as textiles,
from the farms to the final consumers, and the effects of such operations on
farmers, middlemen and consumers. This definition does not include the
input side of agriculture.
Acharya has described, in a dynamic and growing agricultural sector, the
agricultural marketing system ought to be understood and developed as a
link between the farm and the non-farm sectors. A dynamic and growing
agricultural sector requires fertilizers, pesticides, farm equipment, machinery,
diesel, electricity, packing material, and repair services which are produced
and supplied by the industry and non-farm enterprises. The expansion in
the size of farm output stimulates forward linkages by providing surpluses
of food and natural fibers which require transportation, storage, milling or
processing, packaging, and retailing to the consumers.
We can, therefore, define agricultural marketing as comprising of all activities
involved in the supply of agricultural inputs to the farmers and the movement
of agricultural products from the farms (production point) to the consumers/
users. Thus, as per this definition, agricultural marketing system includes
the assessment of demand for agri-inputs and their supply, post-harvest
handling of farm products, the performance of various activities required
in transferring farm products from farm gate to processing industries and/
or ultimate consumers, assessment of demand for farm products and public
policies and programmes relating to the pricing, handling, and purchase and
sale of farm inputs and agricultural products.
4.2.1 Scope of Agricultural Marketing
In a broader sense, agricultural marketing is concerned with the marketing
of farm products produced by farmers and of farm inputs and services
required by them in the production of these farm products. In fact, the
subject of agricultural marketing includes both product marketing as well
as input marketing.
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With the increased marketable surplus of agricultural commodities following Introduction to
the technological breakthrough, the importance of output marketing has Agricultural Marketing
gained momentum in the recent past. On the other hand, input marketing is
a comparatively new subject. The importance of farm inputs like improved
seeds, fertilizers, insecticides and pesticides, farm machinery, implements,
etc. in the production of farm products has increased over time. Thus, based
on the above discussion it becomes clear that the scope of agricultural
marketing must include both product marketing as well as input marketing.

Efficiency and
Marketing
costs
functions,

Agencies, Producer’s
channels, surplus,

Agricultural
marketing
Government
Price spread and
policy and
market
research
integration,

Training and
statistics on
Imports/exports agricultural
of agricultural
commodities.

Fig.4.1: Agricultural marketing

The scope of the field of marketing can be examined from five angles viz.,
producers’ interest, consumers’ interest, societal interest, traders’ interest,
and Government role:
Farmers’ interest: Farmers have limited resources at their disposal. A
healthy marketing system acts as an incentive for the farmers to use the
scarce resources judiciously. Thus efficient input marketing and output
marketing systems are indispensable to bring the desired level of welfare
to the farmers. Farmer in fact may turn out to be a major beneficiary in the
market system properly functions.
Consumers’ interest: Marketing is a system that facilitates the movement of
farm commodities from the place of production to the place of consumption.
Thus, it enables the consumer to choose farm commodities of her/his choice
to satisfy her/his and family needs. Consumers’ welfare is brought about
through increased marketing output by following efficient methods of
marketing.
Society’s interest: Society’s interest is the aggregate of an individual’s
interest. When the consumption requirement of an individual is met by an
effective marketing system, society at large gets benefit from this process
which in turn leads to an increasing standard of living of the people. In this
people’s welfare is directly influenced by the efficient marketing system.
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Agricultural Marketing: Traders’ interest: Middlemen are those individuals which specialize in
An Overview performing various marketing functions and thus facilitate the movement
of the products from producers to consumers. Through the process of
marketing apart from fulfilling the needs of producers and consumers, they
earn their livelihood. They may be merchant middlemen or agent middlemen
or facilitative middlemen.
Government’s role: Government acts as custodian of the welfare of all
the sections of the society i.e. producers, consumers, traders, etc. For this
purpose, it has to perform certain functions like procurement of foodgrains
for the maintenance of buffer stocks as well to meet the public distribution
system, fixation of minimum support prices for various foodgrains, etc. The
government also regulates marketing activities through various legislations
and marketing policies to safeguard the interest of both producers and
consumers.
4.2.2 Evolution of Agricultural Marketing
The agricultural marketing system is understood to comprise of two sub-
systems i.e. product and input marketing. Under traditional agriculture,
input marketing was not so important as today because farmers used to rely
heavily on their own inputs. Only after the evolution of improved farming
techniques and use of modern inputs i.e. high yielding variety seeds, hybrid
seeds, chemical fertilizers, plant protection measures, machinery, etc.,
farmers have started entering the market for buying inputs. Now, the farmers
depend upon purchased inputs for production. Similarly, under traditional
agriculture farmers had very little quantity to sell in the market. Because
farmers’ priority was to meet their home requirements and other obligations
i.e. to pay off rent & debts, etc. Actually, the output market developed only
after the farmers were able to produce more food than their requirements.
However, the process of producing more than own requirements came
about slowly. Now, a large proportion of what the farmers produce is taken
to market as they have become market-oriented. This process has resulted
in the overall development of the market mechanism and the economy as
a whole. The following factors have led to the evolution and growth of
agricultural marketing in India.
(i) Specialization: The increasing tendency of the farmers towards
increasing specialization has increased their efficiency. Specialization
leads to increased production, which is the base for the growth of
marketing and, in turn, of the entire economy.
(ii) Urbanization: It is fact that the urban population is the main buyer
of agricultural surpluses. It is also true that the urban population is
growing much faster than the rural population (due to rural-urban
migration), which has necessitated a faster growth of agricultural
marketing activities.
(iii) Transportation and Communication: It is a fact that agricultural
production is undertaken at every length and breadth of the country.
Therefore effective transportation and communication facilities are
required for moving the product from production areas to consumption
areas. However, due to the lack of these facilities, the movement of
produce from one area to another was limited, and the consumption
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 of a product was restricted only to the areas of production or, at Introduction to
the most, to nearby areas. The improvement in transportation and Agricultural Marketing
communication facilities has enabled the movement of products from
production areas to consumption areas. This has resulted in increasing
the scope of the marketing manifold.
(iv) Technological Change in Agriculture: Technological changes in
agriculture, such as the evolution of HYV’s seeds/dwarf varieties
seeds, intensive use of modern inputs, and cultivation technology
in the agricultural sector, have resulted in a substantial increase in
farm production. This in turn has caused the marketed surplus of the
agricultural produce to increase at a substantial rate resulting in the
growth of the marketing system.
Check Your Progress 4.1
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What is the meaning of agricultural marketing?
………………………………………………………………………
………………………………………………………………………
2) Discuss the scope of marketing in terms of farmers’ interests.
………………………………………………………………………
………………………………………………………………………
3) Enlist the factors causing the evolution and growth of agricultural
marketing.
………………………………………………………………………
………………………………………………………………………

4.3 ROLE OF AGRICULTURAL MARKETING

IN ECONOMIC DEVELOPMENT
Agriculture has been the lifeblood of the Indian economy. It is not because
its contribution is lower than that of services in the Gross Value Added of
the country. It is because many of the services have been emerged due to
modern agriculture. The importance of agricultural marketing in economic
development can be understood for the following reasons.
(i) Optimizer of Resources and Output Management
An efficient agricultural marketing system leads to the optimal use
of the available resource. An efficient marketing system can also
contribute to an increase in the marketable surplus by reducing the
losses arising out of inefficient processing, storage, and transportation.
An efficient market can effectively distribute the available inputs, and
thereby sustain a faster rate of growth in the agricultural sector which
results in overall economic development.
(ii) Widening of Markets
An efficient and orderly marketing system helps in the development
of demand for agricultural produce and thus widens the market for
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Agricultural Marketing: the product by taking them to remote corners both within and outside
An Overview the country. At the same time, it helps a large number of consumers in
satisfying their demand for various farm products.
(iii) Growth of Agro-based Industries
An improved and efficient system of agricultural marketing helps
in the growth of agro-based industries and stimulates the overall
development process of the economy. Many industries like cotton,
sugar, edible oils, food processing, and jute depend on agriculture for
the supply of raw materials.
(iv) Price Signals
The marketing system through transmitting price signals at different
stages of marketing helps, apart from the farmers, market functionaries
in planning their buying and selling activities.
(v) Increase in Farm Income
An orderly marketing system enables the farmers to earn higher levels
of income by reducing the number of middlemen or by restricting the
cost of marketing services and the malpractices in the marketing of
farm products. If the producer does not have an easily accessible market
where he can buy required inputs and sell her/his surplus produce, he
has little incentive to produce more. The need for providing adequate
incentives for increased production is, therefore, very important, and
this can be made possible only by streamlining the marketing system.
(vi) Employment Creation
The marketing system employs millions of persons engaged in various
activities, such as assembling, packaging, transportation, storage, and
processing. Also, several others find employment in supplying goods
and services required by the marketing system.
(vii) Adoption and Spread of New Technology
The marketing system helps the farmers in the adoption of new
scientific and technical knowledge. New technology requires higher
investment and farmers would invest only if they are assured of
market clearance of their surplus production at remunerative prices.
(viii) Addition to National Income
Marketing activities add value to the product thereby increasing the
nation’s gross national product and net national product.
(ix) Better Standard of Living
A better marketing system leads to a better standard of living for the
farmers. This system provides more disposable income in the hands
of the farmers and that income is spent by the farmers to avail and
enjoy modern facilities. Therefore, modern farmers can enjoy a better
standard of living besides contributing to the growth of the economy.
(x) Creation of Utility
Marketing adds cost to the product, but, at the same time, it adds
utilities to the product. The following four types of utilities of the
product are created by marketing:
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 (a) Form Utility: The processing function adds form utility to the Introduction to
product by changing the raw material into a finished form. Agricultural Marketing

(b) Place Utility: The transportation function adds place utility to

products by shifting them to a deficit place from the surplus
areas.
(c) Time Utility: The storage function adds time utility to the
products by making them available at the time when they are
needed.
(d) Possession Utility: The marketing function of buying and
selling helps in the transfer of ownership from one person to
another.

4.4 MARKETING FUNCTIONS

Any single activity performed in carrying a product from the point of its
production to the ultimate consumer may be termed as a marketing function.
A marketing function may have any one or combination of three dimensions,
viz., time, space, and form. The marketing functions are presented as per the
following classification:
Function of Transfer of Function of Physical Facilitating Functions
Function of changing the
Ownership Movement
form of the product

a) Selling a. Transportation a. Standardization a. Market

and grading and financing
b) Buying b. Storage
b. Risk bearing
c) Demand b. Packaging and
c. Market
creation and
information
d) Price
determination

Fig. 4.1: Marketing functions

1) Function of Transfer of Ownership

Selling and buying are the two important functions involved in the transfer
of ownership. Selling is the process of finding the buyers and convincing
them to buy the product at a price that is satisfactory to both sellers and
buyers. Buying includes identifying one’s needs, finding the source of
supply of the goods, and procuring them at the right price.
a) Selling: The selling function consists of the following sub-functions:
i) 
Product Planning and Development: The needs of the
consumers should be taken into consideration in selling. We
identify that product that is required by the buyer and sell the same.
ii) Contractual Function: It involves identifying the potential
consumers for the product and initiating and maintaining
contacts with them for selling the commodity.
iii) Demand Creation: Once the potential consumers are identified
we introduce various sales techniques to stimulate them so that
the desired sales target can be achieved.
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Agricultural Marketing: iv) The Function of Negotiation: Some important factors to be
An Overview considered at the time of selling are quality and quantity of
the commodity proposed to be transacted, time of transfer,
particulars of packing, mode of payment, etc. These should be
well negotiated to avert any future conflicts between the buyers
and the sellers.
b) Buying: Buying includes identifying one’s needs, finding the source
of supply of products, and procuring them at the right price. Following
are the sub-functions of buying:
i) The Function of Planning the Purchases: The buyers must
plan their needs and undertake the purchases. Also, the buyers
should survey their markets to identify the quality and quantity
of the goods that are required.
ii) Contractual Function: It is the identification of the sources of
supply to confirm the suppliers of a commodity so that the flow
of supplies can be made continuous to the market.
iii) The Function of Negotiation: The terms and conditions of
purchase along with the prices are negotiated with the sellers.
Once the negotiations are completed, the goods are transferred
to the buyers. The prevailing methods of buying and selling in
the markets are as follows:
a) Sale Under Cover of a Cloth: Under this method of
sale, the prices of the products are settled through a
transaction, which is done under the cover of a cloth. The
transaction under the cover is that a given price is fixed
between the buyers and the commission agents of the
sellers by pressing the fingers of each other, for which
code symbols are arranged.
b) Sale Through Negotiations: This is a method, which
facilitates direct contact between the buyers and sellers.
c) Sales Based on Samples: In this method, commission
agents approach the buyers with the sample of the lots
proposed to be disposed of. The commission agents go
round the shops of the buyers and produce is offered to
that buyer, who offered the highest price per unit of the
produce.
d) Morghum Method: A common method of sale found
in villages when the farmers borrow funds from local
moneylenders. The transactions are effected based on
the oral agreement that is made between the buyers and
sellers.
e) Open Auction Sale: This is the method, which prevails
in most of the regulated markets. The prospective buyers
examine the lots of the produce kept for sale and offer
their bids openly.
f) Closed Tender System: This is, more or less, the same
as that of the open auction system except that the bids
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 are offered in the form of closed tenders. This method is Introduction to
followed in some regulated markets. Agricultural Marketing

c) Demand Creation: When commodities are basic requirements of the

consuming section, the demand is automatically created. The need for
demand creation arises for those products with which the consumers
are not familiar and they are likely to consume by an act of persuasion
highlighting the merits of the products through personal approach
of the salesmen, advertisement through various mass media like
newspapers, posters, pamphlets, radio, television, etc. Besides sellers
resort to sales promotion activities like distribution of free samples,
price discounts, exhibitions, sales by installments, etc.
d) Price Determination: The concepts of price determination and price
discovery need to be specified. Prices are determined by the aggregate
forces of demand and supply in a market, while prices are discovered
at each stage in the marketing channel i.e., market intermediaries
discover the prices based on the availability of the commodities and
the demand for the commodities from the buyers at each stage.
2) Function of Physical Movement
Transportation and storage facilitate the physical movement of products
from the producer to the consumer.
a) Transportation: Transportation creates place utility. The products
are moved rights from the farmer’s fields to the ultimate consumers
through transportation. The spatial variations in agricultural
production need the movement of the commodities from the places of
surplus production to the places of deficit production. The common
modes of transportation are bullock carts, tractors, trucks, rail, etc.
b) Storage: Agricultural production is seasonal in nature. On the
other hand, consumption of the products is regular and continuous.
Seasonality and regular & continuous consumption require the need
of storing the commodities after harvest to make them available
throughout the year. Storage is involved at various stages in marketing.
The middlemen in the process of buying and selling activity also store
the produce to take advantage of the market situation.
3) Function of Changing the Form of the Product
It facilitates making the products available to the consumers with various
specifications in the usable form and also as per the choice of the consumers.
a) Standardization and Grading: Standardization proceeds grading.
The characteristics based on which the standards are determined are
freshness, ripeness, size, weight, colour, foreign material, moisture
content, etc. Standardization is defined as “the determination of the
basic limits on grades or the establishment of model processes and
methods of producing, handling and selling goods and services.”
Grading means the sorting of produce into different lots having the
same characteristics with respect to quality specifications. Grading
is of two types. Fixed grading/mandatory grading and permissive/
variable grading. In fixed grading, the standards set out are fixed
and it is mandatory for the individuals to follow the set standards if
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Agricultural Marketing: they are going to sell the graded commodities. Permissive grading is
An Overview subject to variations over time
b) Packaging: To make the products move from farm gate to merchants
and finally to different users, some kind of packaging is essential.
It facilitates easy handling, reduces spoilage, ensures cleanliness,
reduces marketing costs, prolongs storage life, etc.
4) Facilitating Functions
These include market financing, risk bearing, and market information.
a) Market Financing: Farmers find it difficult to continue the farm
business with their owned funds and they need a helping hand from
external sources. Apart from production credit, farmers need market
finance too before they dispose of the produce at a favourable price.
The traders who are found at various stages of marketing too find their
owned funds short of the requirement to purchase the stock and carry
on other functions like packaging, processing, storage, etc. Distress
sales are averted if adequate marketing finance is given to the farmers.
b) Risk Bearing: There is always a time lag between the harvesting and
final consumption. Risk is imminent under such a situation and this is
borne by the producers, traders, and others involved in the marketing
process. Following are the kinds of risks associated with the marketing
process.
1. Physical Risks: Physical risk is caused during weighment,
bagging, transportation, storage, etc. Physical risk consists of
loss of quantity as well as loss of quality of the product
2. Price Risk: Price fluctuates during the same day, from week to
week, from month to month, and from year to year. Price rise
can help the farmer and trader and equally, they are at loss, if the
price falls.
3. Institutional Risk: Government policies like movement
restrictions of food grains, imposition of levies, etc. bring losses
to the marketers.
c) Market Information: Market information is broadly defined as the
communication of reception of knowledge or intelligence. It includes
all the facts, estimates, opinions, and other information which affect
the marketing of goods and services. This information is of great
importance to the farmers, merchants, and Government as well.
Market information constitutes market news and market intelligence.
Market news is the present information on prices of the commodities,
market arrivals, stock, directions of outflows, etc. Market intelligence is the
historical record of market situation.
The sources from which one can get the market information are newspapers,
Bulletin of Agricultural Prices (weekly), Agricultural Situation in India
(monthly), Agricultural Prices in India (annual), etc., and the reports of
the Bureau of Economics and Statistics, the Directorate of Marketing and
Inspection (DMI), the Directorate of Economics and Statistics, regulated
markets, etc.
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 Introduction to
4.5 ACTIVITIES AND OBJECTIVES OF Agricultural Marketing
AGRICULTURAL MARKETING SYSTEM
A study of the agricultural marketing system is necessary for an
understanding of the complexities involved in providing efficient services
in the transfer of farm products and inputs from producers to consumers. An
efficient marketing system minimizes costs, and benefits all the sections of
society.
The expectations from the system vary from group to group; and, generally,
the objectives of various groups conflict. The efficiency and success of
the system depend on how best these conflicting objectives are reconciled
which are enumerated below:

Orientation Focus Objective

Production Exploitation of Profits through supplying markets where

technical capabilities task is one of allocating supplies

Promoting the
Profits through persuading people that
Selling consumption of the
what the organization happens to have is
product that the
what they really want.
organization is able to
make or produce.
Profits through the provision of customer
Identifying wants and satisfaction by meeting their needs and
Marketing needs and matching wants.
these to organizational
resources.

Fig 4.2; Business philosophies

Source: Adopted from FAO: https://www.fao.org/3/w3240e/w3240e01.htm

Producers: Producer-farmers want that their produce to be sold in the
market without loss of time and at the maximum possible price for their
surplus produce. Also, they want the system to supply them with the inputs
at the lowest possible price.
Consumers: This objective of marketing conflicts with the objective of
marketing for the farmer-producers. The consumers of agricultural products
are interested in a marketing system that can provide food and other items in
the quantity and of the quality required by them at the lowest possible price.
Market Middlemen and Traders: They are interested in a marketing
system that provides them a steady and increasing income from the purchase
and sale of agricultural commodities.
Government: The objectives and expectations of all the three groups
of society-producers, consumers, and market middlemen conflict with
one another. However, all three groups are indispensable to society. The
government has to act as a watchdog to safeguard the interests of all the
groups associated with marketing. It tries to provide the maximum share
to the producer in the consumer’s rupee; food and other farm products of
the required quality to consumers at the lowest possible price; and enough
margins to market middlemen so that they may remain in the trade. Thus,
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Agricultural Marketing: the government wants that the marketing system should be such as may
An Overview bring about the overall welfare to all the segments of society.
The objectives of an efficient marketing system are:
1. To enable the primary producers to get the best possible returns,
2. To provide facilities for lifting all produce, the farmers are willing, to
sell at an incentive price,
3. To reduce the price difference between the primary producer and
ultimate consumer, and
4. To make available all products of farm origin to consumers at a
reasonable price without impairing the quality of the produce.
The overall objective of the agricultural marketing system in a developing
country like India should be to help the primary producers viz., the farmers
in getting remunerative prices for their produce on the one hand and to
provide the right type of goods at the right place, in the right quantity and
quality at a right time and right prices to the processors and/or ultimate
consumers on the other.

4.6 IMPORTANCE OF MARKETING IN

AGRICULTURAL DEVELOPMENT &
GROWTH
Agricultural marketing was, for many decades, not fully accepted as an
essential element in agricultural development in the countries of Asia and
Africa. Agricultural marketing occupied a fairly low place in the agricultural
development policies of developing countries. The National Commission
on Agriculture (1976) and Farmers Commission (2007) had emphasized
that it is not enough to produce a crop or an animal product; it must be
satisfactorily marketed.
Agricultural marketing plays an important role not only in stimulating
production and consumption but in accelerating the pace of economic
development. In fact, it has been described as the most important multiplier
of agricultural development. The technological breakthrough has led to a
substantial increase in production on the farms and a larger marketable and
marketed surplus. To maintain this tempo and pace of increased production
through technological development, assurance of remunerative prices to
the farmer is a prerequisite, and for this purpose, an efficient marketing
system is needed. The importance of agricultural marketing in agricultural
development and growth can be understood through the following reasons:
(i) Decreasing the channel members
An efficient marketing system ensures increased levels of income for the
farmers by reducing the number of middlemen and malpractices in the
market. For example, ITC through e-choupals, have removed all the middle
man and the benefits are directly going to the farmers. They can get adequate
prices for their crops. This again results in an increase in the marketed
surplus and income of the farmers which results in more demand for the
other products and ultimately leads to the development of agriculture.

86
(ii) Growth in production Introduction to
Agricultural Marketing
The Indian farmer has been shifting from a traditional farming system to
a modern farming system and this has become possible due to an efficient
marketing system that is responsible for providing modern equipment to
the Indian farmers. The system also guarantees better prices of the produce
and thus farmers increase their income. This acts as a multiplier effect in the
economy for growth.
(iii) Earning foreign exchange
The country is not only self-sufficient in the field of agri-products but
also exports these products. In the year 2000-01, principal agricultural
commodity worth Rs. 282657 crore ( 14.08 % of total national export) were
exported which increased to Rs. 274571 crore (11.40 % of total national
export) in 2018-19 (Agricultural Statistics at a Glance, 2020)
The other factors such as better standard of living, optimizer of resources
and output management, increase in farm income, widening of markets,
growth of agro-based Industries, adoption and spread of new technology
and employment creation have already been discussed under the role of
agricultural marketing in economic development.
Check Your Progress 4.2
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What is the difference between market news and market intelligence?
………………………………………………………………………
………………………………………………………………………
2) Define marketing function?
………………………………………………………………………
………………………………………………………………………
3) What do you mean by selling and buying?
………………………………………………………………………
………………………………………………………………………

4.7 MARKETED & MARKETABLE SURPLUS

OF AGRICULTURAL COMMODITIES
Producer’s surplus is the quantity that is actually made available to the non-
producing population of the country. From the marketing point of view,
this surplus is more important than the total production of commodities.
Because the arrangements and the expansion of markets have to be made
only for the surplus quantity available with the farmers, and not for the total
production.
So, the producer’s surplus is the quantity of produce that is, or can be, made
available by the farmers to the non-farm population. The producer’s surplus
is of two types:

87
Agricultural Marketing: 4.7.1 Marketable Surplus
An Overview
The marketable surplus is the quantity of the produce that can be made
available to the non-farm population of the country. The marketable surplus
is the residual left with the producer-farmer after meeting his requirements
for family consumption, farm needs for seeds and feed for cattle, payment
to labour in kind, payment to the landlord as rent, social and religious
payments in kind, the gift to relatives and friends, etc. This may be expressed
as follows:
MS = P - C
Where,
MS = Marketable surplus, P = Total production, and C = Total requirements
(family consumption, farm needs, payment to labour, artisans, landlord and
payment for social and religious work, etc).
4.7.2 Marketed Surplus
Marketed surplus is the quantity of the produce that the producer-farmer
actually sells in the market, irrespective of his requirements for family
consumption, farm needs, and other payments.
Relationship between marketed surplus and marketable surplus
The marketed surplus may be more, less, or equal to the marketable surplus,
depending upon the condition of the farmer and type of the crop. The
relationship between the two terms may be stated as follows:
1. Marketed Surplus is more than marketable surplus: when the
farmer retains a smaller quantity of the crop than his actual requirements
for family and farm needs. This is true under the condition when
farmers particularly the small and marginal farmers, are hard-pressed
for cash and resort to distress sales to meet their commitments to the
money lenders and other sources. The situation of selling more than
the marketable surplus is termed as distress or forced sale.
2. Marketed Surplus is less than marketable surplus: The marketed
surplus is less than the marketable surplus when the farmer retains
some of the surpluses produce. Farmers particularly the large farmers
generally sell less than the marketable surplus because of their better
retention capacity and they anticipate that they would get a higher
price in the lean period. However, small and marginal farmers may
not be in a position to retain more because of their immediate cash
requirements.
3. Marketed Surplus is equal to marketable surplus: The marketed
surplus may be equal to the marketable surplus when the farmer
neither retains more nor less than his requirement. This holds true for
perishable commodities.
4.7.3 Factors Affecting Marketable Surplus
The marketable surplus differs from region to region and, within the same
region, from crop to crop. It also varies from farm to farm. On a particular
farm, the quantity of marketable surplus depends on the following factors:
88
(i) Size of Holding: There is a positive relationship between the size of Introduction to
the holding and the marketable surplus. Generally, the larger the size Agricultural Marketing
of the farm, the more will be marketable surplus.
(ii) Size of production: The higher the production on a farm, the larger
will be the marketable surplus and vice versa.
(iii) Price of the Commodity: The price of the commodity and the
marketable surplus have a positive as well as a negative relationship,
depending upon whether one considers the short and long run or the
micro and macro levels.
(iv) Size of Family: The larger the number of members in a family, the
smaller the surplus on the farm.
(v) Requirement of Seed and Feed: The higher the requirement for
these uses, the smaller the marketable surplus of the crop.
(vi) Nature of Crops Grown: It is a well-established fact that marketable
surplus in the case of food crops tends to be low while for cash crops
it is more. For example, in the case of cotton, jute, and rubber, the
quantity retained for family consumption is either negligible or a
very small part of the total output. Even among food crops, for such
commodities as sugarcane, spices, and oilseeds which require some
processing before final consumption, the marketable surplus as a
proportion of total output is larger than that for other food crops.
(vii) Consumption Habits: Producer’s consumption habits also affect the
extent of marketable surplus. In those areas where a commodity is a
staple food, the marketed surplus is low.
(viii) Hoarding: The tendency of hoarding depends on the current level of
prices and anticipated prices. The traders, peasants, consumers, etc. to
earn more profits in the future may do hoarding. Thus, the larger the
tendency to hoard lesser will be the volume of marketable surplus and
vice-versa.
(ix) Subsistence Farming: In subsistence farming, farming is mainly
undertaken to provide for the family. Only the surplus is marketed.
The majority of landholdings being small, there is a little surplus left.
(x) Cash Requirements: After harvesting, Indian farmer needs cash to
meet certain obligations like land revenue, repayment of the debt, etc.
Therefore, the volume of produce, he is ready to sell in the market
depends on his cash requirement. If s/he needs more cash, s/he will
sell more produce and, thus, there will be more marketable surplus.
Check Your Progress 4.3
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What is a marketable surplus?
………………………………………………………………………
………………………………………………………………………
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Agricultural Marketing: 2) What do you mean by distress sale?
An Overview
………………………………………………………………………
………………………………………………………………………
3) Enlist the factors affecting marketable surplus.
………………………………………………………………………
………………………………………………………………………

Activity 4.1:
Visit a farmer in a nearby village. Measure the marketable and marketed
surplus of that farmer. Also, calculate marketed and marketable surplus-
output ratio.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

4.8 E-MARKETING

The methods of marketing now have changed and improved. E-Marketing

is the product of the meeting between modern communications technologies
and the age-old marketing principles that humans have always applied.
Very simply put, e-Marketing or electronic marketing is the application
of marketing principles and techniques using electronic media and
more specifically the Internet. There are different interrelated terms like
e-Marketing, Internet marketing, and online marketing and these terms
can often be considered synonymous. This type of meraketing includes
both direct response marketing and indirect marketing elements and uses a
wide range of technologies that help to bring together businesses and their
customers. In this, we can say that e-Marketing encompasses all the activities
a business conducts via the world wide web to attract new business, retain
current business, and develop its brand identity.

Fig. 4.3: E-marketing

Source: https://www.mbaskool.com/business-concepts/marketing-and-strategy-
terms/1679-e-marketing.html
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4.8.1 Importance Introduction to
Agricultural Marketing
When implemented correctly, the return on investment (ROI) from
E-marketing can far exceed that of traditional marketing strategies. It is a
means to reach literally millions of people. The nature of the internet has
enabled businesses to have a truly global reach. Through internet marketing,
now a marketer can reach consumers in a wide range of ways and offer a
wide range of products and services to fulfill the needs of the consumers.
As the new technologies are becoming available all the time, the scope
of e-marketing will further grow. Imagine you’re reading your favorite
magazine. You see an advertisement for some new product or service may
be a new model of a tractor or combine- harvester-cum- thresher offering.
With the kind of traditional media, it’s not that easy for you, to take the
step from hearing about a product to the actual acquisition. Now through
e-Marketing, it has become easy to make that step as simple as possible,
within a few short clicks you could have booked a test drive or ordered
the product. Moreover, this can happen regardless of normal office hours.
Effectively, Internet marketing makes business hours 24 hours per day, 7
days per week throughout the whole year. In fact, e-marketing bridges up
the gap between providing information and eliciting a consumer reaction, as
a result of which the consumer’s buying cycle is speeded up.
4.8.2 Benefits of E-Marketing
The benefits of e-marketing are:
(i) More affordable than traditional one,
(ii) More business partners can be reached,
(iii) Caters to a more geographically dispersed customer base,
(iv) Procurement cost is lower,
(v) Purchase costs, sales, and marketing costs are lower,
(vi) Reduction in inventories
Benefits to Consumers
(i) Increased choice of vendors and products,
(ii) The convenience of shopping at home or office,
(iii) Greater information access on-demand, and
(iv) More competitive prices and increased price comparison capabilities.
Benefits to Business Community
(i) Exchange of a larger quantity of information,
(ii) Global visibility,
(iii) Rapid planning cycles and strategies,
(iv) Avoids communication gaps,
(v) Access to new consumer groups,
(vi) Reach to more persons at a lower cost, and
(vii) Relationship building is easy.
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Agricultural Marketing: Check Your Progress 4.4
An Overview
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What do you understand about e-marketing?
………………………………………………………………………
………………………………………………………………………
2) How is e-marketing better than traditional marketing?
………………………………………………………………………
………………………………………………………………………
3) What are the benefits of e-marketing to the consumers?
………………………………………………………………………
………………………………………………………………………

4.9 LET US SUM UP

Agricultural marketing can be defined as comprising of all activities involved
in the supply of farm inputs to the farmers and the movement of agricultural
products from the farms to the consumers. The subject of agricultural
marketing includes marketing functions, agencies, channels, efficiency and
costs, price spread and market integration, producer’s surplus, government
policy and research, training, and statistics on agricultural marketing and
imports/exports of agricultural commodities. Any single activity performed
in carrying a product from the point of its production to the ultimate
consumer may be termed as a marketing function. Agricultural marketing
plays an important role not only in stimulating production and consumption
but in accelerating the pace of economic development. In fact, it has been
described as the most important multiplier of agricultural development. The
marketable surplus is the quantity of the produce that can be made available
to the non-farm population of the country whereas marketed surplus is the
quantity of the produce that the producer farmer actually sells in the market,
irrespective of his requirements. The marketed surplus may be more, less,
or equal to the marketable surplus, depending upon the condition of the
farmer and type of the crop. E-Marketing is the product of the meeting
between modern communications technologies and the age-old marketing
principles that humans have always applied. Internet marketing allows the
marketer to reach consumers in a wide range of ways and enables them to
offer a wide range of products and services.

4.10 KEYWORDS
Agent middlemen: Those individuals who do not take title to the goods
they handle.
Agricultural marketing can be defined as comprising of all activities
involved in the supply of farm inputs to the farmers and the movement of
agricultural products from the farms to the consumers.
Agriculture: means growing and/or raising crops and livestock.
92
Buying: It includes identifying one’s needs, finding the source of supply of Introduction to
the goods, and procuring them at the right price. Agricultural Marketing

Channel: The path through which goods and services move from producers
to consumers.
E-Marketing: E-marketing or electronic marketing is the application
of marketing principles and techniques via electronic media and more
specifically the Internet.
Facilitative middlemen: Those individuals who do not buy and sell but
assist in the marketing process.
Grading: Grading means the sorting of produce into different lots having
the same characteristics with respect to quality specifications.
Market intelligence: The historical record of the market situation.
Market news: It presents information on prices of the commodities, market
arrivals, stock, directions of outflows, etc.
Marketable Surplus: The quantity of the produce which can be made
available to the non-farm population of the country.
Marketed Surplus: The quantity of the produce that the producer farmer
actually sells in the market, irrespective of his requirements for family
consumption, farm needs, and other payments.
Marketing connotes a series of activities involved in moving the goods
from the point of production to the point of consumption.
Marketing functions Any single activity performed in carrying a product
from the point of its production to the ultimate consumer may be termed as
a marketing function.
Merchant middlemen: Those individuals who take title to the goods they
handle.
Selling: It is the process of finding the buyers and convincing them to buy
the product at a price that is satisfactory to both sellers and buyers.
Standardization: It is defined as the determination of the basic limits on
grades or the establishment of model processes and methods of producing,
handling, and selling goods and services.

4.11 SUGGESTED READINGS / REFERENCES

Acharya, S.S. 1997. Agriculture-Industry Linkages: Public Policy and
Some areas of Concern, Agricultural Economics Research Review, Vol. 10,
No. 2, p.162.
Acharya, S.S. and N.L.Agarwal. 2011. Agricultural Marketing in India.
Oxford & IBH Publishing co. Pvt. Ltd, New Delhi.
http://www.angrau.ac.in/media/1638/AECO 341.pdf
Kohls, R.l. and J.N. Uhl. 1980. Marketing of Agricultural Products.
MacMillian Publishing Co. Onc., New York
Subba Reddy, S., P.Raghu Ram., P. Sastry, T.V.N. and Bhavani Devi I. 2010.
Agricultural Economics., Oxford & IBH Publishing Company Private Ltd.,
New Delhi.
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Agricultural Marketing: Thomsen, F.L. 1951. Agricultural Marketing. McGraw-Hill Book Company,
An Overview Inc, New York.

1.12 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 4.1
1) All activities involved in the supply of farm inputs to the farmers and
movement of agricultural products from the farms to the consumers.
2) A healthy marketing system acts as an incentive for the farmers to use
the scarce resources judiciously. Thus efficient input marketing and
output marketing systems are indispensable to bring the desired level
of welfare to the farmers. Farmer in fact may turn out to be a major
beneficiary in the market system properly functions.
3) Specialization; Urbanization; Transportation and Communication;
and (iv) Technological change in agriculture
Check Your Progress 4.2
1) Market news refers to current information about prices of the
commodities, market arrivals, stock, directions of outflows, etc.
Market intelligence is the historical record of the market situation.
This relates to such facts as the prices that prevailed in the past and
market arrivals over time. These are records of what has happened in
the past.
2) Any single activity performed in carrying a product from the point of
its production to the ultimate consumer may be termed as a marketing
function. A marketing function may have any one or combination of
three dimensions, viz., time, space, and form.
3) Selling is the process of finding the buyers and convincing them
to buy the product at a price that is satisfactory to both sellers and
buyers. Buying includes identifying one’s needs, finding the source
of supply of the goods, and procuring them at the right price.
Check Your Progress 4.3
1) The marketable surplus is the quantity of the produce that can be made
available to the non-farm population of the country after meeting all
its requirements.
2) The situation of selling more than the marketable surplus is termed as
distress or forced sale.
3) (i) Size of Holding, (ii) Size of production, (iii) Price of the Commodity,
(iv) Size of Family, (v) Requirement of Seed and Feed, (vi) Nature
of Crops Grown, (vii) Consumption Habits, (viii) Hoarding and (ix)
Cash Requirements
Check Your Progress 4.4
1) e-Marketing or electronic marketing is the application of marketing
principles and techniques via electronic media and more specifically
the Internet. E-Marketing includes both direct response marketing
and indirect marketing elements and uses a range of technologies to
help connect businesses to their customers.
94
2) It is a means to reach literally millions of people. While traditional Introduction to
media costs limit this kind of reach to huge multinationals. Agricultural Marketing
E-Marketing opens up new avenues for smaller businesses, on a much
smaller budget, to access potential consumers from all over the world.
Internet marketing allows the marketer to reach consumers in a wide
range of ways and enables them to offer a wide range of products
and services. Effectively, Internet marketing makes business hours 24
hours per day, 7 days per week for every week of the year.
3) Increased choice of vendors and products, (ii) Convenience of shopping
at home or office, (iii) Greater information access on-demand, and (iv)
More competitive prices and increased price comparison capabilities.

95
 UNIT 5 AGRICULTURAL PRODUCE
MARKETS
Structure
5.0 Objectives
5.1 Introduction
5.2 Influence of Micro-Macro Environmental Forces on Agricultural
Marketing System
5.3 Policies Related to Development and Regulation of Agricultural
Produce Markets
5.3.1 Directorate of Marketing and Inspection
5.3.2 National Institute of Agricultural Marketing (NIAM)
5.3.3 Regulation of agricultural marketing
5.4 Policies for Development of Agricultural Produce Markets
5.5 Influence of Regulations on Marketing Functionaries
5.6 Market Integration
5.7 Marketing Efficiency
5.8 Marketing Costs, Margins, and Price Spread
5.9 Marketing Infrastructure
5.10 Let Us Sum Up
5.11 Keywords
5.12 Suggested Readings / References
5.13 Answers to Check Your Progress

5.0 OBJECTIVES
After studying this unit, you should be able to:
●● discuss the influence of socio-economic and micro-macro
environmental forces on agricultural marketing system;
●● express about the regulation of markets and its influence on marketing
functionaries;
●● discuss the concepts of marketing costs, price spread, and margins;
●● define the marketing efficiency and market integration; and
●● articulating the importance and types of market infrastructure.

5.1 INTRODUCTION
It is well-established fact that marketing activities do not take place in
isolation from all external forces. In fact, all marketing operations are
conducted in a highly complex, dynamic, and changing environment.
There are many imperfections in the marketing system for agricultural
commodities. To protect the interests of the various sectors of the economy,
government intervention in the form of regulation of markets became
96
necessary. The main objective of integration is to undertake closely related Agricultural Produce
activities that will permit them to effectively meet the requirements of their Markets
customers. A change that reduces the costs of accomplishing a particular
function without reducing consumer satisfaction indicates an improvement
in efficiency.

5.2 INFLUENCE OF MICRO-MACRO

ENVIRONMENTAL FORCES ON
AGRICULTURAL MARKETING SYSTEM
The actors and forces outside marketing that affect marketing management
ability to build and maintain a successful relationship with target customers
are known as the marketing environment. The environmental forces can
be divided into broad micro-environmental and macro-environmental
components. The wise marketing manager knows that he or she cannot
always affect environmental forces. However, smart managers can take a
proactive, rather than reactive, approach to the marketing environment.
A. Micro-environment
The firm’s microenvironment consists of six forces that affect its ability to
serve its customers.
1. The firm: The first force is the firm itself and the role it plays in the
micro-environment. This could be deemed the internal environment.
In the firm, the marketing manager, in formulating plans, must take
into account the other groups such as top management, finance, R
& D, purchasing, manufacturing, and accounting. All these groups
constitute a firm’s micro-environment for planners. All departments
must “think consumer” if the firm is to be successful.
2. Suppliers: Suppliers are firms and individuals that provide the
resources needed by the firm to produce goods and services. They
are an important link in the firm’s overall customer “value delivery
system.” One consideration is to watch supply availability and another
point of concern is the monitoring of price trends of key inputs. Rising
supply costs must be carefully monitored.
3. Marketing Intermediaries: Marketing intermediaries are individuals/
functionaries that help the firm to promote, sell, and distribute its
goods to final buyers. It includes:
Resellers are distribution channels that help the firm find customers
or make sales to them. These include wholesalers and retailers who
buy and resell the merchandise.
Physical distribution firms help the firm to stock and move goods
from their points of origin to their destinations. Examples would be
warehouses (that store and protect goods before they move to the next
destination).
Marketing service agencies help the firm target and promote its
products (such as marketing research firms, advertising agencies,
media firms, etc.).
97
Agricultural Marketing: Financial intermediaries help finance transactions and insure against
An Overview risks (such as banks, credit companies, insurance companies, etc.).
4. Customers: The firm must study its customer markets closely since
each market has its own special characteristics. These markets
normally include:
i) Consumer markets (individuals and households that buy
goods and services for personal consumption).
ii) Business markets (buy goods and services for further
processing or use in their production process).
iii) Reseller markets (buy goods and services to resell them at a
profit).
iv) Government markets (agencies that buy goods and services
to produce public services or transfer them to those that need
them).
v) International markets (buyers of all types in foreign countries).
5. Competitors: Every firm faces a wide range of competitors. These
competitors have to be identified and monitored to gain and maintain
customer loyalty. A company must secure a strategic advantage
over competitors by positioning its offerings to be successful in
the marketplace. Competitive advantage building depends on
understanding the status, strengths, and weaknesses of competitors in
the market. No single competitive strategy is best for all companies.
6. Publics: A public is any group that has an actual or potential interest
in or impact on a firm’s ability to achieve its objectives. A firm should
prepare a marketing plan for all of their major public as well as their
customer markets. Generally, publics can be identified as being:
i). Financial publics, ii). Media publics, iii) Government publics--
take developments into account, iv) Citizen-action publics, v) Local
publics, 6) General public, and vii) Internal publics.
B. Macro-environment
All of the actors operate in a larger macro environment of forces that shape
opportunities and pose threats to the firm. There are seven major forces in
the firm’s macro environment.
1. Demographic Environment: Demography is the study of human
populations in terms of size, density, location, age, sex, race,
occupation, and other statistics. It is of major interest to marketers
because it involves people and people make up markets. Demographic
trends are constantly changing. Effect of changes on the demographic
environment is given below
i) Age Structure of the Total Population and Its Changes:
The number of different ages of people such as the number of
children, teenage, youth, old person should be kept in mind at
the time of doing marketing strategy because a product cannot
be certified for every age of the customers.
ii) Changed Family Life: Now a day’s one can easily identify the
changes in family lifestyle such as the growth of working-class
98
 women, income capability, urbanization, etc. These changes Agricultural Produce
are important for doing marketing strategy. With the increasing Markets
number of working women, demand for ready to eat food has
increased and the public goes to restaurants for food to save
time but those things created a market for the product, and the
marketers getting benefit from their work and growing rapidly.
iii) Education and Profession: Education rate and job distribution
also be remembered at the time of doing marketing strategy.
Because the taste, choice, habit, communicating process cannot
be same of an educated and a non-educated person. These
changes are very important for marketing strategy.
iv) Geographical Shift in Population: Geographically living and
shift of population create an impact on marketing. For a lot of
reasons, people tend to go to cities. For these reasons, peoples’
lifestyle and their demand styles are changing. A change in
their demand style has to be kept in mind to keep pace with the
growing market.
2. Economic Environment: In the market, not only people but also
their buying ability is needed. Because buying ability less market is
for nothing. And buying ability rely on peoples’ earning condition,
price of a product, savings, and debt facilities. At the time of doing
marketing strategy, one must remember the shift of earning as well as
the spending. And by analyzing these one should make their marketing
policy. How the economic environment affect marketing decisions
are given below:
i) Changing Income: The per capita income is growing. This
should be led by the distribution of income to all sections of
society. The increase in farming products’ prices should keep
pace with the industrial product so the farmers’ conditions
get improved. For this reason, multinational companies are
applying effective techniques for rural class people.
ii) Changing Consumer Spending Patterns: The spending
patterns are the different basis on earning patterns so their
buying patterns are also different. As family income rises, the
percentage of expenditure on food declines. Changes in major
economic variables such as income, cost of living, interest
rates, and savings and borrowing patterns have a large impact
on the marketplace. Marketers watch these variables by using
economic forecasting.
3. Natural Environment: The natural environment involves the natural
resources that are needed as inputs by marketers or they are affected
by marketing activities. Environmental concerns have grown steadily
in recent years. Marketers should be aware of several trends in the
natural environment. Some trend analysts labeled the specific areas of
concern:
• Shortages of raw materials,
• Increased pollution,
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Agricultural Marketing: • Government intervention, and
An Overview
• Environmentally sustainable strategies.
As an offset of the above environmental concerns, the Green
Marketing trend has started. Marketers have started promoting eco-
friendly products to cater to this need. Manufacturers are required
to use the Ecomark label to inform customers that the products are
environment-friendly.
4. Technological Environment: The technological environment
includes forces that create new technologies, creating new products
and market opportunities. Technology is perhaps the most dramatic
force shaping our destiny. New technologies create new markets
and opportunities. Marketers should be aware of the regulations
concerning product safety, individual privacy, and other areas that
affect technological changes.
5. Political Environment: Marketing decisions are strongly affected by
development in the political environment. The form of government
adopted by the country and political stability are important factors to
be reckoned with by marketers. The political environment includes
laws, government agencies, and pressure groups that influence and
limit various organizations and individuals in a given society. Various
forms of legislation/ laws have been enacted to regulate business
and marketing – to protect companies from each other, to protect
consumers from unfair trade practices, to protect the larger interests
of society against unbridled business behavior.
6. Cultural Environment: This type of environment is made up
of institutions and other forces that affect a society’s basic values,
perceptions, preferences, and behaviors. Culture is the unified result
of factors like religion, language, education, and upbringing. The
cultural values which affect marketing decision making are - the
persistence of cultural value, shifts in secondary cultural value, people
views of organization/ others, etc.
Persistence of cultural values: People’s core beliefs and values
have a high degree of persistence. These are deep-rooted and do not
change easily. Core beliefs and values are passed on from parents to
children and are reinforced by schools, churches, businesses, and the
government.
Shifts in secondary cultural values: Since secondary cultural values
and beliefs are open to change, marketers want to spot them and be
able to capitalize on the change potential.
7. Legal environment: Marketers have to work within the legal
framework prevailing in the country. There has been legislation
passed in India to control or guide businesses and industries. There
are legal regulations on products, prices, distribution, and promotion.
There are legal measures to protect and control trade. Marketers have
to understand the legal environment and adapt to its forces.
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Check Your Progress 5.1 Agricultural Produce
Markets
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What do you mean by marketing environment?
………………………………………………………………………
………………………………………………………………………
2) What are the macro-environmental forces affecting the marketing
system?
………………………………………………………………………
………………………………………………………………………
3) What is the relevance of customers to marketing?
………………………………………………………………………
………………………………………………………………………

5.3 POLICIES RELATED TO DEVELOPMENT

AND REGULATION OF AGRICULTURAL
PRODUCE MARKETS
Agricultural Marketing is a process that starts with a decision to produce
a saleable farm product and involves all aspects of market structure or
system, both functional and institutional, based on technical and economic
consideration. No doubt, agricultural marketing is a State subject; the
Government of India has an important role to play in laying down general
policy framework, framing quality standards, conducting survey and
research studies, and providing guidance, technical and financial support
to the State Governments. The Central Government is aided and advised by
two organizations under its control, namely, the Directorate of Marketing
and Inspection (DMI) and the National Institute of Agricultural Marketing
(NIAM), Jaipur.
5.3.1 Directorate of Marketing and Inspection
On the recommendation of the Royal Commission on Agriculture, 1928,
and the Central Banking Enquiry Committee, 1931, the Central Marketing
Department was established in India in 1935. Later, on the recommendations
of the Patel Committee, the Inspection Directorate of the Ministry of Food
was merged with the Central Marketing Department and was renamed as
the Directorate of Marketing and Inspection (DMI).
This Directorate of Marketing and Inspection has its head office at Faridabad
(Haryana). The DMI maintains a close liaison between Central and State
Governments through its Branch -Head Office at Nagpur, 11 regional
offices, and 37 sub offices spread all over the country. The DMI also has
a network of 22 Regional AGMARK Laboratories with central Agmark
Laboratory at Nagpur as an apex laboratory. The Directorate of Marketing
and Inspection implements the agricultural marketing programmes of the
Union Government under the supervision and control of the Union Ministry
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Agricultural Marketing: of Agriculture and Farmers Welfare. It aims at achieving integrated
An Overview development of marketing of agricultural and allied products in the country.
Besides these, the DMI is actively associated in rendering assistance,
guidance, and advice to the State Marketing Departments regarding the
framing of legislation and subsequent implementation of agricultural
produce markets Acts for bringing about the regulation of agricultural
produce markets. The DMI undertakes programmes of market research and
surveys, training of market personnel, extension, and publicity. Between
the Head Office, Faridabad, and Branch Head Office, Nagpur the sharing of
responsibility in respect of these functions is as follows. The Head Office at
Faridabad looks after: (i) administration of the Agricultural Produce (Grading
and Marking) Act, 1937, rules and other related matters; (ii) administration
of Meat Food Products Order, 1973; (iii) administration of Cold Storage
Order; and (iv) Market regulation, development and extension.
5.3.2 National Institute of Agricultural Marketing (NIAM)
NIAM has started functioning at Jaipur (Rajasthan) with effect from 8th
August 1988. to augment the agricultural marketing infrastructure of
the country through programmes of teaching, research, and consultancy
services; to design and conduct training courses appropriate to the specific
identified needs of the personnel and enterprises and institutions that they
serve; to undertake research to demonstrate and replicate better management
techniques in the field of agricultural marketing; to provide consultancy
services for formulating investment projects and for problem-solving
advice, and to offer educational programmes in agricultural marketing for
implementing the existing facilities.
5.3.3 Regulation of Agricultural Marketing
A regulated market is a wholesale market where buying and selling are
regulated and controlled by the state government through the market
committee.
It aims at the elimination of unhealthy and unscrupulous practices reducing
marketing charges and providing facilities to producers and sellers in the
market. Regulated markets have been established by State Governments
and rules and regulations have been framed for the conduct of their business.
Objectives
The specific objectives of regulated markets are:
1. To prevent the exploitation of farmers by overcoming the handicaps
in the marketing of their products;
2. To make the marketing system most effective and efficient so that
farmers may get better prices for their produce and the goods are
made available to consumers at reasonable prices;
3. To provide incentive prices to farmers for inducing them to increase
the production both in quantitative and qualitative terms; and
4. To promote orderly marketing of agricultural produce by improving
the infrastructural facilities.
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Important features of regulated markets Agricultural Produce
Markets
Under the provisions of the agricultural produce market act, the state
government gives its intention to bring a particular area under regulation
by notifying market areas, market yard, main assembling market, and sub-
market yard, if any, under the principle regulated market.
Main features of regulated markets:
1. Market Committee:
2. Area of Operation:
3. Methods of sales:
4. Licensing of Market Functionaries:
5. Market Levies or Fees:
History of Market Regulation
The Royal Commission on, Agriculture, in its report submitted in 1928,
recommended the regulation of market practices and the establishment
of regulated markets in India in view of the dismal conditions that were
obtained in the agricultural produce markets. Its recommendations were
subsequently endorsed by the Central Banking Enquiry Committee, 1931.
In 1935, the Government of India established the office of the Agricultural
Marketing Adviser (Directorate of Marketing and Inspection) under
the Ministry of Food and Agriculture to look into the problems of the
marketing of agricultural produce. The Directorate recommended to the
State Governments that markets be regulated to safeguard the interests of
the producers and to remove the prevalent malpractices in the markets. In
1938, the Directorate of Marketing and Inspection prepared a model Bill
and circulated it among the States. Since then, State Governments have
enacted legislation for the regulation of markets in their States. These
are The Hyderabad Agriculture Market Act, 1930; the Central Provinces
Cotton Markets Act, 1932; the Madras Commercial Crops Market Act,
1935; the Agricultural Produce Markets Act of Bombay, of Punjab and
Mysore, 1939, of Madhya Bharat, 1952, of Orissa, 1957 and Rajasthan,
1961. In the meantime, Andhra Pradesh adopted the Madras Act, Gujarat
and Maharashtra States inherited the Bombay Act and Delhi and Tripura
passed legislation on the lines of the Bombay Model Act.
Regulation of markets for agricultural products was stressed by several
Committees and Commissions from time to time. The Review Committees
on the working of the Agricultural Produce markets from time to time
have recommended for bringing all the agricultural products including
horticulture, forestry, and livestock under the purview of Agricultural
Produce Market Acts.

5.4 POLICIES FOR DEVELOPMENT OF

AGRICULTURAL PRODUCE MARKETS
Some policies and legislative measures are discussed below:
Grading and Standardization
The Agricultural Produce (Grading & Marking) Act, 1937 empowers
the Central Government to fix quality standards, known as “AGMARK”
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Agricultural Marketing: standards, and to prescribe terms and conditions for using the seal of
An Overview “AGMARK”. The Act of 1937 was amended from time to time to widen
its scope, so that more commodities may be included under the changed
circumstances. Initially, only 19 commodities were included for grading
purposes, but now there are more than 202 commodities in the schedule for
which grade standards are available.
Cold Storage Order
The Cold Storage Order, 1980 was uniformly applicable throughout
the country except in the States of Haryana, Punjab, Uttar Pradesh, and
West Bengal. This order in addition to ensuring hygienic and proper
refrigeration conditions in a cold store also has a provision of rendering
technical guidance for scientific preservation of foodstuffs in a cold store
and prevailing exploitation of farmers by cold store owners. This has been
repealed with effect from 27th May 1997 to remove the controls laid down
in the said Order in the areas of licensing, price control and requisitioning of
cold storage space, etc. and allow the functioning of free-market mechanism
for demand-based growth of cold storage industry in the country free from
all kinds of administrative interference.
Meat Food Products Order
The Meat Product Order, 1973 promulgated under section 3 of the Essential
Commodity Act, 1955 became operative in July 1975. The objective of the
act is to ensure quality control and hygienic manufacturing conditions of
meat food products for domestic consumption and the order is applicable all
over the country. The order prescribes the sanitary and other requirements
to be observed in all establishments as well as the conditions to be observed
by the manufacturers in handling, storage, transport, packing, marking, and
labeling of containers. This order was repealed in 2006.
High Powered Committee on Agricultural Marketing, 1992 (Guru
Committee)
In 1992, a High Powered Committee on Agricultural Marketing was
appointed by the Government of India under the chairmanship of Shri
Shankarlal Guru, the then Chairman of COSAMB and Gujarat State
Agricultural Marketing Board to suggest improvements in the functioning
of the market regulation scheme. The committee submitted its final report
on 26th November 1992. The Committee in its report has suggested several
changes in the existing market regulation programme and restructuring
of the agricultural produce market committees and State Agricultural
Marketing Boards.
The committee, in all, made 89 recommendations relating to various aspects
of agricultural marketing like legal framework, marketing organizations,
central assistance scheme, marketing credit, post-harvest technology,
research, and education.
Expert Group on Agricultural Marketing (Acharya Group)
The Ministry of Rural Areas and Employment of the Government of
India, in July 1998, constituted an Expert Group for suggesting measures
to strengthen the Agricultural Marketing Division of the Ministry and to
104
widen its scope to facilitate the development of marketing network as Agricultural Produce
growth centers in rural areas. Markets

The Expert Group recommended setting up a strong Division of

Agricultural Marketing in the Union Ministry of Agriculture and making
NIAM a professional body. The Expert Group submitted its report in
August 1999, with 38 recommendations on the above aspects. As a follow-
up, the Government of India decided to transfer DMI, NIAM, and their
infrastructure to the Ministry of Agriculture with immediate effect.
Expert Committee on Strengthening and Developing of Agricultural
Marketing (Guru Committee)
Under the chairmanship of Shri Shankar Lal Guru, (and S. S. Acharya
as a member), this committee was appointed in December 2000. The
Expert Committee submitted its report on 29th July 2001 giving 45
recommendations on the above seven aspects. One of the recommendations
of the Expert Committee was to invest Rs. 270,000 crores in agricultural
marketing infrastructure during the next 10 years (10th and 11th Five Year
Plan), which was based on the detailed exercise done by a Working Group
on agricultural marketing infrastructure constituted under the chairmanship
of Dr. S.S. Acharya (a member of the Expert Committee).
New Model Act and Reforms in Agricultural Marketing
The new Model Agricultural Produce Marketing Act, circulated by the
center to the states in 2003 has the following main provisions:
(i) New markets can be established by private entities or cooperatives.
(ii) Promotion of direct marketing (direct purchases by traders or
processors from farmers).
(iii) Promotion of contract farming.
As per the Model Act, several state Governments/UTs have amended their
Acts to reform the entire marketing scenario.

5.5 INFLUENCE OF REGULATIONS ON

MARKETING FUNCTIONARIES
The influence of regulation on marketing functionaries is discussed below:
(i) Licensing of Market Functionaries: All the market functionaries,
from the hamals to traders working in the regulated market, have to
obtain a license from the market committee; after paying the prescribed
fees, to carry on their business. The licensed traders have to keep
proper records and maintain accounts in accordance with the bye-
laws of the market committee. This facilitates the exercise of proper
control on the accounts of the traders and the collection of the correct
amount of the market fee by the market committee. Any violation of
rules by middlemen may lead to the cancellation/suspension of the
license by the market committee or the filing of challans in a court of
law.
(ii) Method of Sale In regulated markets, the market functionaries cannot
affect the sale of agricultural produce without involving the officials
105
Agricultural Marketing: of the market committee. The sale is undertaken either by open auction
An Overview or by the close tender method. By these methods, the sale is carried
out under the supervision of an official of the market committee, and
the signature of the buyer is taken as soon as the auction is over. The
business is done during fixed hours.
(iii) Weighment of Produce: The weighman has to use only standard
weights and a platform scale. This eliminates short weights and
malpractices which arise out of weighing with a hand balance.
Electronic weighing balances/machines have also been installed in
selected markets.
(iv) Market Charges: With the regulation of markets, the market
functionaries can not deduct the market charges in the name darmada,
charity, karda, dhalta and muddat. Also they cannot deduct other
market charges, such as commission, brokerage, hamali, and weighing
charges, more than the specified norms by the market committee. The
market functionaries can charge from the seller only for the activities
undertaken before the sale of the produce, i.e., for transportation,
octroi, and hamali only.
(v) Payment of the Value: In unregulated markets, the payment of the
price of the produce is made by the buyer after 3 to 15 days of the sale
of the produce in accordance with local market rules. In the past, if
the seller insisted on cash payment, the buyer would deduct muddat
(cash discount) to make the payment. This practice has been stopped
with the regulation of markets. Now it is obligatory for the buyer to
make prompt payments for the purchased produce without deductions
of any muddat.
(vi) Rules for the conduct of business: Prior to the establishment of
regulated markets, the rules for the conduct of the business in the market
were framed by traders without any consideration for the interests of
other groups i.e., farmers and consumers. In regulated markets, the
conduct of business takes place under the supervision of the market
committee. The market committee consists of representatives of
all sections, i.e., farmers, traders, co-operative marketing societies,
co-operative or commercial banks, autonomous bodies (Panchayat
Samiti and municipal board of the area), and governments officials.
The composition of the market committee varies from state to state.
(vii) Sale slips: Before the regulation of markets, it was not necessary
to provide sale slips of the produce sold to the farmers. Regulated
markets have brought about a general awakening among producer-
sellers. Now the commission agents are supposed to give sale slips of
the produce sold to the farmers, showing the details of the quantity
sold, the rate of sale, and deductions, if any. A copy of the sales slip is
supplied to the market committee for purposes of checking.
(viii) Taking samples: Earlier the malpractice of the taking away of
samples by the bidders was a very common practice. Now after
the regulation of markets there is a restriction of taking samples by
different functionaries.
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Check Your Progress 5.2 Agricultural Produce
Markets
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What do you mean by the regulated market?
………………………………………………………………………
………………………………………………………………………
2) How did the process of regulation of agricultural markets start in
India?
………………………………………………………………………
………………………………………………………………………

5.6 MARKET INTEGRATION

Market integration is a process that refers to the expansion of firms by
consolidating additional marketing functions and activities under single
management (Kohls and Uhl).
Examples of market integration are the establishment of wholesaling
facilities by retailers and the setting up of another plant by a rice mill. In
each case, there is a concentration of decision-making in the hands of single
management. The extent of integration influences the conduct of the firms
and consequently their marketing efficiency. Markets differ in the extent of
integration and, therefore, there is a variation in their degree of efficiency.

Vertical
Horizontal Integration
Integration
Types of marketing
integration

Conglomeration

Fig. 5.1: Market Integration

Types of Market Integration

There are three basic kinds of market integration.
(i) Horizontal Integration
When a firm or agency gains control of other firms or agencies
performing similar marketing functions at the same level in the
marketing sequence is known as horizontal integration. In this type
of integration, some marketing agencies (say, sellers) combine to
form a Union to reduce their effective number and the extent of actual
competition in the market. Horizontal integration of selling firms is
generally not in the interest of the consumers or buyers.

107
Agricultural Marketing: (ii) Vertical Integration
An Overview
This occurs when a firm performs more than one activity in the
sequence of the marketing process. Vertical Integration is a linking
together of two or more functions in the marketing process within a
single firm or under single ownership. If a firm assumes the functions
of wholesaling as well as retailing is an example of vertical integration.
Another example of vertical integration is a rice mill that engages in
wholesale of rice and retailing activity of rice as well.
Vertical integration leads to some economies in the cost of marketing.
Vertical integration reduces the number of middlemen in the marketing
channel. It is of two types depending upon the stage at which the
integration occurs.
(a) Forward Integration: Forward integration occurs if a firm
assumes another function of marketing that is close to the
consumption function, for example, a wholesaler assuming the
function of retailing.
(b) Backward Integration: This involves ownership or a
combination of sources of supply, for example, when a
processing firm assumes the function of assembling/purchasing
the produce from villages.
Firms often expand both vertically and horizontally. For example,
the modem retail stores are expanding both horizontally as well
vertically. Retailing firms have grown horizontally by expanding
either retail stores or a number of commodities they deal in. They
have grown vertically by operating their own wholesale, purchasing,
and processing establishment.
(iii) Conglomeration
Conglomeration type of integration occurs when a combination of
agencies or activities not directly related to each other operates under
unified management. Examples of conglomeration are Hindustan
Lever Ltd. (processed vegetables and soaps), Delhi Cloth and General
Mills (Cloth and Vanaspati), Birla Group, Jindal Group, J.K. Group,
ITC, and NAFED.
Degree of Integration
There are two types of integration; based on the degree of integration.
(i) Ownership Integration
Ownership Integration occurs when all the decisions and assets
of a firm are completely assumed by another firm. An example
of this type of integration is a processing firm that buys a
wholesaling firm or a retail chain.
(ii) Contract Integration
Contract Integration means an agreement between two firms on
certain decisions, while each firm retains its separate identity.
When Rice mills of an area jointly agree on the pricing of the
rice and processed product, it is a case of contract integration.

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 Agricultural Produce
5.7 MARKETING EFFICIENCY Markets
Marketing efficiency is the ratio of market output (satisfaction) to marketing
input (cost of resources). An increase in this ratio represents improved
efficiency and a decrease denotes reduced efficiency. A reduction in the cost
for the same level of satisfaction or an increase in the satisfaction at a given
cost results in the improvement in efficiency.
Approaches to the Assessment of Marketing Efficiency
Traditionally, the efficiency of the marketing system has been looked at
from the following two angles:
(i) Technical or Physical or Operational Efficiency
This aspect of efficiency pertains to the cost of performing a function.
Efficiency is said to have increased when the cost of performing
a function for each unit of output is reduced. This can be brought
about either by reducing physical losses or through a change in the
technology of the function viz., storage, transportation, handling, and
processing.
(ii) Pricing or Allocative Efficiency
Pricing efficiency means that the system can allocate farm products
either over time, across the space, or among the traders, processors,
and consumers (at a point in time) in such a way that no other allocation
would make producers and consumers better off. This is achieved via
the pricing of the product at different stages, at different places, at
different times, and among different users and hence called pricing
efficiency.
Whenever functions of transportation, storage, and processing are
performed, the cost is incurred, value is added and the product is priced
again. The efficiency of marketing is concerned with the extent to which
the prices (after these functions are performed) deviate from what the cost
of performing these functions warrant. The pricing aspect of marketing
efficiency is affected by the extent of competition, dissemination of market
information, and attitude of the functionaries.
The above two types of efficiencies are mutually reinforcing in the long run;
one without the other is not enough.
Empirical Assessment of Marketing Efficiency
Some simple measures to assess the efficiency of the marketing system for
agricultural commodities are:
(i) Ratio of Output to Input
Conceptually, the efficiency of any activity or process is defined as
the ratio of output to input.
O
E = × 100
I
Where, ‘O’ and ‘I’ are respectively output and input of the marketing
system and ‘E is the index of marketing efficiency.
109
Agricultural Marketing: A higher value of E denotes a higher level of efficiency and vice versa.
An Overview When applied in the area of marketing, the output is the ‘value added’
by the marketing system, and ‘input is the real cost of marketing
(including some fair margins of intermediaries).
(ii) Shepherd Approach
Shepherd suggested that the ratio of the total value of goods marketed
to the marketing cost may be used as a measure of marketing
efficiency. The higher the ratio, the higher efficiency, and vice versa.
‘This method eliminates the problem of measurement of value added.
V
ME = × 100
C
Where:
ME = Index of marketing efficiency
V = Value of the goods sold or price paid by the consumer (Retail
price)
C = Total marketing cost or input of marketing.
(iii) Acharya Approach
According to Acharya, an ideal measure of marketing efficiency,
particularly for comparing the efficiency of alternate markets/
channels, should be such which takes into account all of the following:
(a) Total marketing costs (MC), (b) Net marketing margins (MM),
(c) Prices received by the farmer (FP), (d) Prices paid by the
consumer (RP)
As there is an exact relationship among four variables, i.e., a + b +
c = d, any three of these could be used to arrive at a measure for
comparing the marketing efficiency. The following modified measure
is, therefore, being suggested by Acharya:
MME = FP + (MC + MM)
Where MME is the modified measure of marketing efficiency and MC and
MM are marketing costs and marketing margins respectively.

5.8 MARKETING COSTS, MARGINS, AND

PRICE SPREAD
Market functionaries or institutions perform various marketing functions to
move the commodities from the producers to consumers. Every function or
service involves cost. The intermediaries or middlemen make some profit to
remain in the trade after meeting the cost of the function performed.
In the process of moving the commodities from the producers to consumers,
the difference between the price paid by the consumer and the price received
by the producer for an equivalent quantity of farm produce is often known
as price spread. Sometimes, this is termed as gross marketing margin. The
total or gross margin includes:
(i) The cost involved in moving the product from the point of production
to the point of consumption, i.e., the cost of performing the various
110
 marketing functions and of operating various agencies; and Agricultural Produce
Markets
(ii) Profits of the various market functionaries involved in moving the
produce from the initial point of production till it reaches the ultimate
consumer. The absolute value of the marketing margin varies from
channel to channel, market to market, and time to time for a product.
Concepts of Marketing Margins
There are two concepts of marketing margins.
(i) Concurrent Margins
This concept stresses the difference between the prices prevailing at
successive stages of marketing at a given point in time. For example,
the difference between the farmer’s selling price and retail price on a
specific date is the total concurrent margin.
(ii) Lagged Margins
It takes into account the time that elapses between the purchase and
sale by a party and between the sale by the farmer and the purchase
by the consumer. A lagged margin is the difference between the price
received by a seller at a particular stage of the marketing and the
price paid by him at the preceding stage of marketing during an earlier
period.
Estimation of Marketing Margins and Costs
Three methods are generally used in the computation of marketing margins
and costs.
(i) Chasing of Lot Method
A specific lot or consignment is selected and chased through the
marketing system until it reaches the ultimate consumer. The cost and
margin involved at each stage are assessed.
This method is appropriate for such perishable farm commodities
like fruits, vegetables, and milk because the lag between the time
the commodity enters the marketing system and the time of its final
consumption is very small.
(ii) Sum of Average Gross Margins Method
The average gross margin at each successive level of marketing is
worked out by dividing the difference of the money value of sales and
purchase by the number of units of the commodity transacted by a
particular agency. The average gross margins of all the intermediaries
are added to obtain the total marketing margin as well as the break-up
of the consumer’s rupee.
The following formula may be used to work out the total marketing
margins:
n  Si – Pi 
MT = ∑ 
i=1 Qi 
Where,
MT = Total marketing margin

111
Agricultural Marketing: Si = Sale value of a product for the ith firm
An Overview
Pi = Purchase value of a product paid by the ith firm 0i = Quantity of
the product handled by the ith firm
i = 1, 2, n, (number of firms involved in the marketing channel)
(iii) Comparison of Prices at Successive Stages of Marketing
As per this method, prices at successive stages of marketing at the
producers, wholesalers, and retailers’ levels are compared. The
difference is taken as the gross margin. The margin of an intermediary
is worked out by deducting the ascertainable costs from the gross
margin earned by that intermediary. This method is appropriate
when the objective is to study the movements of marketing costs and
margins in relation to prices and cost indices.
Various measures of the price spread and for the computation of
marketing costs and margins have been given below:
Producer’s Price
Producer’s Price is the net price received by the farmer at the time
of the first sale. This is equal to the wholesale price at the primary
assembling center minus the charges borne by the farmer in selling
her/his produce.
PF = PA - CF
Where PF is the producer’s price, PA is the wholesale price in the
primary assembling market and CF is the marketing cost incurred by
the farmer.
Producer’s Share in the Consumer’s Rupee
It is the price received by the farmer expressed as a percentage of the
retail price (i.e., the price paid by the consumer). If Pr is the retail
price, the producer’s share in the consumer’s rupee (Ps ) may be
expressed as follows:
P s = (PF + Pr) 100
Marketing margin of a Middleman: This is the difference between
the total payments (cost + purchase price) and receipts (sale price
of the middleman (ith agency). Three alternative measures may be
used. The three alternative measures which may be used in estimating
market margins are.
(a) Absolute margin of ith middlemen (Ami)
= PRi – (PPi + Cmi)
(b) Percentage margin of ith middlemen (Pmi)
PRi – (PPi + Cmi)
= × 100
PRi

(c) Mark-up of ith middleman (Mi)

PRi – (PPi + Cmi)
= × 100
PPi
112
Where, Agricultural Produce
Markets
PRi = Total value of receipts per unit (sale price)
PPi = Purchase value of goods per unit (purchase price)
Cmi = Cost incurred on marketing per unit.
The margin calculated above includes profit to the middlemen and the
returns which accrue to him for storage, interest on capital, overheads, and
establishment expenditure.
Total cost of marketing
The total cost incurred on marketing either in cash or kind by the producer
seller and by the various intermediaries involved in the sale and purchase
of the commodity till the commodity reaches the ultimate consumer may be
computed as follows; n
C = CF + ∑ Cmi
i=1

Where: C = Total cost of marketing of the commodity,

CF = Cost paid by the producer from the time the produce leaves the
farm till he sells, and Cmi = cost incurred by the ith middleman
in the process of buying and selling the product.

5.9 MARKETING INFRASTRUCTURE

The structure, conduct, and performance of the marketing system depend,
apart from the regulatory measures, on the status of infrastructural facilities.
The infrastructure consists of a combination of public and private assets,
which sustain the addition of the place, time, and form utilities to the products
and services. These include, apart from the institutions and organizations,
roads, railways, warehouses, cold stores, processing units, research and
training institutions, means of communication and transportation, and
market yards and sub-yards.

Fig. 5.2: Prototype of improvised agricultural infrastructure

Image source: https://kipfinancial.com/new-agriculture-marketing-infrastructure-scheme/

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Agricultural Marketing: Importance of Marketing Infrastructure
An Overview
Market infrastructure is important not only for the performance of
marketing functions and the expansion of the size of the market but also
for the transfer of appropriate price signals leading to improved marketing
efficiency. Infrastructural facilities lead to a reduction in marketing costs
which is crucial for increasing the realization of farmers and reducing the
costs to the consumers.
The basic rationale of any infrastructure is the sustenance it provides
to production activity, income generation, and social service supplies.
The relationship between agricultural development and investment in
infrastructure has been long recognized. The benefits of commercialization
and specialization to a great extent depend upon infrastructure and both
have a push and pull relationship. The availability of infrastructure not only
affects the choice of technology, reduces transportation costs, and produces
powerful impetus to production but also affects income distribution in favor
of small and marginal farmers by increasing their access to the market.
The expansion of different infrastructural facilities has been instrumental
in increasing the integration of spatially separated markets. The role of
adequate infrastructure for accelerated growth of the agricultural sector and
in turn of the entire economy has assumed great importance in recent years
due to several developments viz.,
i) The growth of agricultural production depends almost entirely on
the growth of productivity of land and the availability of modern
technologies. Infrastructure development is necessary for the transfer
of technologies, supply of modem inputs, and facilities for market
clearance.
ii) The creation of adequate infrastructural facilities in a liberalized and
market-driven economic environment is necessary, particularly in
the rural area for minimizing economic disparities between rural and
urban areas.
iii) The creation of infrastructure in rural areas is justified for reducing
the migration of people from rural to urban centers; and
iv) The development of infrastructural facilities is also necessary to
reduce the marketing costs for increasing the realization of farmers.
Types of Marketing Infrastructural Facilities
The infrastructural facilities for marketing can be classified in various ways:
One of the ways to classify marketing infrastructural facilities is physical
and institutional.
(a) Physical Marketing infrastructure includes roads, railways, transport
vehicles, electrification, storage structures, cold stores, cold chains,
telecommunication, grading, packing, and processing units. The
creation of physical infrastructures is a capital-intensive activity with
a long payback period (PBP).
(b) Institutional Marketing infrastructure can be grouped into the
following:
(i) Public sector organizations - Food Corporation of India, Cotton
Corporation of India, Jute Corporation of India, Commodity Boards
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 for tea, coffee, tobacco, spices, rubber, cardamom, coir, silk, etc; Agricultural Produce
National Horticulture Board; National Dairy Development Board; Markets
Commodity Export Councils; State Trading Corporation; Directorate
of Marketing and Inspection; Commission for Agricultural Costs and
Prices; Agricultural Produce Market Committees; State Agricultural
Marketing Boards and Council of State Agricultural Marketing Boards
are some of the marketing institutions which have been created in the
country during the last 60 years.
(ii) 
Cooperative Sector Organizations - Primary, Central and State
level marketing societies/unions/Federations; Special Commodities
marketing societies viz., for sugarcane, cotton, and milk; Processing
Societies viz., for cotton, oilseeds, milk, sugarcane, fruits, and vegetables;
National Agricultural Cooperative Marketing Federation (NAFED);
and Tribal Cooperative Marketing Federation (TRIFED) are the
marketing institutions created in the country in the cooperative sector.
The other way to classify the marketing infrastructure is based on
capital requirements.
(a) Capital Intensive Marketing Infrastructure - Most of the
physical infrastructure viz., roads, storage structures, and
processing plants require large initial capital investment and are
included under capital intensive marketing infrastructure.
(b) Capital Extensive Marketing Infrastructure - The institutional
infrastructure falls in this category. They require limited initial
capital investment but their operational and maintenance cost is
quite substantial.
The difference between capital intensive and capital extensive
marketing infrastructure is of degree rather than of kind.
Check Your Progress 5.3
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What do you mean by market integration?
………………………………………………………………………
………………………………………………………………………
2) What do you mean by pricing or allocative efficiency?
………………………………………………………………………
………………………………………………………………………
3) Define price spread.
………………………………………………………………………
………………………………………………………………………

5.10 LET US SUM UP

The actors and forces outside marketing that affect marketing management
ability to build and maintain a successful relationship with target customers
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Agricultural Marketing: are known as the marketing environment. The environmental forces can
An Overview be divided into broad micro-environmental and macro-environmental
components. The regulated market aims at the elimination of unhealthy
and unscrupulous practices reducing marketing charges and providing
facilities to producers and sellers in the market. Under the provisions of
the agricultural produce market act, the state government gives its intention
to bring a particular area under regulation by notifying market areas,
market yard, main assembling market, and sub-market yard, if any, under
the principle regulated market. Market integration refers to the expansion
of firms by consolidating additional marketing functions and activities
under single management. Marketing efficiency is the ratio of market
output (satisfaction) to marketing input (cost of resources). There are two
approaches to the assessment of marketing efficiency i.e. technical or
physical or operational efficiency and pricing or allocative efficiency. The
difference between the price paid by the consumer and the price received
by the producer for an equivalent quantity of farm produce is often known
as price spread.

5.11 KEYWORDS
Conglomeration This type of integration occurs when a combination
of agencies or activities not directly related to each other operates under
unified management.
Environment: This means the sum total of physical and social conditions
that influence individuals and communities.
Horizontal Integration When a firm or agency gains control of other firms
or agencies performing similar marketing functions at the same level in the
marketing sequence.
Macro environment denotes those elements over which the marketing firm
has no control and outside affair affect an organization.
Market area: The area from which the produce naturally and abundantly
flows to a commercial center, i.e., the market, and which assures adequate
business and income to the market committee
Market Integration refers to the expansion of firms by consolidating
additional marketing functions and activities under single management.
Market yard: This is a specified portion of the market area where the
sale, purchase, storage, and processing of any of the specified agricultural
commodities are carried out.
Marketing Efficiency is the ratio of market output (satisfaction) to
marketing input (cost of resources).
Marketing environment: The various external forces that can directly or
indirectly affect the many activities of an organization.
Marketing Intermediaries: are individuals/ functionaries that help the
firm to promote, sell, and distribute its goods to final buyers.
Micro-environment: denotes those elements over which the marketing
firm has control.
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Price spread: is the difference between the price paid by the consumer Agricultural Produce
and the price received by the producer for an equivalent quantity of farm Markets
produce
Producer’s Price net price received by the farmer at the time of the first
sale.
Regulated market is a wholesale market where buying and selling are
regulated and controlled by the state government through the market
committee.
Suppliers: are firms and individuals that provide the resources needed by
the firm to produce goods and services.
Vertical Integration This occurs when a firm performs more than one
activity in the sequence of the marketing process.

5.12 SUGGESTED READINGS /REFERENCES

Acharya, S.S. and N.L.Agarwal. 2011. Agricultural Marketing in India.
Oxford & IBH Publishing co. Pvt. Ltd, New Delhi
Karunakaran, K. 2010. Marketing Management. Himalaya Publishing
House, New Delhi
Kohls, R.l. and J.N. uhl. 1980. Marketing of Agricultural Products.
MacMillian Publishing Co. Onc., New York
Mamoria, C.B. and Joshi. R L.1995, Principles and Practices of Marketing
in India, Kitab Mahal, Allahabad
Subba Reddy, S., P.Raghu Ram., P. Sastry, T.V.N. and Bhavani Devi I. 2010.
Agricultural Economics., Oxford & IBH Publishing Company Private Ltd.,
New Delhi.
http://www.angrau.ac.in/media/1638/AECO%20341.pdf
http://tnau.ac.in/eagri/eagri50/AECO242/lec03.html
http://shodhganga.inflibnet.ac.in/bitstream/10603/17477/10/10_chapter
5.pdf

5.13 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 5.1
1. The marketing environment consists of all the actors and forces outside
marketing that affect the marketing management’s ability to develop
and maintain successful relationships with its target customers. The
environmental forces can be divided into broad micro-environmental
and macro-environmental components.
2. The macro-environmental forces affecting the marketing system
are i) Demographic Environment, ii) Economic Environment, iii)
Natural Environment, iv) Technological Environment, v) Political
Environment, vi) Cultural Environment, and vii) Legal environment
3. The firm must study its customer markets closely since each market
has its own special characteristics.

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Agricultural Marketing: Check Your Progress 5.2
An Overview
1. Regulated market is a wholesale market where buying and selling are
regulated and controlled by the state government through the market
committee.
2. The Royal Commission on Agriculture, in its report submitted in
1928, recommended the regulation of market practices and the
establishment of regulated markets in India. In 1935, the Government
of India established the office of the Agricultural Marketing Adviser
(Directorate of Marketing and Inspection) under the Ministry of
Food and Agriculture to look into the problems of the marketing of
agricultural produce.
Check Your Progress 5.3
1. Market integration is a process that refers to the expansion of firms
by consolidating additional marketing functions and activities under
single management.
2. Pricing efficiency means that the system can allocate farm products
either over time, across the space, or among the traders, processors,
and consumers (at a point in time) in such a way that no other allocation
would make producers and consumers better off. This is achieved via
the pricing of the product at different stages, at different places, at
different times, and among different users and hence called pricing
efficiency.
3. In the marketing of agricultural commodities, the difference between
the price paid by the consumer and the price received by the producer
for an equivalent quantity of farm produce is often known as price
spread.

118
UNIT 6 INSTITUTIONAL
INTERVENTIONS
Structure
6.0 Objectives
6.1 Introduction
6.2 State Trading
6.2.1 Objectives of state trading
6.2.2 Types of state trading
6.3 Market Intervention
6.3.1 Establishment of the regulated markets
6.3.2 Buffer stocks
6.3.3 Price intervention and policies
6.4 Agmarknet
6.5 Market-led Extension (MLE)
6.6 National Agriculture Market (eNAM)
6.7 Let Us Sum Up
6.8 Keywords
6.9 Suggested Further Readings /References
6.10 Answers to Check Your Progress

6.0 OBJECTIVES
After going through this unit, you will be able to:
●● discuss the meaning, objectives, and types of state trading;
●● acquaint with the various forms of market intervention;
●● discuss the importance and mechanism of the regulated market, buffer
stocks, and intervention in agricultural pricing;
●● explain the role and mechanism of AGMARKNET; and
●● distinguish between market-led extension (MLE) and production–led
extension (PLE).

6.1 INTRODUCTION
The current Agricultural marketing system in India is the outcome of several
years of Government intervention. The Agricultural marketing system has
undergone significant many changes over the last about 7 decades owing to
the increased marketed surplus; increase in urbanization and income levels
and consequent changes in the pattern of demand for marketing services;
increase in linkages with distant and overseas markets, and changes in the
form and degree of Government intervention. Actual buying and selling
of commodities mainly take place in market yards, sub-yards, and Rural
Periodic Markets spread throughout the country. There are in all 7,246
Regulated Markets in the country (as of 30.6 2011) and 21,238 Rural Periodic
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Agricultural Marketing: Markets, about 20 percent of which, function under the ambit of regulation.
An Overview Minimum Support Prices have been a cornerstone of the agricultural policy
since 1965. The objective on the one hand is to ensure remunerative prices
to the producers for their produce to encourage higher investment and
production and evolve a balanced and integrated price structure while at
the same time safeguarding the interest of consumers by making available
supplies at reasonable prices.

6.2 STATE TRADING

One of the responsibilities of the government is to ensure the supply of
essential commodities to the people. This may require direct intervention on
its part in the trading of agricultural commodities. State trading is a common
feature of many economies where agriculture is an important sector of trade.
6.2.1 Objectives of State Trading
The objectives of state trading are:
●● To make available supplies of essential commodities to consumers at
reasonable prices regularly;
●● To ensure a fair price of the produce to the farmers so that there may
be an adequate incentive to increase production;
●● To minimize violent price fluctuations occurring as a result of seasonal
variations in supply and demand;
●● To arrange for the supply of such inputs as fertilizers and insecticides
so that the tempo of increased production is maintained;
●● To undertake the procurement and maintenance of buffer stock, and
their distribution, whenever and wherever necessary;
●● To arrange for storage, transportation, packing, and processing;
●● To conduct surveys and provide the required statistics to the
government so that it may improve the conditions of the farmers; and
●● To check hoarding, black marketing, and profiteering.
6.2.2 Types of State Trading
State trading may be partial or complete, depending upon the extent of
intervention desired by the government.
i) Partial state trading
In partial state trading, private traders and government coexist. Traders
are free to buy and sell in the market. The government may place some
restrictions on them, such as the declaration of stocks, limits on the stock
which can be held at a point of time, and submission of regular accounts.
The government enters the market for the purchase of commodities directly
from producers at notified procurement price. It undertakes the distribution
of commodities to the consumer through a network of fair-price shops. In
this way, it safeguards the interest of both the sectors i.e. producers and
consumers.
ii) Complete state trading
When partial state trading fails to ensure fair prices to producers and
make goods available to consumers at responsible prices, then this
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 extreme form of trading is adopted by the government. The purchase Institutional Interventions
and sale of commodities are undertaken entirely by the government
or its agencies. Private traders are not allowed to enter the market for
purchase or sale.
This state trading necessitates huge finance, and provision of storage
facilities at important production and consumption centers, and calls for the
appointment of efficient men so that the purchase and distribution functions
of professional traders may be effectively taken over by a governmental
agency. In India, complete wholesale trade in wheat was taken over by the
government in 1973; but it had to be given up very soon.
Check Your Progress 6.1
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What are the important objectives of state trading?
………………………………………………………………………
………………………………………………………………………
2) State the different types of state trading?
………………………………………………………………………
………………………………………………………………………

6.3 MARKET INTERVENTION

The institutional intervention of some kind in foodgrain marketing in India
has a long history and it has passed through several phases. The strongest
intervention began in mid-1960s when India faced famine-like situations.
To combat this situation, the then government decided to follow a policy
of self-sufficiency in food. This coincided with the advent of new seeds
of high-yielding varieties of wheat, which later came to be known as the
green revolution along with a similar breakthrough in rice. The adoption of
these new variety seeds involved the use of modern inputs and techniques
of production. This made it necessary to create incentives and favourable
price environment for the farmers who adopt the new seeds. To achieve
this, two new institutions, namely the Agricultural Prices Commission
(later on renamed as Commission for Agricultural Costs and Prices) and
Food Corporation of India, were created that have dominated India’s food
administration ever since (Broca, 1999).
In the interest of public welfare, the government intervenes in the marketing
system. The extent of intervention depends on the objectives of the
government and the extent of defects and malpractices prevailing in the
system. Government intervention may be direct or indirect, and it may take
any one or a combination of the following forms:
(i) The framing of rules and regulations for the protection of the interest
of some sections of the population. These may relate to the grant
or restriction of monopolies, restriction on the activities of traders,
licensing, and market regulation.
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Agricultural Marketing: (ii) Creation of marketing infrastructures such as storage and warehousing,
An Overview transportation and communication facilities, credit facility, grading,
and standardization.
(iii) Administration of prices at different levels of marketing-guaranteeing
minimum support prices to producers, providing commodities at fair
prices to consumers and fixing the rates of commission charged by
commission agents.
(iv) Influencing supply and demand by regulating the import, internal
procurement, and distribution.
(v) Establishment of organizations to provide services to the farmers for
performing certain marketing functions; and
(vi) Promotion of farmers’ cooperative societies/ producers organizations
for agricultural marketing and agro-processing.
Some important forms of market intervention are discussed in the following
sub-sections:
6.3.1 Establishment of the Regulated Markets
The idea of regulating markets for agricultural produce was first conceived
towards the end of the 19th century when the first agricultural market at
Karanja was regulated in 1896 in the former Hyderabad State. Thereafter, a
special law is known as the “Cotton and Grain Market Law” was enacted in
the year 1897 in the Berar region, then known as the Hyderabad Assigned
District. Before Independence, market legislation was in force in Bombay
(1927), Central Province (1932, 1935), Mysore (1939), Punjab (1941), and
Patiala (1947). After starting the planning era, the Planning Commission
emphasized the vital role played by the regulated markets and urged the
states to enact suitable acts, keeping in view the fact that agriculture is a
state subject in the constitution.
At the time of Independence, there were only 250 regulated markets in the
country, which increased to 715 in March 1961; 5766 in April 1986; 7161
in March 2001, and further to 7566 in March 2006. Their number decreased
to 7465 in March 2007 and 7246 in March 2011 due to the merger or
deregulation of some markets as in Bihar State. At present, all the wholesale
markets are functioning under the regulation programme. However, it is
noteworthy that nearly 90 percent of the wholesale assembly markets have
been regulated in the country. The progress of regulated markets is not
uniform in all the stats.
Coverage of agricultural commodities
The number of commodities under the regulation also varies from State to
State, but they include almost all the important agricultural commodities
such as foodgrains, oilseeds, fiber crops, commercial crops, fruits and
vegetables, forestry produce, and livestock products. The number of
commodities notified for regulation varied from a minimum of three in
Kerala to as many as 54 in Andhra Pradesh.
Infrastructural facilities at the regulated markets
The success of the market committee in the implementation of the Act
depends upon the proper location of the market yard and facilities provided
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for the efficient conduct of market transactions. The provision of facilities Institutional Interventions
such as market yard, office building, godowns, shops, water supply,
weighing platform, farmer guest house, cattle shed, bank, and cafeteria are
mostly seen in the bigger regulated markets. The absence of these facilities
is common in the smaller markets. The Indian Standards Institution (ISI)
and Market Planning and Design Cell of the Directorate of Marketing and
Inspection have a standardized layout for the regulated market. The absence
of facilities for handling and location of markets away from the business
centers have contributed greatly to trade taking place outside the regulated
markets. The provision of facilities will improve the physical efficiency
greatly. Some market committees have adequate funds collected as a market
fee, license fee, and rent on godowns, shops, and canteen.
Activity 6.1:
Visit a regulated market in your area. Gather information on the provision
of facilities such as market yard, office building, godowns, shops, water
supply, weighing platform, farmer guest house, cattle shed, bank, cafeteria,
etc.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

Check Your Progress 6.2

Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1. What are the different forms of government intervention in agricultural
marketing?
………………………………………………………………………
………………………………………………………………………
2. What do you mean by regulated markets?
………………………………………………………………………
………………………………………………………………………
3. When & where was the first market regulated? Also, indicate how
many regulated markets are there in India?
………………………………………………………………………
………………………………………………………………………
6.3.2 Buffer Stocks
The term buffer stock of foodgrains refers to the stock of foodgrains
maintained by the government to be used as a buffer to cushion the shocks
of fluctuating supply and price, to meet the emergency needs, and to meet
the situations arising out of serious unexpected shortages resulting from
transport bottlenecks, natural calamities like war, flood, famine, earthquakes,
and from the influx of refugees.
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Agricultural Marketing: Advantages: The main advantages of maintaining a buffer stock are:
An Overview
●● It helps in the stabilization of prices by counteracting the effects of the
activities of speculators and hoarders;
●● It safeguards the producers against low prices, especially during the
surplus production years; and
●● It imparts stability to the country’s food economy.
The government enters the market and purchases foodgrains for the
maintenance of the buffer stock. This buffer stock can be built either by
internal purchases or by imports from foreign countries. It is maintained by
the Food Corporation of India. The optimum level of stock depends on the
level of public distribution of foodgrains intended by the government.
The norms of stocks (called buffer norms) required by the government
for both buffer & operational (PDS) purposes are revised every five years
by a Technical Group. The actual stocks have generally remained above
these norms (except a few years), depending on several factors like level
of support prices, the behaviour of market prices, off-take under public
distribution system, import-export policies, and international market price
situation.
Public procurement of foodgrains
The term public procurement refers to securing foodgrains by the government
or its agencies to meet the requirements for the supply to consumers through
fair price shops and to build a butter stock to met emergency needs in
agriculturally lean years. The prices at which the procurement operation is
carried out are referred to as procurement prices.
Apart from the imposition of movement restrictions, several other
instruments were used at different points of time to achieve the procurement
targets. Some of these are as follows:
(i) Levy on Producers
It is made legally obligatory for producers to sell a part of their
produce to the government at the procurement price. The quantity
to be procured by the government is fixed either in proportion to the
acreage under the crop in that year or at a flat rate. The procurement
of foodgrains may be done directly by the government or through the
agents appointed by it. Farmers are free to sell the surplus at open
market prices. Levy on producers remained in operation only for a
short period during the seventies.
(ii) Levy on Traders and Millers
Under this system, the government procures the required quantity
of foodgrains from traders and millers instead of producer-farmers.
Traders and millers are legally bound to deliver a fixed percentage of
the foodgrains purchased/processed by them to the government at the
announced procurement prices. They are free to sell the remaining
quantity in the open market at the prevailing prices. For example, rice

124
 millers in several states are required to hand over a fixed percentage Institutional Interventions
of rice milled by them to the government at a fixed price (derived
from the support price of paddy).
(iii) Pre-emptive Purchases
In this method, the government purchases food grains in the open
market. The government assumes the first right to purchase the grains
at a price settled between the trader and the food producer.
(iv) Open Market Purchases
Under this method, no price is announced beforehand. The government
or its agency enters the market as a trader and buys the produce after
competing with other traders.
(v) Monopoly Procurement
By this method, the government acquires monopoly rights for the
purchase of foodgrains from farmers. Traders are not allowed to
enter the market for this purpose. This method postulates an adequate
infrastructure on the part of the government in terms of manpower,
storage godowns, finance, and transport facilities. Monopoly
procurement for wheat was introduced in the early seventies but was
withdrawn after one season.
To ensure the availability of foodgrains for the masses at reasonable prices,
the government has been procuring substantial quantities of foodgrains and
maintaining large buffer stocks of foodgrains. The foodgrains procured are
wheat, rice, and coarse grains. The responsibility for the procurement of
foodgrains has been entrusted by the government to the Food Corporation
of India, cooperative marketing societies, and Civil Supplies Departments.
Decentralized procurement scheme (DCP)
The decentralized procurement scheme (DCP) is in operation since 1997.
Under this scheme, the designated States procure, store and also issue
foodgrains under the Targeted Public Distribution System (TPDS) and
welfare schemes. The difference between the economic cost fixed for the
state and the central issue price (CIP) is passed on to the State Government
as a subsidy. The decentralized system of procurement helps to cover
more farmers under the MSP operations, improves the efficiency of the
PDS, provides foodgrain varieties more suited to local tastes, and reduces
transportation costs.
Check Your Progress 6.3
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1. What do you mean by buffer stock?
………………………………………………………………………
………………………………………………………………………
2. Mention different methods of procurement.
………………………………………………………………………
………………………………………………………………………
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Agricultural Marketing: 3. What do you mean by pre-emptive methods of procurement?
An Overview
………………………………………………………………………
………………………………………………………………………
6.3.3 Price Intervention and Policies
The important objectives of government intervention in the pricing of
agricultural commodities are:
1. To provide stability to prices of farm products
2. To maintain the flow of productive resources in the farm sector
3. To maintain the terms of trade between the farm and non-farm sector
4. To provide foodgrains and other farm goods to the consumers at
reasonable prices
5. To provide a regular flow of raw material to agro-based industries at
reasonable prices
6. To ensure that the gains of technological changes are shared by all the
sections of society
Forms of intervention
Government intervention in the pricing of farm products can be grouped
under the following broad heads:
1) Administered Prices
One of the methods of intervention in the market mechanism has been
the announcement of different administered prices viz., minimum
support prices, statutory minimum prices, procurement prices, and
issue prices.
i) Minimum Support Price: The price support policy was
initiated by the Government to protect agricultural producers
against any sharp drop in farm prices during bumper production
years. If there is a good harvest and market prices tend to
dip, the government guarantees an MSP or floor price to
farmers, which covers not only the cost of production but also
ensures a reasonable profit margin for the producers. MSP is
announced each year and is fixed after taking into account the
recommendations of the Commission for Agricultural Costs
and Prices (CACP). In fact, these prices are sort of insurance to
the farmers that a price not lower than the announced minimum
price will be paid to the farmers when they bring their produce
for sale in the market.
Minimum support prices for different agricultural crops viz.,
foodgrains; oilseeds, fiber crops, sugarcane, and tobacco are
announced by the Government of India before the start of
the sowing season of the crop. This makes it possible for the
farmers to have an idea about the extent of price insurance
cover provided by the Government for the crop.
126
 ii) Statutory Minimum Price: The minimum price has been Institutional Interventions
assigned a statutory status in the case of sugarcane and as such
the announced price is termed as a statutory minimum price.
There is statutory binding on sugar factories to pay the minimum
announced price and all those transactions or purchases at a
price lower than this are taken as illegal.
iii) Procurement Prices: Procurement price of a commodity refers
to the price at which government procures the commodity from
producers/manufacturers for maintaining the buffer stock or the
public distribution system. These prices are announced by the
Government of India on the recommendations of the Commission
for Agricultural Costs and Prices before the harvest season of
the crop. At these announced prices, the government procures
the foodgrains in the needed quantity either for maintaining the
buffer stock or for the distribution through fair price shops.
iv) Issue Prices: These are below open market prices and always
higher than procurement prices. The prices at which the central
government supplies foodgrains to the states for distribution
through the fair price or ration shops are called Central Issue
Prices (CIPs). Since July 2002, the CIP for wheat and rice has
been kept at a constant level but differentiated for the poorest of
the poor (AAY), poor (BPL), and not-so-poor (APL) families.
2) Influencing supply and demand: It includes the following measures:
i) Domestic procurement: Procurement of a commodity in the
domestic market is done by adopting such methods as open
market purchase, pre-emptive purchase, imposition of levy, and
monopoly procurement.
ii) Imports and exports: A liberal import policy is adopted for
a commodity that is in short supply and vice-versa. Similarly,
exports are encouraged when the domestic supply is comfortable.
Imports suppress domestic prices and exports raise the domestic
price level.
iii) Maintenance of buffer stocks: It influences the supply of a
commodity. The basic purpose of maintaining buffer stock is
to even out weather-induced fluctuations in domestic supply.
Purchases are made in the years of bumper production and the
stocks are released in years of short supply.
iv) Public distribution system: Under this system, a specified
quantity is supplied to the consumers at a price lower than its
economic cost through a network of fair-price shops.
v) Rationing: This method is adopted to control the demand
and thereby keep the rise in demand under check by adopting
a limited quantity per capita for a specified period. The main
purpose of rationing is to keep the demand for a commodity
under control.
127
Agricultural Marketing: vi) Movement restrictions: Here the government bans the
An Overview movement of the commodity from one area to another. The
demarcation of area for movement restrictions varies from
commodity to commodity as also with the objective of the
restrictions.
3) Influencing behavior of market middlemen: The important forms
adopted by the government to influence the behavior of market
middlemen are: i) Licensing of traders and mandatory declaration of
stocks, ii) Regulation of markets, iii) Ban on private trade, and iv)
Restriction of forward trading
4) Creation of market infrastructural facilities: Due to the lack of
necessary infrastructural facilities, farmers do not get a reasonable
and fair price for their produce, and consumers have to pay a higher
price for it. Since the infrastructural facilities are capital-intensive,
they cannot be created by individuals. Some of the facilities created
by the government to provide necessary conditions for efficient
marketing include construction of roads, creation of warehousing &
storage facilities, prescription of grade standards and uniform grading,
market intelligence & dissemination of price information, the opening
of more fair price shop, etc.
Market Intervention and Price Support Schemes
Market Intervention Schemes: The Department of Agriculture &
Cooperation implements the Market Intervention Scheme (MIS) for the
procurement of horticultural commodities which are perishable in nature
and are not covered under the Price Support Scheme. MIS is an Adhoc
scheme of price support. The objective of the intervention is to protect the
growers of these commodities from making distress sales in the event of
a bumper crop during the peak arrival period when the prices tend to fall
below economic levels and the cost of production.
Price Supports Scheme (PSS): The Department of Agriculture &
Cooperation implements the PSS for procurement of oilseeds, pulses, and
cotton, through NAFED which is the Central nodal agency, at the Minimum
Support Price (MSP) declared by the government. NAFED undertakes
procurement of oilseeds, pulses, and cotton under the PSS as and when prices
fall below the MSP. Procurement under PSS is continued till prices stabilize
at or above the MSP. Losses, if any incurred by NAFED in undertaking
MSP operations are reimbursed by the central government. Profit, if any,
earned in undertaking MSP operations is credited to the central government.
Direct price and market interventions
Direct market intervention refers to the direct entry of public agencies in
the market to influence the market structure, conduct, and performance
(Acharya, 2001). Some of the forms of direct market intervention currently
in vogue in India are (i) maintenance of a stock of rice and wheat, (ii)
distribution of cereals and sugar at prices lower than market prices, and (iii)
open market operations (procurement and sale) by the public agencies. To
ensure implementation of the guaranteed price or MSP, stabilize prices and
feed the public distribution system (PDS), the government procures large
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quantities of foodgrains through FCI and other official agencies from the Institutional Interventions
market at the procurement price, which is invariably the same as the MSP.
Check Your Progress 6.4
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1. What important aspects are considered by the Commission for
Agricultural Costs and Prices for recommending the prices of
agricultural commodities?
………………………………………………………………………
………………………………………………………………………
2. What do you mean by direct price and market interventions?
………………………………………………………………………
………………………………………………………………………

Activity 6.2
Visit a regulated market in your area. Gather information on the crops
traded in the market, the minimum support price of each traded crop, and
agencies who procure the crops.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

6.4 AGMARKNET
The market is the driver for agricultural growth. The efficiency of the market
depends on the effective dissemination of information. It has the potential
to help the agriculture sector to overcome some of the traditional barriers
to development by improving access to information, expanding the markets
bases, enhancing employment opportunities, and making governments
services work better. Decision Support System on agricultural production
and marketing, water allocation in an irrigation system, and cattle farming
system in livestock are required to be developed aggressively.
Market information is of vital importance to all in the marketing system
whether farmers, traders, processors, or consumers who require market
information for different purposes.
Concept of AGMARKNET
Market information is needed by farmers in planning production and
marketing, and equally needed by other market participants in arriving at
optimal trading decisions. The existence and dissemination of complete and
accurate marketing information is the key to achieving both operational and
pricing efficiency in the marketing system. Advancement in Information
and Communication Technology (ICT) has made the world a smaller place
and a larger market at one go.
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Agricultural Marketing:
An Overview

Fig. 6.1: AgmarketNet Portal interface

Image Source: https://www.slideserve.com/Leo/agmarknet

The Ministry of Agriculture and Farmers’ Welfare has started the ICT-based
Central Sector Scheme of Agricultural Marketing Information Network
(AGMARKNET), in March 2000, to link important agricultural produce
markets spread all over the country and the State Agricultural Marketing
Boards and Directorates. The portal is being executed with the technical
support of the National Informatics Centre (NIC). The scheme has made
rapid strides. By means of information technology, the agriculture sector
has the potential to achieve higher efficiencies to redefine the way in
dealing with production and post-harvest losses. AGMARKNET portal
(http://agrmarknet.nic.in) strengthens the interface between farmers and
other beneficiaries. Markets are regularly reporting price-related data which
is being disseminated through the portal. The AGMARKNET portal also
serves as a single-window for accessing websites of various organizations
concerned with agricultural marketing. It provides weekly trend analysis for
the important market in respect of major commodities.
AGMARKNET is a user-friendly software package ‘AGMARK’, developed
to facilitate organization and transmission of market data, which has been
implemented in the markets. The platform is also available on the mobile
app.
(Source: Gujarat Agricultural Marketing Board available at http://agri.gujarat.gov.in/
boards_corporations/gs-agri-mark-board/schemes/agmarknet/as-overview.htm)
Aims of the Scheme
The main objective is to establish a nationwide information network for
speedy collection and dissemination of market information and data for its
efficient and timely utilization. The scheme is related to the following:
(i) To facilitate collection and dissemination of information related to
market, Prices, Infrastructure, and Promotion
130
(ii) To sensitize and orient farmers to respond to new challenges in Institutional Interventions
agricultural marketing by using ICT as a vehicle of extension,
(iii) To improve efficiency in agricultural marketing through regular
training and extension for reaching region-specific farmers in their
own language,
(iv) To assist for marketing research to generate marketing information
for its dissemination to farmers and other marketing functionaries at
the grass-root level to create an ambiance of good marketing practices
in the country.
Agencies involved in Implementation
The agencies involved in the execution of the scheme are Directorate of
Marketing and Inspection (DMI), National Informatics Centre (NIC),
State Governments through State Agriculture Marketing Boards (SAMB)/
Departments, National and State level institutions, individual market
committees/ authorities, where applicable in the country. NIC will make
available computer hardware, develop software, train market personnel
in handling computer hardware and software, update the software
package from time to time, provide internet connectivity and develop and
commission State level portals. It will also arrange to harmonize/integrate
software packages developed by the State with AGMARKNET to bring
uniformity to the database. It will continue to manage the AGMARKNET
portal. Management of State level portals could be outsourced wherever
considered necessary by respective competent authorities. In addition to
price, diverse other market-related information is provided on the portal, for
example, the accepted standards of grade labeling; sanitary and phytosanitary
requirement; physical infrastructure of storage and warehousing; marketing
yards; fees payable; etc.

6.5 Market-Led Extension (MLE)

The market-led extension (MLE) tells farmers ‘the need to transform
themselves from mere producers-sellers in the domestic market to producers
cum sellers in a wider market sense to best realize the returns on their
investments, risks, and efforts’. As such, there is a need for the conversion
of production – led – extensions (PLE) into MLE. This will help farmers
in three ways: (i) minimizing production cost, (ii) inclination toward the
export-oriented product, and (iii) moving towards modernization of a
markets system to meet the challenge of globalization.
The MLE requires transforming the traditional top-down, technology-driven
extension model, to a more decentralized, farmer-led, and market-driven
extension system. For example, with economic development, demand for
food products began to change towards high-value crops such as fruits and
vegetables, as well as livestock, fisheries, and other value-added products.
To meet the changing demand for both staple and high-value food products,
extension systems must broaden their focus and teach new technical,
management, and marketing skills. This change in strategy will enable

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Agricultural Marketing: small-scale farmers to take advantage of new market opportunities and the
An Overview changing worldwide demand for both staple and high-value food products.
Advantages of MLE
Changes in consumption patterns are being observed where economic
development is taking place and that is creating markets for new high-value
products. Key functions of an innovative market-led-extension approach
under such situations are given as under:
●● Expand high-value markets;
●● Identify innovative farmers;
●● Farmer-to farmer assessment;
●● Train the interested farmers;
●● Organize the producer groups;
●● Develop market chains;
●● Research on high-value (HV) markets; and high-value commodities
and products.
The market-led-extension approach helps farmers move incrementally
toward agricultural diversification. Small-scale subsistence farm households
do not stop producing the basic food crops needed for home consumption.
Rather, they allocate a small amount of their land to produce a specific high-
value crop (e.g., fruits or vegetables) or product (backyard poultry, honey,
mushrooms, etc.) and, workout the necessary production and marketing
practices.
Then, they begin to scale up the production of these crops or products based
largely on profitability. For higher agricultural growth and farm, a broader
extension focus is required that also includes farm management, marketing,
and credit programs. The market-led extension strategies are designed to
increase farm income and rural livelihoods which partly depend on the
socioeconomic characteristics of different farm households, as well as the
potential enterprises and market opportunities that may be available within
specific locations.
Paradigm Shift from Production-led Extension to Market-led Extension
The shift has been depicted through the following table:
Aspects Production-led Extension Market-led Extension
Purpose/ Transfer of production Enabling farmers to get
objective technologies optimum returns out of the
enterprise
Expected end Delivery of messages High returns
results Adoption of the package
of practices by most of the
farmers
Farmers are Progressive farmer High Farmer as an entrepreneur
seen as producer “Agripreneur”
Focus Production/yields, seed to Whole process as an enterprise /
seed” High returns. Rupee to Rupee”

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 Institutional Interventions
Technology Fixed package Diverse baskets of the package
recommended for an agro- of practices suitable to local
climatic zone covering very situations/ farming systems
huge area irrespective of
different farming situations
Extensionists’ Messages Joint analysis of the issues
interactions Training \ Motivating Varied choices for adoption
Recommendations Consultancy
Linkages / Research-Extension- Research-Extension-Farmer
liaison Farmer extended by market linkages
Extensionists’ Limited to delivery mode Enriched with market
role and feedback to research intelligence
system Establishment of marketing
and agro-processing linkages
between farmer groups,
markets, and processors
Contact with Individual Farmers’ Interest Groups,
farmers Commodity Interest Groups /
SHG’s
Maintenance of Not much importance Very important as agriculture
Records as the focus was on viewed as an enterprise to
production understand the cost-benefit ratio
and the profits generated
I n f o r m a t i o n Emphasis on production Market intelligence includes
T e c h n o l o g y technologies likely price trends, demand
Supports position, current prices, market
practices, communication
network, etc besides production
technologies
Source: AEM – 201, Market Led Agriculture Extension – Challenges and Opportunities

6.6 NATIONAL AGRICULTURE MARKET

(eNAM)
To create a unified national market for agricultural commodities, a pan-India
electronic trading portal was created which networks the existing APMC
Mandis, known as the National Agriculture Market (eNAM). This facilitates
the pan-India trade in agricultural commodities through a common online
market platform. The eNAM platform also helps in better price discovery
through a transparent online auction platform considering the quality of
produce and also timely online payment. The Small Farmers Agribusiness
Consortium (SFAC) is the lead agency for implementing eNAM under the
Ministry of Agriculture and Farmers’ Welfare, Government of India. So far
1000 APMC markets have been integrated into the eNAM platform in 18
states and 3 union territories.
It is important to mention that e-NAM is not a parallel marketing structure
to the existing APMC markets. It is a device to create a national network of
existing physical mandis through an online platform. The eNAM utilized
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Agricultural Marketing: the physical infrastructure of the mandis through an online trading portal,
An Overview enabling buyers situated even outside the Mandi/ State to participate in
trading at the local level. Any Mandies can join the e-NAM as it provides
a “plug-in” to any market yard existing in a State (whether regulated or
private). The special software developed for e-NAM is available to each
mandi which agrees to join the national network free of cost with necessary
customization to conform to the regulations of each State Mandi Act.
e-NAM has increased the choice of the farmer when he brings his produce
to the mandi for sale. Local traders can bid for the produce, as also traders
on the electronic platform sitting in other states/ Mandi. The farmer may
choose to accept either the local offer or the online offer.
Source: https://enam.gov.in/web/ retrieved on 14.10.2021.
Check Your Progress 6.5
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What is meant by the AGMARKNET?
………………………………………………………………………
…………………………………….…………………………………
2) What is Market-Led Extension (MLE)?
………….……………………………………………………………
……………………………………………………….………………

6.7 LET US SUM UP

State trading is a common feature of many economies where agriculture
is an important sector of trade. There are two types of state trading- partial
or complete depending upon the extent of intervention by the government.
In the interest of public welfare, the government intervenes in the
marketing system. The extent of intervention depends on the objectives
of the government and the extent of defects and malpractices prevailing
in the system. Government intervention may be direct or indirect. It may
take different forms like the framing of rules and regulations, creation of
marketing infrastructure, administration of prices, promotion of farmers’
cooperative societies/farmers organizations, etc. The first agricultural market
was regulated at Karanja in 1896 in the former Hyderabad State. At present,
there are 7246 regulated markets in India. The number of commodities
under regulation varies from State to State, but they include almost all the
important agricultural commodities. The government enters the market and
purchases foodgrains for the maintenance of the buffer stock. This buffer
stock can be built either by internal purchases or by imports from foreign
countries. One of the methods of intervention in the market mechanism
has been the announcement of different administered prices viz., minimum
support prices, statutory minimum prices, procurement prices, and issue
prices. These prices are announced for different crops by the Government of
India on the recommendations of the Commission for Agricultural Costs and
Prices (CACP). Beginning with the Kharif crops of 1991-92, the system of

134
announcement of procurement prices has been abolished and only minimum Institutional Interventions
support prices for cereals are announced. In the case of other crops, it was
only the minimum support prices that were being announced. Now for all
foodgrain crops, only the minimum support price system is operative.
Market intelligence plays important role in planning and organizing
marketing practices. To provide timely market information to farmers and
other stakeholders, an online platform called AGMARKNET was created.
The farmers, buyers and commission agents of agricultural produce, media
persons, government functionaries, academicians, market functionaries,
agri-business consultants, etc are important stakeholders. The information
available on the Portal is in the public domain and can be instantly accessed
from anywhere in the world. Farmers and stakeholders are accessing this
information throughout the length and width of the country and many
agencies are using the contents of the Portal to generate market intelligence
and making the same available to various stakeholders to support them in
the appropriate decision making.
With changing global economy, environmental degradation, market
fluctuations, and demographic pressures, the theme of extension has
changed from production-oriented to market-oriented. The only increase in
production cannot be a suitable solution for today’s farmers. Farmers who
plan their production according to the market were getting better returns
and profit. Thus, the scope for acceptance and requirement of market-led
extension over conventional extension is higher. The basic thought behind
the market-led extension is a quality improvement with appropriate concern
over price and marketing.

6.8 KEYWORDS
Partial state trading: Private traders and government coexist. The
government may place some restrictions on private traders.
Complete state trading: The purchase and sale of commodities are
undertaken entirely by the government or its agencies.
Buffer stocks: It refers to the stock of foodgrains maintained by the
government to be used as a buffer to cushion the shocks of fluctuating
supply and price, to meet the emergency needs, and to meet the situations
arising out of serious unexpected shortages.
Public procurement: Refers to securing foodgrains by the government or
its agencies
Procurement prices: The prices at which the procurement operation is
carried out are referred to as procurement prices.
Pre-emptive Purchases: The government assumes the first right to purchase
the grains at a price settled between the trader and the food producer.
Monopoly Procurement: The government acquires monopoly rights for
the purchase of foodgrains from farmers. Traders are not allowed to enter
the market for this purpose.
Fair Price Shops: Distribution channels of Government making available the
essential commodities like rice, kerosene, wheat, etc., to the common man
at controlled prices.
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Agricultural Marketing: Issue Prices: The prices at which the central government supplies foodgrains
An Overview to the states for distribution through the fair price or ration shops.
Market yard: This is a specified portion of the market area where the
sale, purchase, storage and processing of any of the specified agricultural
commodities are carried out.
License fee: A fee paid to the government for the privilege of being licensed
to do something
Speculator: An individual who makes a purchase or sale of a commodity
at the present price with the object of sale or purchase at some future date
at a favourable price.
Hoarders: A person who accumulates things and hides them away for
future use
Productive resources: Anything that any business uses to add value.
Productive resources are usually categorized into the four factors of
production - which are land, labour, capital, and entrepreneurial skill.
Direct market intervention: Refers to direct entry of public agencies in
the market to influence market structure, conduct, and performance.

6.9 SUGGESTED FURTHER READINGS /

REFERENCES
Acharya, S.S. and N.L.Agarwal. 1994. Agricultural Prices – Analysis &
Policy. Oxford & IBH Publishing co. Pvt. Ltd, New Delhi.
Acharya, S.S. and N.L.Agarwal. 2011. Agricultural Marketing in India.
Oxford & IBH Publishing co. Pvt. Ltd, New Delhi.
Broca Sumiter. 1999. Food Security, Trade in Foodgrains and Trade
Liberalisation: The Case of India, Paper presented at the NCAERIEG-
World Bank Conference on Reforms in the Agriculture Sector for Growth,
Efficiency, Equity and Sustainability, April 15-16, 1999, Delhi.
Chand, Ramesh. 2002. Government intervention in foodgrain markets in
the new context. New Delhi: National Centre for Agricultural Economics
and Policy Research (Mimeo).
Kahlon, A.S and Tyagi.D S, 1983. Agricultural Price Policy in India. Allied
Publishers Pvt. Ltd., New Delhi.
Karunakaran, K. 2010. Marketing Management. Himalaya Publishing
House, New Delhi
Subba Reddy, S., P.Raghu Ram., P. Sastry, T.V.N. and Bhavani Devi . 2010.
Agricultural Economics., Oxford & IBH Publishing Company Private Ltd.,
New Delhi.
http://www.ncap.res.in/upload_files/others/oth_5.pdf
http://tnau.ac.in/eagri/eagri50/AECO242/lec06.html
https://enam.gov.in/web

136
 Institutional Interventions
6.10 ANSWERS TO CHECK YOUR PROGRESS
Check Your Progress 6.1
1) To ensure a fair price of the produce to the farmers, minimize violent
price fluctuations, and arrange the supply of inputs like fertilizers and
insecticides so that the tempo of increased production is maintained.
2) Partial state trading and Complete state trading
Check Your Progress 6.2
1) Government intervention may take any one or a combination of
framing of rules and regulations; creation of marketing infrastructure;
administration of prices; Influencing supply and demand by regulating
the import, internal procurement, and distribution; Establishment of
facilitating market organizations; promotion of farmers’ cooperative
societies, etc.
2) A regulated market aims at eliminating unhealthy and unscrupulous
practices, reducing marketing charges, and providing facilities to
producer-sellers in the market.
3) The first agricultural market was regulated at Karanja in 1896 in the
former Hyderabad State. At present, there are 7246 regulated markets
in India.
Check Your Progress 6.3
1) The stock of foodgrains maintained by the government to be used as
a buffer to cushion the shocks of fluctuating supply and price, to meet
the emergency needs, and to meet the situations arising out of serious
unexpected shortages resulting from transport bottlenecks, natural
calamities like war, flood, famine, earthquakes, and from the influx of
refugees.
2) Levy on producers; levy on traders and millers; Pre-emptive Purchases;
Open Market Purchases; and Monopoly Procurement
3) In this method, the government purchases food grains in the open
market. The government assumes the first right to purchase the grains
at a price settled between the trader and the food producer.
Check Your Progress 6.4
1) Need for incentives to farmers for more production; rational utilization
of land and other production resources; and likely effect of the price
policy on the rest of the economy.
2) Direct market intervention refers to the direct entry of public agencies
in the market to influence market structure, conduct, and performance.
Some of the forms of direct market intervention currently in vogue in
India are (i) maintenance of a stock of rice and wheat, (ii) distribution
of cereals and sugar at prices lower than market prices, and (iii) open
market operations (procurement and sale) by the public agencies.
Check Your Progress 6.5
1) Agricultural Marketing Information Network (AGMARKNET)
facilitates generation and transmission of prices, commodity arrival
137
Agricultural Marketing: information from agricultural produce markets, and web-based
An Overview dissemination to producers, consumers, traders, and policymakers
transparently and quickly.
2) With the globalization of the market, farmers have to transform
themselves from mere producers-seller in the domestic market to
producers cum sellers in a wider market sense to best realize the
returns for their investments, risks, and efforts. This revamping of
the extension system to make the farmers ready to use the emerging
marketing opportunities for their prosperity is called the market-led
extension.

138
UNIT 7 GLOBAL TRADE
DOCUMENTATION
Structure
7.0 Objectives
7.1 Introduction
7.2 Types of Export and Import Documents
7.2.1 Modes of Exports and Documents
7.2.2 Important Documents for Shipment
7.2.3 Export Procedure and Documents
7.2.4 Documents for Imports
7.3 Role of Export Promotion
7.3.1 Functions of the EPCs
7.3.2 Other Organizations for Export Promotion
7.4 Credit Guarantee Corporation in Agricultural Exports
7.4.1 Functions of Export Credit Guarantee Corporation (ECGC)
7.5 Let Us Sum Up
7.6 Keywords
7.7 Suggested Further Readings/ References
7.8 Answers to Check Your Progress
7.0 OBJECTIVES
After studying this unit, you should be able to:
●● identify the types of export and import documents;
●● discuss the role of export promotions; and
●● explain the functions of Exports Credit Guarantee Corporation.

7.1 INTRODUCTION
Any export and/or imports require many steps and several documents.
Thorough knowledge of export procedures and documents is essential if a
company wishes to export its products. Similarly, if any company wishes to
import certain items it also must know import procedures and documents
because exporters and importers are situated in two different countries and
are governed by different legislative frameworks. Not only the procedure and
documents but knowledge of export promotion agencies and schemes may
facilitate imports and exports. Export and imports also require guarantees
and insurance. So an importer or exporter must also be aware of their source
and procedure. An effort here has been made to throw light on export and
import procedure and documentation and also on export promotion efforts
of the government of India and also the role of Export Credit Guarantee
Corporation.

139
Agricultural Marketing:
An Overview 7.2 TYPES OF EXPORT AND IMPORT
DOCUMENTS
The export consignment can be sent by sea, land, or air. At one time all
goods were sent by sea. In recent years the use of air carriers has come into
prominence. Airfreight costs are more than sea freight. The advantage of air
freight is the reduction in the period of storage and transit which make up
for the difference in costs. However, the sea is still the most popular form
of transporting goods to overseas customers, chiefly because of the high
volume that can be carried and the relatively low freight costs. When time
is not of primary importance, the sea is the normal mode of transportation
to overseas countries.
The shipping documents play an important role in the export trade. Hence,
the exporter must prepare all the shipping documents carefully and submit
them to their bankers in time to avoid any delay in getting payment from
their bankers as well as from the overseas banks. While sending the goods
by any of the modes, the exporter should first scrutinize and check the
contents of the contract and license terms. The exporter should also follow
the delivery schedule and the instruction given by the buyer about the
marketing, labeling, packing, etc.
7.2.1 Modes of Exports and Documents
Several government regulatory agencies, such as the Directorate General of
Foreign Trade in India, inspection agencies, insurance companies, customs,
and central excise authorities, banking institutions, clearing and forwarding
agents, shipping companies or airlines, etc. facilitate trade transactions
between the exporters and importers. The exporters and importers have
to comply with the rules, regulations, and trade customs of all these
organizations.
Export documents, though most of them are the same, depends on the modes
by which goods are sent to the buyers in other countries.
(i) Export by post: When goods are required to be sent abroad by post,
the exporter can book the goods from any post office in India. Export
of goods, by post, can be grouped under the following two different
categories:
●● Trade samples and gift parcels not involving foreign exchange
●● Merchant goods involving foreign exchange
These parcels should accompany:
●● Export license
●● PP form, in duplicate, with a copy duly countersigned by the
bank.
●● Form D, quadruplicate for goods entitled to customs drawback.
●● AR4 form, in duplicate, if the goods are exported under claim
for rebate of central excise duty.
●● Customs declaration form, one copy of which is to be pasted
on the packet and three copies are to be attached to the packet.
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(ii) Export by Air: Certain type of goods, which are perishable or high Global Trade Documentation
in cost but low in size, can be exported by air. Shipping by air is
advantageous in many ways like lesser packaging charges are
involved as there would be less handling of goods in transit. There
is likely to be less risk of pilferage, damage, and it ensures faster
delivery of goods which in turn leads to quicker payments resulting in
lower stock & quicker turnover. The proof of export by air known as
the ‘Airway Bill’ issued by the airline is the main export document.
(iii) Exports by Sea: Export by sea are one of the most traditional forms
of exporting goods to overseas markets. The exporter contacts the
shipping company or its agent, well in advance for the space required
for shipment of his consignments on a particular ship. While contacting
the shipping company or its agent, the exporter should give all the
particulars of the consignments like type of cargo, gross and net weight
of each package and total packages, port of loading, destination, and
the approximate date of shipment and name of streamer if known.
When the request of an exporter for the reservation of space is
accepted, the shipping company or its agent will issue a “shipping
order” containing the instructions regarding loading and shipping
of the consignment and a copy of which is sent to the commanding
officer of that particular vessel.
(iv) Roadways and Railways: Trucks and railway wagons play an
important role in carrying goods from the site of the manufacturer to
the port in the home country and from the port to the buyer’s destination
in the host country. In India, railways carry exporter goods on priority.
The exporter should approach the dispatching station master with the
shipping order which shows that the required and necessary space in
the ship has been reserved. If the exporter desires to book a wagon, s/
he should produce the following papers to the station master:
1) Shipping order
2) Forwarding Note- complete in all respect with the necessary
fees.
3) Information on the type of wagon required.
As soon as the loading is complete and ‘Railway Receipt’ is received,
the exporter should endorse the receipt in the name of her/his cleaning &
forwarding agent and send it to her/him for further shipping arrangements.
Clearing and forwarding agents: The new exporter or companies that
have limited dealing with the export trade should make use of shipping
and forwarding agents. These agents are very useful as they have regular
contacts with the customs offices, shipping companies, and their agents
and specialized in their job. They are supposed to do everything from a
collection of goods from factory or warehouse, packing, documentation to
final shipment. For rendering these they charge some percentage or fee.
The percentage will, of course, depend on the type of product, its size, and
weight in relation to its selling price.
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Agricultural Marketing: 7.2.2 Important Documents for Shipment
An Overview
The following are some of the useful documents needed for exports:

Shipping Mates Airway

Landing
bill receipt bill
slip

Insurance
Bill of Shipment policy/
lading documents certificate

Shipping Carry
Freight ticket
order
declaration

(i) Landing Slip: On payment of the landing charges the exporter gets
a small slip called landing slip. If the exporter has to send the goods
to the port commissions shed, s/he will have to use either a lorry or
a cart. S/he has, therefore, to prepare an export cart giving the name
of the ship, number shed, shipper marks on packages, quantity, and
description. S/he has also to send the export cart, a form called ‘Dock
Challan’ giving the details about consignment, its marks, number,
description, quantity, etc.
(ii) Shipping Bill: The shipping bill may be either for free goods or with
duty. The shipping bill contains the name of the vessel, master or
agents, flag, port of destination, country of final destination, exporter’s
name and address, details about packages, number and destination of
goods, marks, detail about each case, Free On Board (FOB) value,
real value as defined in the sea customs Act whether Indian or foreign
merchandise to be re-exported and total weight. The customs official
will put his stamp as and when the appraiser satisfies himself about
the FOB and real value of the goods and whether the goods have the
license or endorsement if required. After the customs appraiser has
checked some details e.g. the ship is registered the FOB and the real
values, s/he will issue instructions to the preventive officer on board
the ship to check a certain % of cases. After the order is issued, the
duplicate copy of the shipping bill is returned to the exporter which
the exporter has to submit to the preventive officer for examination
and if he is satisfied, he will allow the shipment by endorsing on the
dock challan. Then the shipping company will load the cargo on the
slip.
(iii) Mate’s Receipt: When the cargo is loaded on board the ship, the chief
of the vessel will issue ‘Mate Receipt’. The mate receipt contains the
name of the shipping line, vessel, port of loading, port of dispatch,
place of delivery, shipping marks, kind of containers, description of
goods, gross weight, condition of cargo at the time of its receipt on the
board, etc. The mate’s receipt is of transferable nature & the exporter
is required to present it to the shipping company’s office or its agent’s
office for the exchange into Bill of Lading.

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(iv) Bill of Lading: The Bill of Lading is a document issued by the shipping Global Trade Documentation
company or its agent acknowledging the receipt of goods mentioned
in the bill for shipment and undertaking to deliver the goods in the
condition as received by the consignee provided the freight and other
charges specified in the Bill of Lading has been paid.
(v) Airway Bill: It is also known as the air consignment note or airway
bill of lading. It is the receipt issued by the airline company for the
carriage of goods in terms of the conditions of the contract of carriage
of goods. The airway bill is not treated as a document of title and is
not issued in negotiable form.
(vi) Insurance policy/ certificate: In international trade, when the goods
are in transit, they are exposed to marine perils. Marine insurance is
intended to protect the insured against the risk of loss or damage of
goods in transit due to marine perils. A marine insurance policy is a
contract whereby the insurer in consideration of payment or premium
by the insured agrees to indemnify the latter against loss incurred by
him in respect of goods exposed to perils of the sea.
(vii) Shipping Order: It is issued by the shipping line intimating the
exporter about the reservation of space for shipment of cargo through
a particular vessel from a specified port and on a specified date.
(viii) Cart/Lorry Ticket: This ticket is prepared for admittance of cargo
through the port gate. This is also known as ‘Vehicle Ticket or Gate
Pass’. This includes the details of export cargo i.e. shipper’s name,
cart number, marks on packages, quantity, and description.
(ix) Freight declaration: It is required to be attached to the export
documents if any importer agrees to pay freight charges. When the
exporter pays the freight, s/he also should submit the same declaration.
All the documents that evidence shipment of goods, such as above are
known as transport documents. With container shipments becoming popular,
Combined Transport Document (CAD) is increasingly being used. The
combined transport document covers the movement of cargo from the place
of containerization to the place of destination using multi-model transport.
7.2.3 Export Procedure and Documents
Documentation is one of the most important aspects of overseas trade because
it alone can secure the swift passage of goods to the customers resulting
in prompt payments. Before 1990, the form of documents and related
formalities, which had been developed by different government agencies
and authorities in India, was aimed to suit their own individual requirements
with little regard to the interrelationship of different documents. All these
documents were prepared individually and separately and were highly
prone to errors and discrepancies. As a result, it made export documentation
in India extremely complicated and overlapping in nature.
The Aligned Documentation System (ADS) has now been adopted in
India. It is a methodology of creating information on a set of standard
forms printed on paper of the same size in such a way that the items of
identical specification occupy the same position on each form. This system
achieves economy of time and effort, simplifies and priorities information
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Agricultural Marketing: required by government agencies, and aligns it in a standardized format.
An Overview ADS requires the preparation of only one master document containing the
information common to all documents included in the aligned series. The
commercial documents under ADS are prepared on a uniform and standard
A4 size paper while the regulatory document papers are prepared on a full-
scale paper.
On average, about 25 documents have to be prepared for an export shipment.
For understanding, these documents can be divided into 2 categories namely
commercial documents and regulatory documents.
(i) Commercial documents: These are used by importers and exports
in the discharge of their respective legal and other incidental
responsibilities under sales contracts. They are of two types namely
Principal and Auxiliary.
(a) Principal documents – These are required for effecting physical
transfer of goods and their title from exporter to importer.
These include Commercial invoice; Packing list; Certificate
of inspection; Insurance policy; Bill of lading; Certificate of
origin; Bill of exchange; Shipment advice, etc. A commercial
invoice contains information on the exporter, the consignee’s
details, country of origin of goods, country of final destination,
terms of delivery and payment, vessel/flight number, port of
loading, port of discharge, number and kinds of packaging,
detailed description of goods, quantity, rate and the total amount
payable, etc. certain importing countries require the commercial
invoice and the packing list to be prepared or translated into
the language of importing country. For example, Italy requires
Italian, France requires the French language, etc.
(b) Auxiliary documents – These are required for the preparation
of principal export documents. These include Proforma invoice;
Shipping instructions; Insurance declaration; Intimation of
inspection; Shipping order; Mate’s receipt; and Letter to bank
for negotiation and collection of documents etc.
(ii) Regulatory documents: These are prescribed by different
government departments and bodies for compliance with formalities
under relevant laws. These include Exchange Control Declaration-
GR Forms; Freight payment certificate; Insurance premium payment
certificate; ARE I; ARE II (Application for Removal of Excisable
Goods) forms; shipping bill; Vehicle ticket etc.
Every exporter must hold a valid Importer-Exporter Code (IEC) number
for exporting or importing goods from India or into India without which
Indian customs would not permit the import-export transaction. Also, in
order to get benefits under the export-import policy, an exporter is required
to get her/him registered with an appropriate export promotion council
relating to her/his main line of exports. Besides Export Promotion Councils,
the registration authorities also include the Marine Export Development
Authority (MPEDA); Agricultural and Processing Food Development
Authority (APEDA); Commodity Boards; Development Commissioners
of Free Trade Zones (FTZs), Export Processing Zones (EPZs), Special
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Economic Zones (SEZs); Federation of Indian Export Organisation (FIEO), Global Trade Documentation
etc.
Goods which are shipped out of the country are eligible for exemption
of states’ sales tax, central sales tax, and central excise duties. However,
exporters are required to get themselves registered with the sales tax
authority of the state under the Sales Tax Act. Both the manufacturers and
the merchant exporters have the option to either deposit the central excise
duty at the time of taking goods out of the factory and avail of its refund
later or take the goods out by signing a bond with the central excise authority
without paying the duty. Once the central excise authorities receive the
proof of shipment along with the bill of lading, shipping bill, and ARE I/
ARE II form, the exporter’s running bond account is credited.
The important export steps and documents are discussed below:
STEP 1: Enquiry: This is the starting point in an export transaction. Inquiry
is a detailed document that seeks various information like product name,
size, quantity, price, sample, drawing, design, mode of dispatch, payment
terms, etc. These types of information are sought by the importer from the
exporter.
STEP 2: Proforma Invoice generation: Based on the inquiry raised by the
importer, a proforma invoice is generated by the exporter and sent to the
importer. This proforma invoice carries almost all information sought by
the importer in her/his inquiry. Proforma invoice also helps the importer in
opening a letter of credit and also arranging money from the bank and other
financial institutions.
STEP 3: Placement of order: Importer or buyer places an order if he
agrees on the specification, quantity, price, mode of payment and delivery,
etc. of the product. This is an important legal document and is required by
both importer and exporter for various types of clearances later on.
STEP 4: Acceptance of order: After receiving the order from the importer,
the exporter goes through the document carefully. If the document is in
order, the exporter sends acceptance of the order to the importer. A letter
of credit is then opened by the importer. This is a guarantee given by the
buyer’s bank and the most important document for exports. Letter of credit
helps in the realization of payments through banks.
STEP 5: Goods readiness and documentation: After the acceptance of
the order, the exporter starts planning for the manufacturing, inspection,
and packing of goods. First, the exporter arranges for the finance. He may
avail credit from commercial banks or EXIM banks at concessional rates
for manufacturing, purchasing, and packaging of goods. Once the goods
are ready/duly packed in Export-worthy cases/cartons (depending upon
the mode of dispatch), the Invoice is prepared by the Exporter. If the
number of packages is more than one, a packing list is a must. A packing
list provides details of how the goods are packed, the contents of different
boxes, cartons, or bales, and details of the weights and measurement of
each package in the consignment. Under the Export (Quality Control
and Inspection) Act, 1963, it is mandatory to obtain an export inspection
certificate for a number of products by the notified agency. The agencies
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Agricultural Marketing: entrusted with compulsory pre-shipment quality inspection include Export
An Overview Inspection Agency (EIA), Bureau of Indian Standards (BIS), Agricultural
Marketing Advisor (Agmark), Drugs Controller, Tea Board, Coffee Board,
etc. Inspection of export goods may be carried out as in-process quality
control, self-certification, and consignment-wise quality control. The pre-
shipment inspection should be completed before the consignment is sealed
by the excise authorities.
STEP 6: Dispatch of Goods from works: The Central Excise authorities
then seal the consignment in the factory premises of the exporter. This
avoids open inspection by customs authorities at the port.
STEP 7: Clearing and Forwarding (C&F) Agents: C&F agents are
normally hired by the exporters as they help them in many tasks and
formalities. C&F agents help exporters in sending the consignments by
air or by sea. They prepare various documents like customs, shipping,
transportation, etc., get them passed through authorities, and arrange for
various facilities in lieu of a fee. As nowadays EDI system is used, C&F file
all relevant documents electronically on behalf of exporters.
STEP 8: Custom clearance: Custom authorities assess shipping bills and
other relevant documents, examine cargo where ever required and grant
custom clearance by endorsing the shipping bill. This is termed as ‘Let
Export”.
STEP 9: Forwarding documents by C&F agents: After the completion
of shipment and other formalities, C&F agents forward the following
documents to the exporter:
●● Bill of Lading or Airway bill, as the case may be.
●● Customs signed Export Invoice and Packing List.
●● GR forms (in duplicate)
●● SDF form (in duplicate)
●● AR 4 (original and duplicate) duly endorsed by customs
●● Exchange control copy of Shipping bill
STEP 10: Bills Negotiation: Exporter sends the shipment advice to
importer, soon after the shipment. This shipment advice carries information
about the shipment. It indicates details of ship or flight, port of discharge
and destination, description of cargo, contract number, etc. After this, the
exporter presents the following documents to the negotiating bank:
●● Export order
●● Packing list
●● Bill of exchange
●● Commercial invoice
●● GR form
●● Full set of clean onboard bill of lading
●● Letter of credit
●● Marine insurance policy
●● Bank certificate
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The exporters in the developing countries are expected to furnish the GSP Global Trade Documentation
Certificate of Origin to the bankers, along with other shipping documents as
imports from developing countries enjoy certain duty concessions under the
Generalized System of Preference (GSP).
STEP 11: Bank to bank dealings: After receiving various documents from
the exporter, the negotiating bank scrutinizes them and sends them to the
bank of the importer enabling them to clear the payments. A bank certificate
is issued to the exporter by the negotiating bank as soon as the payment
is received. This marks the end of the export transaction. In India, it is
mandatory for the exporter to negotiate shipping documents only through
authorized dealers of RBI.
Some important documents that are used in various steps mentioned above
include:
• Marine Insurance Certificate: It is a document that gives details
of the shipment insured together with a shortened version of the
provisions of an open cover. The exporter should buy the policy for
the CIF value plus ten percent to cover other expenses which the
importer might have to incur in anticipation of the safe arrival of the
goods.
• Certificate of Origin: Certificate of origin is used as evidence of the
origin of goods. It includes the details of the goods covered and the
country where the goods are grown, produced, or manufactured. The
exporter should obtain this from any recognized Chamber of Commerce,
EPC, and Government Department on payment of a small fee.
• G.S.P. Certificate: Under Generalized System of Preference (G.S.P),
manufacturers and semi-manufacture from developing countries
including India will be entitled to a concessional rate of import duty.
• Packing list / Note: It includes the date of packing, connecting
invoice number, order number, details of shipping, etc.
• Export Declaration Forms: a) GR (Guaranteed Remittance) Form
for export to all countries other than by post b) PP (Postal Parcel)
Form for export to all countries by parcel post except when made on
value payable or cash on delivery basis c) Form SOFTEX (Software
Export Declaration) to be used for declaring software exports through
data communication links and receipt of loyalty on the software
packages/products exported.
• Certificate of Inspection: It is issued by the inspection agency
concerned certifying that the consignment has been inspected as
required under the Export (Quality Controls & Inspection).
• Certificate of Measurement: It should be obtained either from the
Indian Chamber of Commerce or any other approved organization.
• Commercial Invoice: It is prima facie evidence of the contract of
sale and purchase.
• Consular Invoice - It is a document required mainly by Latin American
countries. It facilitates the clearing of goods through customs of the
importing country.
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Agricultural Marketing: • Freight Declaration: It is to be attached to the export documents if
An Overview
the importer agrees to pay the freight.
• Health Certificate: This is required for the export of food products,
seeds, animal meat products, etc. issued by the Health Department of
Exporting Country.
7.2.4 Documents for Imports
Documents for imports are similar to the documents for exports. Let us now
discuss a few important documents that are needed for imports:
• Airway Bill (AWB)
• Cargo Arrival Notice (CAN)
• Letter of Authority, in favour of INTERPORT CLEARING
• Bank Delivery Order - in case A.W.B / C.A.N is in favour of the
Bank.
• Commercial Invoice (duly signed)
• Packing List.
• Indent / Proforma Invoice / Purchase Order
• Catalogue / Drawing / Technical Literature
• Letter of Credit
• Insurance Certificate or Insurance Premium Memo (Required only if
terms are C & F / F.O.B).
• Certificate of Origin.
• Import and GATT declaration forms duly filled and signed.
• I.E.C. Code No. (D.G.F.T. has now issued P.A.N based certificates)
• Income Tax P.A.N No.
• Factory license / Shop and Est. Certificate / Sales Tax registration
• Freight Certificate (If freight Payable in India).
• MODVAT declaration (If applicable).
• Original documents (Bank attested).
• Blank letterheads.
The above-listed documents are required in the normal course of clearance
to ensure smooth and quick clearance of your Cargo. In case the customs
officer has any doubt, they can ask for any other papers, which on-demand
will be called for from the importers. With regards to certain categories of
Imports related to certain schemes or for different nature of products, the
customs department will insist on certain additional documents during the
assessment of the Bill of Entry. Various documents required for the various
products, different schemes, or the different modes that they are being
imported are listed below.
Machinery and Spares
• Original Catalogue and Write-up.
• Separate value of Spare - individual as well as consolidated.
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• Container and case-wise packing list. Global Trade Documentation

• In the case of electrical goods e.g. Circuit Breakers, Switches, Relays,

etc. Their ratings should be specified (e.g. K.V. / Volts / Amps / Watts).
• In the case of accessories, the catalogue must show a detailed list of
standard accessories. If the accessories are optional then duty will
be charged on Merits. In such cases, separate values will have to be
indicated. Certain customs exemption notifications do not permit
accessories (standard and optional) for benefit of concessional duties
at all.
• In case Software is shipped along with the equipment, whether the
Software is inbuilt or separate.
100 % E. O. U. (Export Oriented Units) / S.T.P (Software Technology
Parks) / E.H.T.P (Electronic Hardware Technology Parks) Schemes
• Documents for registration of E.O.U. at customs (Green Card, STP
approval)
• End-use Bond
• Transit Bond (If the shipment is to be sent to a place other than the
port of import)
• Warehousing Bond.
D.E.P.B. (Duty Entitlement Pass Book) Scheme
• Original DEPB license.
E.P.C.G. (Export Promotion Capital Goods) Scheme
• Original E.P.C.G. license with a list of Import items duly attested by
D.G.F.T. (Director General of Foreign Trade)
• Bond for clearance under E.P.C.G. as per Custom’s format along with
Bank Guarantee (if required).
Second-Hand Capital Goods
• Invoice must clearly indicate the year of Manufacture.
• Evidence of the original value of new equipment.
Free of Charge Shipments
• Evidence of Value, Price list, previous Import documents.
• Correspondence regarding free supply with the supplier.
• In case of spares Catalogue of spares as well as that of the main
equipment.
Chemicals
• Test Bond - required in case of 1st import from a new supplier or in
absence of literature or a previous test report.
• Certificate of Analysis.
• Manufacturer’s literature.
• End-use declaration.
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Agricultural Marketing: Import of Metals
An Overview
• Mills Test Certificate.
Re-imports
• Invoice showing repair charges.
• Original Export Shipping Bill duly endorsed by customs at the time of
export indicating Model No. and Sr. No. of the Item for establishing
the identity of goods during import examination.
• Export Airway Bill and Insurance memo indicating Freight and
Insurance charges.
Check Your Progress 7.1
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) What is the Aligned Documentation System (ADS)?
………………………………………………………………………
………………………………………………………………………
2) What kinds of documents are needed for exports?
………………………………………………………………………
………………………………………………………………………
Activity 7.1
Visit an exporter in your vicinity and discuss the export procedure and
documents used by them. Based upon the discussion, prepare a flow chart
of the procedure followed by the exporter and also prepare a list of all
export documents used by them.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

7.3 ROLE OF EXPORT PROMOTION

All the countries realize and recognize the fact that exports are an integral
part of their economic development. Hence, they readily assist the exporters
in their efforts. As a part of their export promotion strategy, all national
governments have established institutional set-ups to support export
activities. The functions of an export promotion programme may be:
• To create awareness about exporting as an instrument of growth and
market expansion.
• To reduce and remove barriers to exporting.
• To create promotional incentives.
• To provide various forms of assistance to potential and actual
exporters.
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The Department of Commerce is the primary government agency Global Trade Documentation
responsible for evolving and directing foreign trade policy and programmes,
maintaining commercial relations with other countries, supervising state
trading, initiating various export promotion measures, and developing and
regulating export-oriented industries. The government of India has set up
Export Promotion Councils (EPC) and other institutions for the purpose of
promoting exports. The basic objective of Export Promotion Councils is to
promote and develop the exports of the country. Each Council is responsible
for the promotion of a particular group of products, projects, and services.
The main role of the EPCs is to project India’s image abroad as a reliable
supplier of high-quality goods and services. In particular, the EPCs shall
encourage and monitor the observance of international standards and
specifications by exporters. The EPCs shall keep abreast of the trends and
opportunities in international markets for goods and services and assist their
members in taking advantage of such opportunities in order to expand and
diversify exports.
7.3.1 Functions of the EPCs
Major functions of the EPCs are:

To organise visits To build a

•To provide •To offer of delegations of statistical base
commercially useful professional advice its members To promote and provide data
information and to their members in abroad to interaction on the exports
assistance to their areas such as explore overseas
members in technology between the and imports of
developing and upgradation, quality market exporting the country,
increasing their and design opportunities; community and exports and
exports; improvement,
standards and
•To organise the Government imports of their
participation in both at the members, as
specifications,
trade fairs,
product
exhibitions and Central and State well as other
development, levels; and relevant
buyer-seller meets
innovation, etc.;
in India and abroad; international
trade data.

The EPCs are non-profit organizations registered under the Companies

Act or the Societies Registration Act, as the case may be. To give a boost
and impetus to exports, the EPCs must function as professional bodies.
For this purpose, executives with a professional background in commerce,
management, and international marketing and having experience in
government and industry are brought into the EPCs.
7.3.2 Other Organizations for Export Promotion
Besides EPCs, there are other organizations set up by the Government
of India. These organizations, besides doing their core jobs also promote
exports. Some of these are:
(i) Commodity Boards: There are five statutory Commodity Boards
under the Department of Commerce. These Boards are responsible
for the production, development, and export of tea, coffee, rubber,
spices, and tobacco.

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Agricultural Marketing: (ii) Marine Products Export Development Authority: The Marine
An Overview Products Export Development Authority was set up as a Statutory
Body in 1972 under an Act of Parliament. The Authority has its
headquarters at Kochi and field offices in all the Maritime States of
India. The Authority is responsible for the development of the marine
industry with a special focus on marine exports. Besides, it has Trade
Promotion Offices in Tokyo (Japan) and New York (USA).
(iii) Agricultural and Processed Food Products Export Development
Authority: The Agricultural and Processed Food Products Export
Development Authority (APEDA) was established in 1986 as a
Statutory Body under an Act of Parliament. The Authority has its
headquarters in New Delhi. The Authority has five Regional Offices
at Guwahati, Hyderabad, Kolkata, Bangalore & Mumbai and is
entrusted with the task of promoting agricultural exports, including
the export of processed foods in value-added form. APEDA has also
been entrusted with the monitoring of export of 14 agricultural and
processed food product groups listed in the Schedule to the APEDA
Act. APEDA has been actively engaged in the development of
markets besides up gradation of infrastructure and quality to promote
the export of agro products. In its endeavor to promote agro products,
APEDA provides financial assistance to the registered exporters under
its Schemes for Market Development, Infrastructure Development,
Quality Development, Research and Development, and Transport
Assistance.
(iv) Export Inspection Council: The Export Inspection Council was set
up as a Statutory Body in 1964 to ensure sound development of export
trade of India through quality control and inspection and for matters
connected therewith. The Council is an advisory body to the Central
Government, with its office located in New Delhi. The Executive
Head of the EIC is the Director of Inspection & Quality Control who
is responsible for the enforcement of quality control and compulsory
pre-shipment inspection of various commodities meant for export
and notified by the Government under the Export (Quality Control
and Inspection) Act, 1963. The Council is assisted in its functions by
the Export Inspection Agencies (EIAs), which are field organizations
located in Chennai, Delhi, Kochi, Kolkata, and Mumbai and have
state-of-art and accredited laboratories with the required logistic
support for quality certification activities.
(v) Indian Institute of Foreign Trade: The Indian Institute of Foreign
Trade was established in May 1963. The Institute has its head office in
New Delhi and one regional branch in Kolkata. The Institute has been
conferred “Deemed University” status and is engaged in conducting
academic courses leading to issue of degrees in International Business
& Export Management; training of personnel in international trade;
organizing research on issues in foreign trade, marketing research,
area surveys, commodity surveys, market surveys; and dissemination
of information arising from its activities relating to research and
market studies.
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(vi) Indian Institute of Packaging: The Indian Institute of Packaging Global Trade Documentation
was registered in May 1966. The Institute has its head office
located in Mumbai and branch offices at Delhi, Chennai, Kolkata,
and Hyderabad. The main function of the Institute is to undertake
research on raw materials for the packaging industry, organize
training programmes on packaging technology, consultancy services
on packaging problems and stimulate the consciousness of the need
for good packaging.
(vii) State Trading Corporation of India Limited (STC): STC was set
up on 18th May 1956, primarily to undertake trade with East European
Countries and to supplement the efforts of private trade and industry
in developing exports from the country. STC has played an important
role in the country’s economy by arranging imports of essential items
of mass consumption (such as wheat, pulses, sugar, etc.) into India
and developing exports of a large number of items from India. The
core strength of STC lies in handling exports/ imports of bulk agro
commodities.
(viii) Export Credit Guarantee Corporation of India Limited (ECGC):
The Corporation was established in 1957 as the Export Risk Insurance
Corporation of India Ltd. Keeping in view the wider role played by
the Corporation, the name was changed to Export Credit Guarantee
Corporation of India Ltd. (ECGC). The ECGC is the premier
organization in the country, which offers credit risk insurance cover
to exporters, banks, etc. The primary objective of the Corporation is
to promote the country’s exports by covering the risk of export on
credit.
(ix) India Trade Promotion Organization (ITPO): India Trade
Promotion Organization has been formed by merging erstwhile Trade
Development Authority (TDA) with Trade Fair Authority of India
(TFAI) with effect from 1st January 1992. India Trade Promotion
Organization is the premier trade promotion agency of India and
provides a broad spectrum of services to trade and industry to promote
India’s exports. These services include the organization of trade fairs
and exhibitions in India and abroad, Buyer-Seller Meets, Contact
Promotion Programmes apart from information dissemination on
products and markets.
(x) Federation of Indian Export Organisations (FIEO): The
Federation of Indian Export Organizations set up in 1965, is an Apex
body registered under the Societies Registrations Act XXI of 1860,
of various export promotion organizations and institutions with its
major regional offices at Delhi, Mumbai, Chennai, and Kolkata. The
main objective of FIEO is to render an integrated package of services
to various organizations connected with export promotion. It provides
the context, direction, and thrust to India’s global export effort. It
also functions as a primary servicing agency to provide integrated
assistance to its members comprising professional exporting firms
holding recognition status granted by the Government, consultancy
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Agricultural Marketing: firms, and service providers. The Federation organizes seminars and
An Overview arranges participation in various exhibitions in India and abroad
(xi) Indian Council of Arbitration: The Indian Council of Arbitration,
India’s premier Arbitral Institution, is a Society registered under the
Societies Registration Act, 1860 operating on a no-profit basis, with
its head office in New Delhi and eight branches with a pan India
network. The organization originally established in 1965 promotes
and administers the use of Alternative Dispute Resolution mechanisms
in commercial disputes, thereby expediting dispute resolution and
encouraging greater domestic and international commerce. The main
objectives of the Council are to promote the knowledge and use of
arbitration and provide arbitration facilities for amicable and quick
settlement of commercial disputes to maintain the smooth flow of
trade, particularly export trade on a sustained and enduring basis.
(xii) Price Stabilization Fund Trust: The Price Stabilization Fund (PSF)
Scheme was launched by the Government of India in April 2003
against the backdrop of a decline in international and domestic prices
of tea, coffee, rubber, and tobacco causing distress to primary growers.
The growers of these commodities were particularly affected due to a
substantial reduction in unit value realization for these crops, at times
falling below their cost of production. The objective of the Scheme
is to safeguard the interests of the growers of these commodities
and provide financial relief when prices fall below a specified level
without resorting to the practice of procurement operations by the
Government agencies. The Scheme is being operationalized through
the Price Stabilization Fund Trust.
(xiii) GS1-India: GS1 India is a not-for-profit standards body promoted
by the Ministry of Commerce (GOI) and Indian Industry to spread
awareness and provide guidance on the adoption of global standards
in Supply Chain Management by Indian Industry for the benefit
of consumers, Industry, Government, etc. GS1 India is the only
organization in India authorized to issue company prefix numbers
for use in barcodes, RFID tags, etc. for unique, unambiguous, and
universal identification of products, cartons, containers, etc. GS1
standards find wide application in Supply Chains across sectors for a
unique-yet-universal product, consignment and entity identification,
EDI (Electronic Data Interchange), product data synchronization, etc.
GS1 standards are the dc-facto global standards in the identification
of consumer products in retail. GS1 India is an affiliate of GS1 Global
Office, twin headquartered at Brussels (Belgium) and Lawrenceville,
New Jersey (U.S.A.), which oversees operations of a network of over
100 GS1 organizations across the world.
Besides, all private sector exporting companies, export houses, star trading
houses, superstar trading houses, etc. also promote exports.
Check Your Progress 7.2
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
154
1) Discuss the functions of the Export Promotion Councils. Global Trade Documentation

………………………………………………………………………
………………………………………………………………………
2) Mention any three organizations, other than EPCs, that also promote
exports.
………………………………………………………………………
………………………………………………………………………

Activity 7.2
Visit the websites of all Export Promotion Councils (EPCs) and gather
information on their objectives and functions. Based on the information
gathered, comment on their respective roles and significance in promoting
Indian exports.
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

7.4 CREDIT GUARANTEE CORPORATION IN

AGRICULTURAL EXPORTS
Export Credit Guarantee Corporation of India Limited (ECGC) was
established in the year 1957 by the Government of India to strengthen
the export promotion drive by covering the risk of exporting on credit.
Back in July 1957 it was known as Export Risks Insurance Corporation
(ERIC) and was renamed Export Credit and Guarantee Corporation Limited
(ECGC) in 1964 and finally to Export Credit Guarantee of India in 1983.
Being essentially an export promotion organization, it functions under the
administrative control of the Ministry of Commerce & Industry, Department
of Commerce, Government of India. It is managed by a Board of Directors
comprising representatives of the Government, Reserve Bank of India,
banking, insurance, and exporting community. ECGC is the fifth largest
credit insurer in the world in terms of coverage of national exports. The
present paid-up capital of the company is Rs.800 crores and the authorized
capital is Rs.1000 crores.
ECGC provides a range of credit risk insurance covers to exporters against
loss in the export of goods and services. It offers guarantees to banks and
financial institutions to enable exporters to obtain better facilities from
them. It also provides Overseas Investment Insurance to Indian companies
investing in joint ventures abroad in the form of equity or loan
7.4.1 Functions of Export Credit Guarantee Corporation
(ECGC)
Payments for exports are open to risks even at the best of times. The risks
have assumed large proportions today due to the far-reaching political and
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Agricultural Marketing: economic changes that are sweeping the world. An outbreak of war or
An Overview civil war may block or delay payment for goods exported. A coup or an
insurrection may also bring about the same result. Economic difficulties
or balance of payment problems may lead a country to impose restrictions
on either import of certain goods or on the transfer of payments for
goods imported. In addition, the exporters have to face commercial risks
of insolvency or protracted default of buyers. The commercial risks of a
foreign buyer going bankrupt or losing his capacity to pay are aggravated
due to political and economic uncertainties. Export credit insurance is
designed to protect exporters from the consequences of the payment risks,
both political and commercial, and to enable them to expand their overseas
business without fear of loss.
(i) Credit Insurance Policies: Credit insurance protects if the
policyholder is rendered unable to pay an outstanding debt due to any
incident that is covered in the terms of the policy. Under this genre are
included the Shipments (Comprehensive Risks) Policy (also called the
Standard Policy) suited for goods exported on short-term credit (i.e.
credit not exceeding 180 days), the Small Exporter’s Policy issued to
exporters with an anticipated annual turnover of up to Rs.50 lakhs.
Considering the requirements of large exporters, the Corporation has
decided to introduce policies where the premium is charged based on
the expected level of exposure. There is also a Consignment Policy
that protects Indian Exporters from possible losses that incur from
selling goods to ultimate buyers.
(ii) Guarantees to Banks: A guarantee from ECGC ensure that the
liabilities of a debtor are met even when s/he fails to settle it himself/
herself. The duration for the period of cover is twelve months and
all packing credit advances as per the RBI (Reserve Bank of India)
guidelines are eligible.
(iii) Special Schemes: A letter from ECGC guarantees that a buyer’s
payment to a seller is received on time and for the correct amount.
If the buyer is unable to make payment on the purchase, the bank is
required to cover the full or remaining amount of the purchase. When
a bank in India adds its confirmation to a foreign Letter of Credit, it
binds itself to honor the drafts drawn by the beneficiary of the Letter
of Credit. The confirming bank suffers a loss if the foreign bank fails
to reimburse it with the amount paid to the exporter. For example, the
Transfer Guarantee seeks to safeguard banks in India against losses
arising out of such risks. Transfer Guarantee is issued, at the option
of the bank to cover either political risks alone or both political and
commercial risks. Loss due to political risks is covered up to 90% and
loss due to commercial risks is up to 75%.
(iv) Help to exporters: ECGC helps the exporters in the following way:
• It offers insurance protection to exporters against payment risks.
• It guides export-related activities.
• It makes available information on different countries with its
own credit ratings.
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 • It makes it easy to obtain export finance from banks/financial Global Trade Documentation
institutions.
• It assists exporters in recovering bad debts.
• It provides information on the credit-worthiness of overseas
buyers.
Check Your Progress 7.3
Note: a) Use the spaces given below for your answers.
b) Check your answer with those given at the end of the unit.
1) How does ECGC helps the exporters?
………………………………………………………………………
………………………………………………………………………

7.5 LET US SUM UP

Thorough knowledge of procedure and documentation is essential if
a company wishes to export or import products. Not only the procedure
and documents but knowledge of promotion agencies and schemes may
facilitate imports and exports. Several government regulatory agencies, such
as the Directorate General of Foreign Trade in India, inspection agencies,
insurance companies, customs, and central excise authorities, banking
institutions, clearing and forwarding agents, shipping companies or airlines,
etc. facilitate trade transactions between the exporters and importers.
The Aligned Documentation System (ADS) has now been adopted in India.
It is a methodology of creating information on a set of standard forms
printed on paper of the same size in such a way that the items of identical
specification occupy the same position on each form. This system achieves
economy of time and effort, simplifies and priorities information required
by government agencies, and aligns it in a standardized format.
As a part of their export promotion strategy, all national governments have
established institutional set-ups to support export activities. The Department
of Commerce is the primary government agency responsible for evolving
and directing foreign trade policy and programmes, maintaining commercial
relations with other countries, supervising state trading, initiating various
export promotion measures, and developing and regulating export-oriented
industries.
Export Credit Guarantee Corporation of India Limited (ECGC) was
established by the Government of India to strengthen the export promotion
drive by covering the risk of exporting on credit. ECGC provides a range
of credit risk insurance covers to exporters against loss in the export of
goods and services. It offers guarantees to banks and financial institutions
to enable exporters to obtain better facilities from them. It also provides
Overseas Investment Insurance to Indian companies investing in joint
ventures abroad in the form of equity or loan

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Agricultural Marketing:
An Overview 7.6 KEYWORDS
Bill of Lading: The Bill of Lading is a document issued by the shipping
company or its agent acknowledging the receipt of goods.
Aligned Documentation System (ADS): It is a methodology of creating
information on a set of standard forms printed on a paper of the same size in
such a way that the items of identical specification occupy the same position
on each form.
Commercial documents: These are used by importers and exports in the
discharge of their respective legal and other incidental responsibilities under
sales contracts.
Regulatory documents: These are prescribed by different government
departments and bodies for compliance with formalities under relevant
laws.
C&F (Clearing and Forwarding) Agents: They carry out several functions
and provide various services related to the shipping of the consignments,
either by air or by sea.
Marine Insurance Certificate: It is a document that gives details of the
shipment insured.

7.7 SUGGESTED FURTHER READING/

REFERENCES
• Cateora, P. R., Graham, J. L., and Salwan, P., 2008, International
Marketing, 13th edition, Tata McGraw Hill Publishing Co. Ltd., New
Delhi, India.
• Johansson, J. K., 2008, Global Marketing – Foreign Entry, Local
Marketing and Global Management, 4th edition, Tata McGraw Hill
Publishing Co. Ltd., New Delhi, India.
• Joshi, R.M., 2007, International Marketing, 6th impression, Oxford
University Press, New Delhi, India.
• Keegan, W.J., 1998, Global Marketing Management, 5th edition,
Practice Hall of India Pvt. Ltd., New Delhi, India.
• Onkvisit, S. and Shaw, J. J., 2009, International Marketing – Analysis
and Strategy, 3rd edition, PHI Learning Pvt. Ltd., New Delhi, India.
• Samli, A.C. and Hill, J.S., 1998, Marketing Globally - Planning and
Practice, NTC Business books, Lincolnwood, Illinois, U.S.A.
• http://www.ecgc.in (Export Credit Guarantee Corporation of India
Limited)
• http://www.apeda.com (The Agricultural and Processed Food
Products Export Development Authority)
• http://www.stc.gov.in (State Trading Corporation of India Limited)
• http://www.mmtclimited.org (Minerals and Metals Trading
Corporation)
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• http://www.dgft.gov.in (Directorate General of Foreign Trade, Global Trade Documentation
Government of India)
• http://www.commerce.nic.in (Department of Commerce, Government
of India)

7.8 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 7.1
1) It is a methodology of creating information on a set of standard forms
printed on a paper of the same size in such a way that the items of
identical specification occupy the same position on each form. ADS
require the preparation of only one master document containing the
information common to all documents included in the aligned series.
2) On average, about 25 documents have to be prepared for an export
shipment. These documents can be divided into 2 categories namely
commercial documents and regulatory documents.
Check Your Progress 7.2
1) Provide commercially useful information and assistance; offer
professional advice; organize participation in trade fairs, exhibitions,
and buyer-seller meet; etc.
2) Commodity Boards, Marine Products Export Development Authority,
and Agricultural and processed Food Products Export Development
Authority
Check Your Progress 7.3
1) Offers insurance protection, guidance in export-related activities;
provides information on different countries with its own credit
ratings; makes it easy to obtain export finance; from banks/financial
institutions; helps in recovering bad debts, and provides informationon
credit-worthiness of overseas buyers.

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