TYBMS – V Sem Rural Marketing

RURAL MARKETING DEFINITION Market: ‘Market means not a particular market place in which things are bought and sold but the whole of any region in which buyers and sellers are in such a free intercourse with one another that the prices of the same goods tend to equality, easily and quickly.’-Cournot Marketing: ‘Marketing as a process by which goods and services are exchanged and their value is determined in terms of money prices.’ – H. E. Mitchell Agricultural Marketing: According to National Commission on Agriculture – XII Report “Agricultural marketing is the process which starts with a decision to produce a suitable farm commodity or product & it involves all aspects of market structure or systems, both functional and institutional, based on technical and economic considerations and include pre and post harvest operations like assembling, grading, storage, transportation, and distribution. ” Historical Perspective Of Agricultural Marketing: Historical perspective of agricultural marketing is mainly divided in to four periods they are as fallows: 1. Ancient period 2. Medieval period 3. Colonial period 4. Post independence/ modern period Ancient period: During the ancient period barter system was present where people used to exchange their goods or commodities in terms of another commodity. Kautilya in Arthashastra has mentioned that trade, commerce and finance formed the basis of the state. Medieval period: During the medieval period the main four kingdoms were: a. Delhi Sultan’s Dynasty. b. Mughal Dynasty.

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TYBMS – V Sem Rural Marketing
c. Vijayanagar kingdom. d. Peshwas Regime. Delhi Sultan’s Dynasty:  Internal trade: Were of two kind, namely; (i) Costal trade, and (ii) Inland trade  External trade: Was mainly between four countries i.e. Afghanistan, Central Asia, Persia and Iraq.  Trade centers: were situated at Delhi, Banaras, Allahabad, Ajmer, Pune, and the towns on highways like Agra, Patna, Ahmedabad, Barhampur, etc.  Main commodities: Food grains, spices and sugar were the main commodities for the export Mughal Dynasty:  Mughal controlled the sea – borne trade in Indian marine territories right from eastern coast of Africa up to the straits of Marucca.  There where mainly four outlets of sea – Cambay, Malabar, Coromandal coast and Bengal coast.  Main commodities: rice, sugar, edible oils, fat and spices, commercial crops like silk and sandalwood had also a large market.  Internal trade: during the Mughal period was of three kinds, namely, Coastal trade - Cochin to Cambay Riverine trade - through Ganga - Jamuna River and Bengal delta. Surface trade - from North region to central province.  Market centers: Kanpur, Agra, Delhi, Patna, etc. Vijaynagar Kingdom:  External trade: Portugal, Kuwait and Egypt Major commodities: husked and cleaned rice, palm, sugar, coconut, fruits, tobacco, spices etc.  Internal trade: were of three kinds: Costal trade- Cambay to Cochin Reiverine trade- through Godavari, Krishna, Tungabhadra, Kauvery. Surface trade- Cambay, Bhatkal, Mangalore, Malbar, Cochin and Calicut etc. Trade centers: Musalipatanam, Calicut, etc. Major Commodities: rice, coconut, edible oil, jaggery and other commodities.

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TYBMS – V Sem Rural Marketing

Peshwas Regime:  External trade: China, Afghanistan and Persia.  Internal trade: Was carried out through water and land  Main commodities: sugar, spices, dry fruits, and food grains.  Trade centers: Poona, Satara, Kolhpur, Nasik, Solapur, Kalyan and Miraj. Colonial period:  The Colonial Administration converted the traditional payment to the State, in the form of a proportion of actual produce in kind, into a fixed payment of land revenue in the form of cash.  The land revenue was calculated to be 5% of gross produce per acre in Central Provinces, 7% in Berar, 7% to 13% in Delhi & Bombay and 20% Gujrat.  Zamindari system was introduced during this period. This all led to debt traps to the poor farmers.  Brokers and dalals came in to existence between the farmer and the consumer. Post independence/ modern period: Five-year plan was introduced: First five year plan: Regulated markets were established in Bombay, Madras, Punjab, Hyderabad, Mysore and Madhya Pradesh where the management of these markets was vested in the committees in which growers (farmers) were also represented. In this plan the main thrust was laid on cooperative marketing and its aim was to have minimum 425 regulated markets in India. Second five year plan:  To recognize the existing system so as to secure for farmer his due share of price paid by customer and sub serve the needs of planned development.  Total agriculture produce markets were 2500 out of which 725 were regulated markets. Third five year plan:   Bring remaining markets to regulation, and Expand grading program for the commodities. Aim to improve agriculture market system and

Fourth fie year plan: 

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The main thrust here was of establishing Cooperative Marketing System. Madhya Pradesh. market yards and grading units. Seventh five year plan: Further expansion of regulated markets in terms of area and commodities. Eighth five year plan: Strength of marketing infrastructure with special reference to perishable commodities. Sixth five year plan: The main thrust was on  Further expansion of regulated markets in terms of both more markets and more commodities to be brought under the scope of regulation. Rajasthan and Kerala have > 80% of the population in the Rural areas only.TYBMS – V Sem Rural Marketing  In interest of producer the measure tasks undertaken were developments of road. States like Uttar Pradesh. RURAL MARKET PROFILE Profile of Rural Market can be studied as two topics : 1.  Development of rural markets and potential markets. RURAL CONSUMER: a. b. States like Bihar and Orissa still have > 90% in the Rural area. While.7% 1991 76% 24% Rural population Urban Population Majority of the population of India still exist in the Rural Area itself. Consumer Characteristics:  Low purchasing power -4- . Rural demand. its size and composition 1. Size of rural consumer population 1971 80% 20% 1981 76.3% 23.  Strength and stream lining the arrangement for enforcement to ensure regulated system of open auction. trade practices and margins of intermediaries. Fifth five year plan: Development of agriculture marketing through cooperatives. Rural consumer 2.

nearly. Location Pattern Urban: Population concentrated in 3200 cities & towns Rural: Population scattered over 576000 villages. 22000 crores in 1993-94. rural prosperity and the discretionary income with the rural consumer are directly tied with agricultural prosperity because. compared with 12 crore in urban India.TYBMS – V Sem Rural Marketing       Low standard of living Low per capita income Low literacy level Low economic and social position Tradition bound community Religion.5 lakh or nearly 25% of the villages have population of 200 or less. d. Rural savings: The commercial and co-operative banks have been marketing the saving habit in the rural areas for quite some years. 60% of rural income is from Agriculture. 70% of rural households are saving and majority of them belong to salary earners and self-employees non -farmers. Inference: Rural Demand is Seasonal and Festival linked.5 crore of literate people are in Rural India Every year 60 lakh is getting added to the literate population of rural India. f. Literacy level:   Rural India – 23% literacy as compared with 36% of whole country In absolute numbers 11. 5000 crores in 1969-70 to Rs. Rural income: Evidently. SIZE AND COMPOSITION OF RURAL DEMAND:  Size of Rural market in non-food consumption items has been increasing from Rs. Inference: Rural demand is scattered over a large area. 6300 villages have population more than 5000 persons More than 55% villages have population of 500 or less people More than 1. 2. culture and even superstition c. (Size of market at current prices) -5- .  e.

Pumps and Tube wells – 11%. availability of public transport. Seasonal and Agriculture dependent: -6- . detergents. Haryana. post offices. Large and Scattered Market: The rural market of India is very large.15%. Pesticide consumption grew at compounded rate of 12%.  Product categories like cooking utensils.000 crore rupees worth of nonfood consumer goods are being sold per year.  As per an IMRB study. Bihar’s average is just 22. more than 60% of the villages in India now have shops stocking soaps. ornament or jewellery. and states like Maharashtra.76. FEATURES / PROFILE OF RURAL MARKET 1. consisting of >600 million consumers. of consumers Large is in terms of Business 2. it is a big market. scattered / spread over 5. packaged tea and batteries. TV transmission. water supply etc. electricity. In terms of business generated too. Heterogeneous Market: The relative status of the rural areas of different states differs. washing soaps. IMRB study reveals that an average village in India has 33 development index points. 22. nature of facilities. Karnataka range between 40 and so. Kerala’s average Is 88.TYBMS – V Sem Rural Marketing  Composition of demand: Many new products have entered the consumption basket of rural consumer. Rajasthan and UP are close to Bihar. Tractors . while MP. Demand. 3. bathing soaps. packaged tea.  There has also been a rapid growth in consumption of Agri-inputs : Between 1971 and 1991 consumption of fertilizers grew at an annual compound growth rate of 10%.000 villages. No. etc. banks. Parameters on which they differ are Health and education facilities. detergents.

It produces 15 million eggs.TYBMS – V Sem Rural Marketing The basic occupation of people in Rural Indian is Agriculture and agriculture is seasonal. 3. Blue Revolution). -7- . Improved exports due to Export Policy: Open market. Rural demand is not only harvest linked but also festival linked. CHANGING PATTERNS IN RURAL DEMAND . Self Employment policy with assistance from bank has become great success in rural areas. 50 million tonnes of milk per annum (White revolution. 5. medium & long-term loans – has helped rural masses in better investment. increased purchasing power. Better credit facilities through banks: All types of loans – short. Rural people have money only during the harvest period and most of the harvest periods are celebrated as Festivals in India. social. increased purchasing power. Steady growth despite inhibiting factors: The market has grown not only in quantitative terms. 4. WTO. 2. Many new products have made entry into rural consumer basket. Hence. Hence. cultural and linguistic factors. Characterised by Great Diversity: The rural consumers of India are vastly diverse in terms of religious. GATT. increased income. 4. Today. rural India generates 185 million tonnes of food grains per year and expected to reach 210 million tonnes by 2010. has all resulted in better openings / markets. but qualitatively also. 90 million broilers.REASONS 1. New Employment Opportunities: New Income due to rural development or agricultural advancement. Green Card / Credit Card for farmers: Helps / encourages farmers to buy consumer goods on easily payable credits / installment basis. Operation flood. 5. Green Revolution: A technological break through since 1965 in Indian agriculture.

10. Marketing Efforts: Firms like HLL. etc. BrookeBond. Sales force Management 4. Remittances from Indians working abroad: A sizeable contribution to growing rural income & purchasing power. it would be totally naïve to think that any firm can easily enter the market and walk away with a sizeable share of it. Managing Physical Distribution in Rural Markets: The special problems in physical distribution in the rural context are: (i) (ii) Transportation Warehousing -8- . 9. 7. Media: Role of newspapers.. radio.V. etc. BFL. tax exemption in backward areas. subsidy. have started penetrating rural market. Godrej soaps. Awareness of the rural people Kindled their hopes Strengthened Earn their motivation to work more Consume more 8. has given rise to new demand for goods and services. Bajaj Auto. Political & Social changes through favourable Government policies: New farm policy. Channel Management 3. Expectation Revolution among Rural Masses: Expectation Revolution brought about a powerful change in the environmental dynamics. Physical Distribution 2. high support price.TYBMS – V Sem Rural Marketing 6. TAPPING THE RURAL MARKETS While the rural market of India certainly offers a big attraction to markets. What are these problems? How are they peculiar to the rural market? How does a firm solve them? The Problem Areas in Rural Marketing: 1. T. Promotion and Marketing Communication I. etc.

iii. Communication Transportation problem: Railway: Though India has the fourth largest railway system in the world. Warehousing problem: Business firms find it quite difficult to get suitable godowns in many parts of rural India. Three tier warehouse structure: Top tier -At nodal points/ major market centre Second / Middle tier -At Mandi level Third / Bottom tier . or it has to establish its own depots or stock points run by its stockists / distributors. The government had planned to connect at least the bigger villages. and there are no public warehousing agencies in the interiors of rural India. ii. many parts of the rural India remain outside the rail network.TYBMS – V Sem Rural Marketing (iii) i. Warehouses owned by cooperatives provide warehousing service only to their members. A business firm has to manage with the CWC/SWC n/w. Road: Nearly 50% of the 576000 villages in the country are not connected by roads at all. with all – weather roads by 1990 – but this is not accomplished yet.At villages CWC/SWC do not extend their network of warehouses in rural parts. villages with a population of 1500 or above. Many parts of rural India have only kuchha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. Communication Problems: owned by cooperatives owned by cooperatives CWC and SWC -9- .e. i. which stops with the nodal points.

Trucks for medium / short distance movement. Advantages – Bullock carts are cheaper. physical distribution costs gets escalated with 80% of the total rural consumers living in the less than 1000 people category of villages. as compared to the urban market. they are available in plenty and are ideal for rural roads. It means higher costs of transportation. Advantage – The costs of physical distribution can be shared by the firm and the stockists. some of the firms try out remote control marketing – simply consigning the goods and retiring the bills through banks – unfavourable for the long term. the firms have a network of stockists or c & f agents at the strategic locations for facilitating Physical Distribution of its products in the rural areas. is quite inadequate in rural areas.10 - . At the same time. Consequently. Combining different Modes o Transport may be Advantageous: o o o o The system of rail-cum-trucks for long distance movement.TYBMS – V Sem Rural Marketing Communication infrastructure. These vans takes the products to the retail shops in every nook and corner of . Delivery vans and bullock carts for local haulage. Brooke Bond-Lipton and ITC use delivery vans. the total distribution per unit is higher by as much as 50 % on an average in the rural market. Company Delivery Vans: Companies like HLL. Cost-service dilemma – Maintaining the required service in the delivery of the products at the retail level becomes very difficult. The Firm can share Physical Distribution responsibility with its stockists or clearing – cum – forwarding agents: With a view to keeping the costs low. Some companies have fared two and a half times increase in the cost of distribution in rural areas compared to urban areas. Tomco. Water transport. consisting of posts or telegraph and telephones. Instead. 2. 3. Solutions / Firms cope with Physical Distribution: 1. higher inventory carrying costs and transit or storage losses.

Syndicated Distribution: The firms come together and encourage an independent agency to operate such delivery vans with a view to hiring its service. the choice of candidates is really limited. Greater Dependence on Dealers Inescapable  Dependence of the firm on intermediaries is very much enhanced. Disadvantages: the cost of operating such vans is high. 4. The delivery vans here becomes a syndicated service.11 - . Control is mostly indirect. Scope For Manufacturers’ Own Outlets Limited. Channel Management in the Rural Markets: i.TYBMS – V Sem Rural Marketing the rural market. Multiple tiers. This can work only if the market / area assures business substantial enough to cover such costs. Non Availability Of Dealers: Even if the firm is willing to start from scratch and try out rank newcomers. it also helps the firm in the sales promotion. . II. High costs and Administrative Problem: Manufacturer’s own warehouses / branch office Wholesaler / Stockist in the town Mandi Level Distribution Village Level Shopkeeper Rural Consumer ii. It enables the firm to establish direct salescontact with thousands of rural consumers. iii.

but its role is limited in marketing branded products. Inadequate Bank Facilities: Rural outlets need banking support for three important purposes:  stocks   To receive supplies through bank (retiring documents with the bank) To facilitate securing credit from banks. And the vicious circle of lack of credit facilities leading to inadequate stocking or loss of business finally resulting in poor viability of outlets get perpetuated. To facilitate remittances to principals and to get fast replenishment of vi. Inadequate Credit Facilities From Banks: The rural outlets are unable to carry adequate stocks due to lack of credit facilities. Solutions:  The Existing Market Structure: Indian rural market is composed of 22. The structure involves stock points in feeder Towns to service. Poor Viability Of Retail Outlets: Manufacturer incurs additional expenses on distribution and still the retail outlets find that the business is unremunerated to them. The co-operative societies are mainly concerned with distribution of agricultural inputs are the FPS with distribution of essential commodities.12 - . v.FPS Co-operative Societies – Village Shandy/ Weekly markets. The stock points belong to either the manufacturer or the marketer / distributor for the area. These retail outlets at the village level.TYBMS – V Sem Rural Marketing iv. They are unable to extend credit to their customers. .  The Available Channel Choices:   Private shops.000 primary rural markets and 20 lakh retail sales outlets of which nearly one lakh are FPS (Fair Price Shops) of the public Distribution System (PDS). The village shandy is widely used in rural marketing. One retail shop serves on an average 60-70 families in the rural areas.

Educated unemployed persons. The firm supplies the goods to the stockists either on cash or credit or on consignment basis. According to the Operations Research Group (ORG) there are 2. warehousing of goods and sub-distribution of goods in the area covered by the feeder town. Over a period of time. Satellite Distribution: The firm appoints stockists in feeder tours. on account of the growth in demand & deeper market penetration. Willingness to get located in Rural Areas.of retailers in and around the feeder towns and attaches them to the stockists. Moneylenders willing to branch off to trade. Land owners willing to branch off to trade. If such retail points also happen to be transportation centers within the feeder town area. but care is taken to see that his volume of business does not shrink. It is quite natural that firms seeking an effective presence in rural marketing. some retailers grow in terms of business turnover. Advantages: It helps & facilitates market penetration in the interiors of rural market. Cultural congruence: The salesman must have proper acquaintance with the cultural pattern of rural life in the given territory. III.TYBMS – V Sem Rural Marketing  The Private Village Shops: They are the main channel in the rural market for a large variety of consumer products. They take care of financing of goods. 1. Unique Traits required on the part of rural salesman. Sales Force Management in Rural Market. The firm also appoints a no. This is achieved.13 - . The process continues as long as the market keeps expanding. It has to select its outlets from out of existing shopkeepers or select a few freshers & appoint them as the outlets. the firm elevates them as stockists. in practice. they are also the cheapest and the most convenient channel to align with.02 sales outlet in rural India. The choices are usually confined to the following categories : Existing traditional private shops. The stockists take care of the sub-distribution job or the terms or conditions determined by the firm. willingly embrace the private village shops. 2. . The area of operation of the original stockists shrinks in this process.

Tradition bound Cultural barriers Overall economic backwardness Linguistic diversity Motivating them. for. Attitude factors: The rural salesman must have great deal of patience as their customer is a Traditional & cautious person. Rural salesman are also required to travel more compared to their urban counterparts. coaching in selected village markets. Educate rural marketing environment. Rural marketing also presupposes the delivery of new standard of living to the rural masses. using the consumption pioneers and opinion leaders. in rural India. Knowledge of the local language: The rural salesman needs a strong background of the local language.   IV. Capacity to Handle Large Number of Product Lines: The rural salesman usually do not generate economic volume of business if they handle a large variety of items. 6. 5. within each major language group. Greater creativity: Rural salesman should introduce new products in the rural areas through creative selling. Perseverance is another essential traits 4. . Developing them Marketing Communication in Rural Markets It has been estimated that all organized media put together can reach 30% of the rural population in India.TYBMS – V Sem Rural Marketing 3. He must be well versed in the specific lingo and idiom of the local area / community. Problems:      Low literacy rate: printed word has limited use. the colloquial expression and speaking manners vary considerably from locality to locality. It is essentially developmental marketing.14 - . Managing Rural Sales Force   Selecting the salesman Giving them orientation – more on the job training.

direct mail. Radio .TYBMS – V Sem Rural Marketing Various publications reach only 18% of rural population. non-formal media. Other print media. in the rural context the firm has to choose a combination of formal and Formal / Organised : TV. pictures and colours must be used. Pops :More than written words. point of purchase (POPs). 33% of total cinema earnings in the country come from rural India. Puppet Shows.repeat exposures is a must. house to house campaigns by special promotion squads. radio. rural specific art forms like Harikatha and Villupatu performed at village melas and temple festivals. etc. the message loses its edge during this period. demonstrations. Short feature films with disguised advertisement. mike announcements. illuminations and other displays in rural areas. outdoors. music records.15 - . symbols. direct advertisement. Cinema : 29 % of all rural people do see cinema as a matter of regular lifestyle or habit. A V vans :Films can exhibit its films or other A-V presentations such as slide shows. etc. Selecting the media mix: Evidently. Communication Stages in Rural Area Rural Communication to be effective . and if the gap between them is long. sound or sight presentations.    Creating Awareness Altering Attitudes Changing Solutions 1. study classes. Out doors :Hoardings. TV : 77 % of villages in India now receive TV transmission and 27 % of all rural people actual watch TV. Dance-dramas. Press. information centers on companies products. decorated bullocks carts carrying ad panels. radio does have a major role in rural communication. Non-formal / rural Specific Media : A V vans / Publicity vans. films or documentaries. is a well established medium in rural areas while radio as a medium cannot match TV in potentiality or effectiveness. Messages. The van is a comprehensive mobile . caparisoned elephants. wall paintings. that combine knowledge or advertisement can be employed for rural communication. puppet shows. processions. Cinema.

a major part of produce is brought for sale by the producer-farmer themselves. Owned by market committees. Based on Volume of Transaction 5. Based on Extent of Public Intervention Classification of Markets 1. the message. Disadvantage: The cost is high Syndicated AV vans : Firms which cannot effort to operate publicity vans of their own utilize the syndicated AV van service offered independent agencies.TYBMS – V Sem Rural Marketing promotion station at the exclusive command of the concerned firm. major transaction takes place among buyers and sellers of a village. usually a greater time lag is involved between introduction of a product and its economic size sale. This is the rural buyer’s adoption process is usually more time consuming. Based on Nature of Transaction 6. Based on Nature of Commodities 9. the language or the delivery must match the rural context.16 - . Transaction is between farmers and traders. local bodies / private individuals . near center of production of agricultural commodities. Based on Time Span 4. Location:   Village Markets – Located in small villages. Communication for the Rural Market has to be uniquely assembled and delivered: The theme. In rural marketing. Based on Number of Commodities 8. Based on Location 2. Primary Wholesale Market – Located in big towns. Based on Degree of Competition 7. Based on Area / Coverage 3. 2. the copy. Based on Stage of Marketing 10. STRUCTURE AND TYPE OF AGRICULTURAL MARKET Dimensions of Market: 1. Portable exhibition kits can be carried in the vans.

Area / Coverage:  Local / Village Markets – Buying and selling activities are confined among buyers and sellers drawn from same village or nearby villages. commission agents.17 - . silver. Ex: fish. Time Span:     Short period Market – few hours. Ex: foodgrains. The produce in these markets is handled in large quantities. Ex: fresh milk. oilseeds Secular Markets – permanent nature. Transaction is between traders. Ex: dural commodities like jute. timber 4. meant for import / export of goods. major transaction takes place between village traders and wholesalers.buyers and sellers are drawn from whole world. weighmen. Ex: manufacture goods. There are specialized marketing agencies performing different functions such as. milk Long Period Markets – larger period. Volume of Transaction: Wholesale Markets – Commodities are bought and sold in large quantities / bulk.  Sea board Markets – Located near sea shore. 2.buyers and sellers are at national level. cotton 3. mostly perishable commodities in small lots.TYBMS – V Sem Rural Marketing and are periodically held wherein every shopkeeper has to pay rent for the space he occupies. tea  World Market .  Secondary Wholesale Markets – Located in district head quarters / important trade centers / near railway junctions. products of highly perishable nature. Ex: coffee. Ex: foograins  National Market . brokers. The bulk arrival in these markets is from other markets. .  Terminal Markets – where the produce is finally disposed off directly to the consumer / processor / assembled for export and possesses sufficient warehousing and storage facilities covering a wide area extending over a state or two. gold. vegetables  Regional Markets – buyers and sellers for commodities are drawn from a larger area. less perishable.

which mainly assemble the commodities for future distribution to other markets. cotton markets. shares and securities. Specialised Market: Transactions take place only in one or two commodities e.g. c. cotton etc. Duopoly. Regulated markets: Markets in which business is done in accordance with the rules and regulations framed by the statutory market organisation and represent different sections involved in markets. Consuming Markets: Which collect the produce for final disposal to the consuming population located in areas where production is inadequate or in thickly populated urban centers. Stage of marketing: a. b. consultancy 9. Monopolistic competition  large no of sellers deal in heterogeneous and differentiated form of a commodity. barley. Spot or Cash Market: A market in which goods are exchanged for money Forward Market: Purchase and sale of commodities takes place at time ‘t’ immediately after the sale. No of Commodities: a. but the exchange of commodity takes place on some specific date in future i. 7. Service Market: deals in providing service e. Nature of Commodities: a. The marketing costs are . Producing market: Those markets. Imperfect Market: Monopoly. b. 6. Oligopoly.g.TYBMS – V Sem Rural Marketing  Retail Markets – Commodities are bought and sold as per consumer requirements. Perfect Market: Large number of buyers and sellers. are bought and sold. b. Extent of public intervention: a. food grains market. General Market: All types of commodities such as food grains.18 - . b.e. mango markets. b. oilseed. Commodity Market: deals in goods and raw materials such as wheat. Capital Market: deals with bonds. Degree of competition: a. 10. 8. ‘t+1’. 5. fibre crops etc. Nature of Transaction: a. Located in producing areas.

private negotiations take place directly between the buyer and seller.a. METHODS OF SALE: 1. the name and the offer price of the highest bidder is announced to the seller by the c. Disadvantage: Provides opportunities for cheating the seller this system has been abolished by the government. to the buyer. taken by commission agent: The commission agent takes the sample of the produce to the shops of the buyer. 4. Traders frame the rules for the conduct of business and run the market. In village. Under cover of a cloth (Hatha system): The prices of the produce are settled by the buyer and the commission agent of the seller by pressing/twisting the fingers of each other under cover of a piece of cloth. The commission agent makes a number of rounds to prospective buyers until none is ready to bid a higher price then the one offered by a particular buyer. by the prospective buyers. loss of incentive to the farmers to produce quality goods. Advantage: Within a short time a large number of lots are sold off. 2.TYBMS – V Sem Rural Marketing b. The price is offered. . The produce is given to highest bidder. not suitable when either large quantities have to be sold or a large number of buyers exist in the market. slow. based on the sample.19 - . If the price is accepted the commission agent conveys the decision to the seller and the produce is given after it has been weighed. The individual buyers come to the shops of commission agent at a time convenient to the latter and offer price for the produce which. Dara Sale Method: The produce is mixed and then sold as one lot. Unregulated markets: Business is conducted without any set rules and regulations. Code symbols are associated with the twisting of the fingers and traders are familiar with these. Disadvantage: Time consuming. The negotiations in this manner continue till a final price is settled. Therefore. Private Negotiations: Unregulated markets. When all the buyers have given their offers. Disadvantage: produce of good quality and one of poor quality fetch same price. Quotations on sample. for buyers are not aware of the price offered by other buyers. they think are appropriate after the inspection of the sample. Advantage: Seller gets good price. 3.

Buyers sometimes join hands. 3 types of open auctions: a. Auction serves as meeting place for supply of and demand of the goods. It disposes of the market supply promptly. 2. Moghum Sale Method: The sale of produce is effected on the basis of a verbal understanding between the buyer and the seller without any pre-settlement of price but on the distinct understanding that the price of the produce to be paid by the buyer to the seller will be the one as prevailing in the market on that day or at that rate at which other sellers of the village sold the produce. 3. Open Auction Method: The prospective buyers gather at the shop of the commission agent around the heap of the produce. . In most of regulated markets the sale of produce is permissible only by this method. The payment of the price of goods is made immediately after the sale if an auction has been completed. 2. Phar system of open auction: One bid is given for all the lots in a particular shop and all the lots are sold at that price. especially in peak marketing season the time allotted for auction is short.TYBMS – V Sem Rural Marketing 5. Disadvantages: 1. Requires more time for both buyer and seller have to wait for the day and rime of auction. Auction leads to a buyer market for buyers have full information about the supply of and demand for the product. In big market centers.20 - . for farmers are indebted to the local moneylenders. examine it and offer bids loudly. As a result sellers may receive a low price. One extreme case of this method is when one bid is given for the product in the whole market. Fair dealing to all the parties. 3. 6. 4. 4. Advantage: 1. The produce is given to the highest bidder after taking consent of the seller farmer. This method is common in villages.

which is. made available by the farmers to the non-farm population.TYBMS – V Sem Rural Marketing b. Advantage: Time saving. for family consumption. for seeds. and deposit the slip in a sealed box by buying at the commission agent’s shop. P= Total production and C= Total requirements. Close Tender System: The produce displayed at the shop of the commission agent is allotted lot numbers. payment to artisans – carpenter. and feed for cattle. Rostev Bid system of open auction: The bidding starts from a point in the market at a notified time about which the prospective buyers are given information in advance. MARKETED AND MARKETABLE SURPLUS The producer’s surplus is the quantity of produce. The prospective buyers visit the shops inspect the lots offer a price for the lot which they want to purchase on a slip of paper. The auction is supervised by the auction clerk or the person nominated by the market committee.is that quantity of the produce. or can be. potter and mechanic – payment to the landlord as rent. MS1=P-C. The producer’s surplus is of two types: 1) Marketable Surplus: . Random Bid system of open auction: The commission agent invites a few buyers when the produce is brought to his shop for sale. As a result competition is poor. involves minimum physical labour. All the prospective buyers are not informed. and social and religious payments in kind. The bidding party after the auction the produce at one shop moves to the next in a clockwise or anti clockwise directions till the auction of the produce at all the shops is over or the scheduled auction time expires. When the auction time is over the slips are arranged according to the lot number and the highest bidder is informed by the commission agent that his bid has been accepted and that he should take delivery of the produce. blacksmith. where MS1= Marketable surplus. 7. The marketable surplus is the residual left with the producer-farmer after meeting his requirements. which can be made available to the non-farm population of the country. c.21 - . no possibility of collision among the buyers. Regulated markets in Tamilnadu have close tender system method. payment to Labour in kind. . farm need.

his feed and need requirements. This situation holds true under the following conditions: a) Large farmers generally sell less than the marketable surplus.is that quantity of produce. This is true especially of small and marginal farmers. and his social and religious payments. >. because of their better retention capacity. With the fall in price of the related to a competing crop.marketable surplus.When the farmers retain a smaller quantity of the crop than his actual requirements for family and farm needs. where need for cash is immediate. the payment of wages in kind. b) Farmers may distribute the crop for another crop.22 - . the marketed surplus is the total quantity of arrivals in the market out of the new crop. which may be defined subjectively and objectively. because of the variation in the prices. or = Marketable surplus 1) Marketed Surplus > Marketable surplus: . irrespective of his requirements for family consumption. This situation of selling more than the marketable surplus is termed as distress or forced sale. Limitations: a) Limited geographic coverage b) Small and marginal farmers c) Inconvenience in borrowing Relationship between marketed and marketable surplus: Marketed surplus can be <. which the producer-farmer actually sells in the market. Subjectively. the term refers to theoretical surplus available for sale with the producer-farmer after he has met his own genuine consumption requirements and the requirements of his family.TYBMS – V Sem Rural Marketing 2) Marketed Surplus: . the farmers may consume more of the 1st crop and less of the 2nd crop. Objectively.When the farmer retains some of the surplus produce.When the farmer retains neither more nor less than his requirements. 2) Marketed Surplus < Marketable Surplus: . This holds true for perishable commodities and of the average farmers . either for family consumption purpose or for feeding their livestock. Bansil writes that there is only one item. farm needs and other payments. 3) Marketed Surplus = Marketable Surplus: . They retain extra produce in the hope that they would get a higher price in the later period.

. 7) Cash requirements – If fixed: Marketable surplus will vary inversely with price changes. 3) Price of the communication – has both positive and negative relationship. smaller is the marketed surplus. and given the price level. and that the marketed surplus is inversely proportional to the price level.Dandekar and Rajkrishnan say there is a positive relationship. HYV Seeds. the marketed portion of the output is determined.A. This implies that the farmers’ consumption is a residual. crop may increase the producer’s real income sufficiently to ensure that the income effect on demand for the consumption of the crop outweighs the price effect on production and consumption.Mathur and M. Karnataka are predominantly riceconsuming states. 4) Size of the family – Larger the number of members in a family.M. depending upon whether one considers short and long run. 5) Requirement of seeds and farm – Higher the requirements.N. New technologies. 2) Level of Production – Positive relationship. Relationship between prices and marketable surplus: 1) Inverse Relationship: . Food crops are retained.g. the smaller the surplus in the farm. 8) Nature of crops – Farmers produce two types of crops: food crops and cash crops. Ezekiel. or the micro and macro levels. while cash crops enter the market. 2) Positive Relationship: . Olson and Krishnan have also argued that the marketed surplus varies inversely with the market price. They contend that a higher price for a. 9) Mode of production – Use of traditional methods: less marketable surplus.P. 6) Consumption habits – e. according to a study by Dr. Dharm Narayan.P. . If variable: Marketable surplus will increase in response to increase in price.TYBMS – V Sem Rural Marketing Factors affecting marketable surplus: 1) Size of holding – There is positive relationship between the size of holding and the marketable surplus. This behaviour assumes that farmers have inelastic cash requirements. South India.23 - . They postulate that the farmers’ cash requirements are nearly fixed. and hence wheat enters the market.V. chemical fertilizers: more marketable surplus.

(ii) Arahatias/Commision AgentsKaccha Arahatias – primarily act for the sellers. etc. and directly purchase the produce from the cultivaters. Transport Agency.Commission Agents.Those middlemen who take title to the product with a view to making a profit on it. 1) Beoparis: Village Beoparis have their small establishments in villages. including farmers. Beoparies.act on behalf of the traders in the consuming market. The processors (vice millers. iii) Speculative Middlemen. They either sell the collected produce in the nearby market or retain it for sale at a later date in the village itself. Communication Agencies. E. oil millers or cotton/jute dealers) and big wholesalers in the . They purchase the produce of those who have either taken finance from them or those who are not able to go to the market. Brokers. Arahatias. Retailers. They often visit nearby markets or keep in touch with the prevailing prices. Village beoparis also supply essential consumption goods to the farmers.24 - . They sometimes provide advance money to farmers or itinevant beoparies/traders on condition that the produce will be disposed of through them. They transport it to the nearby primary or secondary market and it there. so long as the substitution effect is non-zero. Advertising Agencies. iv) Facilitative Middlemen.Wholesalers. Middlemen: i) Merchant Middlemen. Pacca Arahatias.some middlemen do not buy and sell directly but assist in the marketing process. Itinerant Beopari are petty merchants who move from village to village.TYBMS – V Sem Rural Marketing Rajkrishnan has pointed that the elasticity of the marketable surplus is not negative. They charge arahatias/commission in addition to the normal rate of interest on the money they pay in advance. They specialise in risk-taking. Hamals/Labourers. MARKETING AGENCIES 1. They act as financiers of poor farmers.g. Grades. ii) Agent Middlemen. Weighmen/Tolas. Producers 2.

 Creating capital assets. The remaining is carried forward over the period of 7 years. MARKETING FINANCE Agricultural credit is of two types: 1. mechanization. agricultural machinery. Consumption credit: It is basically for survival of farm families. payment of wages. (iii)Long term:  5/7 years to 20/25 years. 2. Land fencing.  Purchase of livestock. storage facilities etc. electricity charges etc. hike charges of machinery or tools.Survey committee 15 months to 5 years.Production credit: (i) Short term: 15 to 18 months Loans to meet daily working capital requirements of farmers’ purchase of Inputs.25 - .Production credit 2. construction of farm houses. (ii) Medium term: .  Only a part of medium term loan is expected to be ventured in current production. equipment etc.TYBMS – V Sem Rural Marketing consuming markets employ Pacca arahatias as their agents for the purchase of a specified quantity of goods within a given price range. Sources of agricultural credit: a) Co-operative credit: i) Primary co—operative credit: Short term ii) C-operative Land Development Bank: Medium term Limitations: i) Limited geographic coverage ii) Small and marginal farmers .Consumption credit 1. (a) Cash component (b) Kind component: Co-operative marketing societies. NABARD 18 months to7 years.

The National Agri. ♦Reduction of regional disparities within states. Margins and security Credit norms finance: 30:70 cash: kind Recovery or default RBI issues guidelines: . These banks also finance for operation of FCI. Indirect finance is granted by providing advances for distribution of fertilizers or other inputs.TYBMS – V Sem Rural Marketing iii) Inconvenience in borrowing iv) Huge over dues V) Linked with ownership landholding b) RBI: Appointed AIRCSC. e) Agricultural Refinance: Parliament established Devt Corporation: 1963 ♦To co-ordinate. ♦Economic upliftment of weaker section.26 - . State Government and their agencies for procurement. recommended: i) ii) The National Agri. LDB’s. guide and assist long-term finance lending institution. ♦Helping in reduction of regional imbalances. Credit (Long term operations) fund. Credit (Stabilisation fund) • • • c) SBI: It provides financial assistance to marketing for processing co-operatives as well as for co-operative sugar factories. d) Commercial Banks: Direct finance is granted for agricultural operations for short and medium periods.R. industrial co-operatives etc. f) R.B: (Features) ∆ ∆ Rural Based Cater to the needs of backward areas.

∆ Problems:  Problems in organization (Multi-agency control)  Increasing Losses. ∆ Fluctuations in the price: If the prices increase.  Recovery Problems.TYBMS – V Sem Rural Marketing ∆ Authorised capital structure: Authorised Capital. Paid-up capitalRs 25 Lakhs. Land Improvement loans Act 1883 – Long-term loans. Share Capital Ratio – 50:15:35 i. Cotton and oilseeds are higher than for trading in food grains . chillies. g) NABARD: Apex Body.  Problems in Management. Factors Affecting Capital Requirements of an Agriculture. Govt: Own Deposits: Sponsoring Commercial Bank.27 - . .Marketing Firm: ∆ Nature and Volume of Business: Financial requirements for trading in high value crops like cumin. ∆ Necessity of carrying large stocks: This is in case of seasonal produce. the financial requirements increase.Rs. TO assist the farmers to overcome emergencies. floods and the other natural calamities. Whole sale business requires more than retail business. 1 Crore. ∆ Terms of payment for purchase and sale: Whether payment will be in cash or credit or by instalments affect financial requirements of manufacturing middlemen. ∆ Continuity of business during various seasons: Financial requirements are higher for continuing business than the seasonal businesses. ∆ Risk – Taking capacity: A middleman with low risk – taking capacity often resorts to hedging and needs less finance than the middleman who takes risk. h) Government Finance: ∆ ∆ ∆ ∆ Takkavi loans to release distress caused by the draughts. ∆ Time required between production and sale: Financial requirements are higher for durable goods than the perishable ones.e. which looks after the financial needs of agricultural and rural development. Agriculturists’ Loans Act 1884 – Short-term loans.

There are many imperfections in the marketing system for agricultural commodities. 35% to 80% in cash crops and 80% to 90% in perishable commodities . which result in low returns for their produce . About 60% to 80% of the food grains are still marketed in the first quarter of the harvest season.The village sale is 20% to 60% in the food grains. since the marketing agency has to hold stock for a longer period in anticipation of a price rise.TYBMS – V Sem Rural Marketing ∆ General conditions in the economy: During the period of price falls/recession. DEFECTS IN RURAL MARKETING:Efficient Marketing is a prerequisite in the development process of any economy.28 - . 2) Post harvest immediate sales by farmers / distress sales:A majority of the cultivators tend to sell their produce immediately after the harvest at the low prices prevailing at that time . They are: 1) Heavy village scales of agricultural commodities:A majority of the farmers in India sell a large part of their produce in the villages . e) Farmers dislike city markets mainly since of their lack of knowledge about prevailing market practices . The basic objectives of an efficient marketing are to ensure remunerative prices to the producers and a reduction in the marketing costs and margins. c) There is small quantity of marketable surplus with a majority of the farmers since of the small size holdings . to provide commodities to the consumers at reasonable prices. and promote the movement of surpluses for economic development. d) Perishability of the produce or lack of storage facilities.The factors responsible for village sale :a) Farmers are indebted to village moneylenders . b) Transport Bottlenecks: Difficult to carry the produce in bullock carts to the markets which is often situated at long distances. They are often forced either to enter into advance sale contract or sell the produce to them at low prices . the possibility of theft or robbery in transit. the financial requirements increase.traders or landlords. The reasons for existence of "Distress Sales ":a) Poor Retention power of the farmers arising out of their pressing need .

Hence. d) Low risk bearing ability of the farmers . The reasons for lack of organisation among them are – 4. As a result of which the length of marketing channel increases and the cost of marketing and market margins go up. muddat (charge for making cash payment). 3. e) In surplus producing states like Punjab or Haryana . Marketing aspect is not given due importance by the farmers. theft or other uncertainties . etc are paid. Existence of many middlemen / Superfluous Middlemen: There is no restriction from social / government for entry of market middlemen. 100/. therefore. brokerage. weighment.29 - . 5. most of the marketed surplus of the wheat or paddy / rice is sold by the farmers to public agencies at the support prices and this remains constant during marketing year. producers receive less price.is very high for agricultural goods compared to that of the products of other sectors. They cannot therefore. darmada (charity for goshala. Multiplicity of Market Charges: The cost of market of produce worth Rs. A large number of market charges – commission. Hence. insist on a reservation price for their produce and they silently watch as the open auction takes place. hamali. Caste feeling among the farmers Locational disadvantages and difficulty in bringing them under one organisation. 6. it is advantageous to sell during post harvest season.TYBMS – V Sem Rural Marketing for cash to repay their debts and meet their cash needs for payment of land revenue . dhalta (excessive moisture charges). b) Inadequate storage facilities available in the villages . c) Fear of loss of produce by fire . Existence of Malpractices: . and for meeting their social obligations. Difference in the size of holdings and the surplus available with the farmers. water hut). because of their ignorance. the purchase of items of basic necessity . either private or public . Because of this. they have low bargaining power and they have to deal with traders having strong organisation. while consumers pay high price. there a number of middlemen between producer and consumer. Inadequacy of institutional marketing infrastructure and lack of producer’s organisation: Farmers are disorganized and market their produce individually. The rates of these charges also vary from market to market. karda (impurity charges).

The situation has not improved much with the role of institutional credit as farmers find the institutional sources more cumbersome & rigid. spurious deductions. As a result. Absence of Grading or standardization of produceA large no. Inadequate storage facilitiesBy its very nature. this results in an increase in real cost of marketing of produce. of farmers have little knowledge of the practice of the grading of the produce prior to its sale. LINES OF IMPROVEMENT . Inadequate transport or communication facilitiesInadequate transport or communication facilities are one of the prime obstacles in the improvement of marketing efficiency. farmers depend on the hearsay reports which they receive from village merchants and as result sell their produce at lower rates. agricultural products is not only confined to few areas but it is also confined to few reasons in a year. Presently. 8. High costs of borrowingCharging exorbitant rates. non-issue of receipts for repayments were & are major problems faced by farmers while borrowing from money lenders. taking away a part of produce as sample by bidders. 7. cheating illiterate borrowers by inserting larger amounts than borrowed. the storage facilities are not only inadequate but also the available godowns are not properly managed. 9. The surplus produce of these areas has to be distributed to other places. 11. whereas its consumption is spread throughout the year so the continuous supplies can be assured throughout the year only by adequate & efficient storage facilities. Lack of Reliable and up-to-date market information: There are no of reliable channel for the communication of price information to producerfarmers. as a result high prices during off season. they get a lower price for their produce. etc. which are in need of it. unfair weighment. bungling of accounts. They usually mix up superior or inferior quality products to make a single lot. who are isolated in remote villages. Sometimes. 10. This has resulted in wastages or reduced supplies.TYBMS – V Sem Rural Marketing Such as – deduction of unauthorized market charges. Since of the resource specificity or fixity. farmers are penalized by traders for the existence of a small percentage of poor quality produce in the lot. certain crops and products can be grown only in certain regions. In the absence of reliable information.30 - .

. price behaviour. 1958 which prescribes compulsory use of metric system of weights and measures in the country. In some markets. Weights & a platform scale. licensing of market functionaries. In short. 2. Regulated markets also ensures weighment of the produce is done by a licensed weigh man with std. traders & the government look after the functioning of these markets. The domestic demand for food grains may be stable. curbing the deduction of unauthorized market charges. Many of the marketing charges such as darmada. tobacco etc independent on several other factors so information on demand pattern. Improvement of transport facilities: The following are some of the suggestions for effecting improvements in transport functions reducing transport costs: I. Establishment of regulated marketRegulated markets are placed where transaction are governed by various rules or regulations. Introduction of open auction system of sales & enforcement of standard weights or to reduce impartial arbitration in case of disputes.TYBMS – V Sem Rural Marketing 1. the market charges payable by sellers have been transferred to the buyer. 1977.31 - . 5. This eliminates short weights & malpractices. a weighbridge has been installed. 4. better methods of production handling& packing etc had to be made available to them appropriate decisions. They are responsible for the employment of the fare trading practices. Provision of marketing news: Marketing news & information is vital for taking production & marketing decision. Recently. Standardization of contracts: A series of legislation came into effect to ensure regulation of all marketing activities. (b) Standards of weight & measures (packed goods) act. 3. Method of sales like hatta system are banned. karda. Markets may be regulated either by local bodies or operate under the state legislation. (a) The standards of weights and measures act. ensures packing of goods of the correct weights in the packages already existing. The market communities consisting of representatives of growers. There must be full utilization of the capacity of the transportation facility in terms of load to reduce per quintal cost of transportation. a rural market offers a package of measures to remove these defects. Use of standard weights and measures: There are two acts namely. dhalta & muddat are abolished. But the demand for cash crops like sugarcane turmeric.

Development of co-operative marketing: Co-operative organisations are voluntary business organisations formed by the members with a felt need to market their own compared to the collectively to maximize advantages as compared to the private trade. There should be reduction in the barriers to inter-state movement of produce. meat. minimises storage losses. co-operatives and other available by panchayats selected by state government.32 - . IV. iii. damage. etc. Increased provision of storage & warehousing facilities: Different means of storages & warehouses have to be provided. These storage centres may be constructed and managed by panchayats. standardisation is determination of basic limits or grades. Grading or standardisation enables farmers to get a higher price for their produce. They can protect the farmers from exploitation at the hands of traders by offering collective bargaining. The transportation cost per quintal can be reduced by fixing the rate of transportation for different means. . Co-operatives can help to reduce the price spread Co-operative marketing may have a healthy impact on marketing trends and will help in the stabilisation of prices. vegetables. ensures better scope of exports. III. cold storage for perishable commodities such as fruits. The following advantages can be derived from co-operative marketing system I. This will help check distress sales. Marketing co-operatives can generate necessary holding power with farmers by providing easy and cheap credit to them. While. A network of rural storage centres should be built on priority basis in order to prevent distress sales. Hence awareness of grading & standardisation and its advantages has to be built up. wastage and loss arising out of inadequate and defective storage facilities. fish. Govt. 8. eggs. Improvement in grading and standardisation: Grading means sorting of unlike lots of the produce into different lots according to the quality specifications laid down. it reduces market costs by minimising the expenses on the physical inspection of produce. has already launched a scheme called national grid of rural godowns (NGRG) in 1979 to the extent of 50% to be shared equally by central & state govt. 7. ii. breakage or pilferage. 6.TYBMS – V Sem Rural Marketing II. dairy products. etc have to be established or made available at affordable cost to the farmers. iv. Use of proper types of wagons to reduce spoilage.

VII. Traders are free to buy and well in the market the government may place some restrictions on them. integrate. or streamline production marketing or processing firms. such as declaration of stocks. State Trading was initially taken up by the food department in the state and central government.33 - . To arrange for storage. This may require direct intervention on its parts in trading of agricultural commodities. To minimise violent price fluctuations occurring as a result of seasonal variations in supply and demand. . Types of State Trading: a. packaging and processing. complete wholesale trade in wheat was taken over by the government in 1973. private traders and government coexist. Objectives of State Trading: I. b. VI. To make available supplies of essential commodities to consumers at reasonable prices on a regular basis. distribution and sale of foodgrains.TYBMS – V Sem Rural Marketing In brief. To check hoarding. It undertakes the distribution of commodities to consumers to consumers through a network of price shops. storage movement. Private traders are not allowed to enter the market for purchase or sale. Limits on stocks which can be held at a point of time and submission of regular accounts. To ensure a fair price of the produce to the farmers so that there may be an adequate incentive to increase production. To undertake the procurement and maintenance of buffer stock and their distribution whenever and wherever necessary. transportation. To arrange for supply of such as fertilizers and insecticides. black marketing and profiteering. The government enters the market for purchase of commodities directly from producers at notified procurement price. V. III. co-operative marketing may link. but it had to be given very soon. II. IV. Complete Shops: The purchase and sale of commodities is undertaken entirely by the government or its agencies. Partial State Trading: Here. In Jan 1965. STATE TRADING AND RURAL MARKETING One of the responsibilities of government is to ensure the supply of essential commodities to the people. transport. In India. the FCI was set up to undertake the purchase.

This notes is neither a text book nor a guide. but just a reference material.TYBMS – V Sem Rural Marketing Please Note The material being circulated is just my personal copy any addition or deletion is left to the discretion of the concerned faculty.34 - . Mrs. With Regards. Malini Nagabhushan .