Lec 28

Constraints in Traditional marketing systems relating to

agricultural / horticultural / forest produces - Role of
Government in promoting agricultural marketing
 ROLE OF GOVERNMENT IN PROMOTING
AGRICULTURAL MARKETING

• Efficient marketing is a prerequisite in development

process of any economy
• The basic objective of efficient marketing is to ensure
remunerative prices to farmers, reduction in marketing
costs and margins and to provide commodities to
consumers at reasonable prices.
• Many imperfections are there in traditional agricultural
marketing system.
• To correct these imperfections and to protect interests of
various segments of society, government intervention in
marketing system is necessary
 Characteristics of traditional agricultural
marketing system

1. Heavy village sales of agricultural commodity

• Farmers indebted to village moneylenders or
traders
• Inadequate transport facilities
• to meet social and religions obligations
• Perishability of produce
2.Post harvest immediate sales by farmers
• Poor retention power of farmers arising out of
their pressing needs for cash to repay debts
• Inadequate storage facilities in village
• Lack of enterpreneurship and low risk bearing
ability of farmers
3.Inadequacy of institutional marketing structure
• Farmers disorganized and market their produce
individually - have low bargaining power and had
to deal with traders having strong organization.
The reasons for lack of organization are
 Location dispersal
 Difference in size of holding and surpluses
available with farmers
 Marketing not given due consideration because
of farmers ignorance
 Other factors like social factors
4.Existence of Many Middlemen
• No restriction either socially or by government
for entry as middlemen.
• marketing channel increase and marketing
margin and cost of marketing goes up.
5.Multiplicity of Market Charges
• Cost of marketing of produce worth of Rs.100
high as compared to products of other sectors.
• Large number of market charges like brokerage,
commission, weigh men charges paid.
6.Existence of Malpractices
• deduction of unauthorized market charges,
spurious deductions, unfair weighment of
produce and unhealthy sale method common in
agricultural marketing.
7.Lack of Reliable and up-to-date Marketing
Information
• No reliable channel for communication of price
information to farmers in remote villages.
• So farmers depend on hearsay reports from
villages merchants.
8.Low Marketable Surplus of a Large Variety of
Products.
• Farmers grow large number of crops and adopt
diversified farming due to risk in farming.
• Priority given to crops for home consumption.
Products for sale many - but small quantity
9.Absence of grading and standardization of
produce
• Farmers have little knowledge of grading the
produce mix superior with inferior quality and get
low price for produce.
 The various forms of alternate marketing

(a) Direct marketing,

(b) Marketing through farmers’ interest group,
(c) Co-operative Marketing,
(d) Forward and future market,
(e) e-commerce,
(f) Setting up of mega markets
 Direct Marketing

• Apni Mandi, Rythu Bazars, and Uzhavar

Sandies.
• fruits, vegetables and flowers
• to eliminate the middlemen and arrange
facilities for the farmers to sell their produce
directly to the consumers at reasonable rates
fixed every day.
 Co-operative Marketing

• not unique in the functions they perform, but in the manner and
philosophy
• successful in processing of sugar, paddy, milk and cotton.
• 203 sugar cooperatives which produce nearly 55 percent of the
total sugar production in India
• 87,000 dairy cooperatives working with 87 lakh milk producers
• There are 173 cooperative spinning mills accounting for 22
percent of yarn and fabric production, and 431 ginning and
pressing cooperatives accounting for 12 percent of all units
• 13, 000 fisheries co-operatives in India.
• Success- value addition and high returns to producing members,
functional vertical integration, high participation of members,
and professional management and leadership
 IT – BASED MARKET INFORMATION SYSTEM

• to provide day-to-day information with regard to

commodity arrivals and prevailing rates etc., to inform
about the latest research in agricultural marketing,
packaging/storage etc. related information and to
provide linkage/connectivity with the World Trade Centers
(WTCs), APEDA, NIAM, NBB, IIP, State Agricultural
Marketing Boards, universities etc.
• A national level IT-based integrated Agricultural Marketing
Information service (AMIS) with a Decision support System
(DSS) plays an useful role
• Agricultural Marketing Information System Network
(AGMARKNET)
• Organized marketing of agricultural commodities -
through a network of regulated markets
owned, operated, and managed by Agricultural
Produce Market Committees (APMCs).
• Most of the State Governments and Union
Territories have enacted legislation (APMC Act) to
provide for regulated markets and as on today,
7557 markets have been covered under
regulation.
• Besides, there are 21,731 Rural Periodic Markets
(RPMs), about 15 percent of which function under
the ambit of regulation
 CHALLENGES OF AGRICULTURAL MARKETING

1. Variation in Market Fees/Market Charges

2. Neglect of Rural Markets
3. Absence of a Common Trade Language 
4. Variation in Entry Tax/Octroi and Sales Tax 
5. Controls Under Essential Commodities Act
6. Other Barriers-storage, transportation,
telecommunication, quality control, packaging, price risk
management, integration of spot markets with commodity
exchanges, pledge financing, cool chains, market led
extension, contract farming
 OPPORTUNITIES IN AGRICULTURAL MARKETING

• varied ago-climate
• Growing demand for agricultural inputs

• Biotechnology, Export, secondary and tertiary

processing , marine and inland fish and
ornamental fish culture, livestock , forest , apiary,
 Mushroom , Organic farming, bio-pesticides and
bio- control, Seeds, hybrid and genetically
modified crops, Micro-irrigation systems , green
house conditions , HRM and infrastructure
 NEED OF PARADIGM SHIFT

• Direct sourcing from the farmers and limiting the intermediaries

• Value addition activities
• Organizing the farmers into growers’ groups/commodity
groups/ cooperatives/self help groups/producer companies
• Proactively promoting grades and standards
• Government can proactively prepare the farmer groups
• uninterrupted cool chain
• modernizing existing marketing channels
• professional, managerial practices
• Public Private Partnership.
• quality consciousness
• Promoting consumer demand and Leveraging the ICT
 Role of Government in Promoting Agricultural Marketing

• Farming rules and regulations

• Promotional activities of storage and warehousing, transportation

and communication facilities, credit facility, grading and
standardization and encouragement of co-operative marketing.

• Administration of prices- Guaranteeing minimum support price to

producers, Providing commodities at fair price to consumers
• Fixing rates of commission charged by commission agents.

• Influencing supply and demand by export, import, internal

procurement and distribution.
Government efforts to improve marketing

• Directorate of Marketing and Inspection

• State marketing department
• regulated market.
• State agricultural marketing boards
• Council of State Agricultural Marketing Board
(COSAMB)
• State Trading Corporation
• Food Corporation of India
• Buffer stock ,procurement and distribution
• Quality control of agricultural products
• Consumers protection
• Administered prices-minimum support and
procurement price
• Passing of acts for improving agricultural marketing
• Promotion of co-operative marketing
• NAFED, National Agricultural Co-operative
marketing Federation established in 1958.
• Monopoly procurement Eg. procurement of paddy
in Cauvery Delta Region
• Public distribution system
 Buffer Stock

• stock of food grains maintained by government as a buffer

• to cushion shocks of fluctuating supply and price,
• to meet emergency needs,
• unexpected shortages from transport bottlenecks,
• natural calamities of food, famine, earthquake and
refugees problem.
Main Advantages
• helps in price stabilization
• Safeguards producers against low price
• Imparts stability to country’s food economy.
 Public Distribution System

• since 1943
• wheat, rice, sugar, edible oil, kerosene and controlled cloth
were distributed to consumers by its network of fair price
shops
• Difference between issue price and economic price borne by
government as food subsidy 
Revamped PDS
• additional - tea, soap, pulses and iodised salt to households
located in tribal and hill areas were distributed.
• For below poverty line people,10kg of food grain per month
per family at prices less than issue price were also
distributed
Targeted PDS
• Below Poverty Line and Above Poverty Line
people were distinguished and essential
commodities were distributed only to Below
Poverty Line people.
 Regulated Markets

• Markets in which business done in accordance with rules and regulations

framed by statutory market organization.

• Marketing costs standardized and practices regulated

• Elimination of mal practices and assignment of dominating power to

farmers.

• Voluntary

• Alternative marketing system

• Around 7000 regulated markets are in India. 278- T.N.

• TN – Agricultural produce (Regulation) Act, 1987
 Specific objectives
• To prevent exploitation of farmers by
overcoming handicaps in marketing of products
• To make marketing more effective and efficient
so that farmers get better price for products
and consumers get goods at reasonable prices.
• To provide incentive price to farmers for a
better production programme both in
quantitative and qualitative terms.
• To promote orderly marketing of agricultural
produce by improving infrastructural facilities.
 Important features

• Method of sale: closed tender method

• Weighment of produce: licensed weighmen
with standard weights and platform scale
• Grading of Produce
• Market news service
• Market charges- 1% of value
• Payment of value without deduction.
• Licensing of marketing functionaries
 Services Rendered
• correct weighment by using electronic weigh
bridges and weighing balances,
• godown facilities,
• bank facility – pledge loan
• immediate payment,
• daily price information,
• rest sheds, drinking water facility, cattle sheds,
free medical aid to farmers, input shops, phone
and fax facilities
• Agmarknet- internet connectivity
 Notification of produce

Notified - 42 Agricultural Commodities like

• cereals,
• millets,
• pulses,
• oilseeds,
• cotton,
• turmeric
 Pledge Loan Facilities to Farmers
• maximum period of 6 months and take pledge
loan of 75% of the total value of the produce
upto a maximum of Rs.1,00,000. 6% - 8%

• 9% for traders

• Tamil Nadu Farmers Development and Welfare

Scheme- Rs.50000, 75000 and Rs. 1 lakh
 CO-OPERATIVE MARKETING SOCIETY

• Voluntary business organization established by

members
 Functions

• To market produce of members at fair prices

• To safeguard members from excessive marketing costs and
malpractices
• To make credit facilities available
• To make scientific storage of member’s produce. To provide
facilities of grading and marketing information.
• To introduce system of pooling so as to acquire better
bargaining power.
• To arrange for export of produce of members
• To act as agent of government for procurement of food grains
• To make arrangement for transport of produce of members
• To arrange for supply of inputs required by farmers
 Types
• Single commodity marketing societies like
sugarcane, cotton, milk
• Multi-commodity co-operative marketing
societies
• Multi-purpose, multi-commodity marketing
• Structure may be of two or three tier
• three tier- Assam, Bihar, Madhya Pradesh, Kerala,
Karnataka, Orissa, Rajastan, West Bengal and
Tamil Nadu
• Membership- 2 types- farmers and traders
 Reasons for slow progress

• Co-operative marketing located at distant taluk

levels and farmers need immediate cash
• Rivalries among farmer members
• Not providing food and shelter to farmers
• Manager of societies linked with local traders and
do not business advice to farmers
• Lack of funds to meet credit needs of farmers
against pledging.
• They also do not have storage facilities.
• Lack of business expertise unlike traders and
commission agents.
 Suggestion for strengthening

• Area of operation large enough to have

sufficient business and viability.
• Storage, transport, accommodation and
drinking facilities strengthened
• Co-operative feeling among members
inculcated by proper education
• adequate representation given to SF and MF.
• In selection of officials of co-operative
marketing societies, weight age given to
business experience and qualification.
 Direct Marketing
(i)Apni Mandi: Punjab, Haryana and Rajasthan

(ii)Rythu Bazars: Andhra Pradesh-producer’s share in

consumer’s rupee is more by 15 to 40 percent

(iii Uzhavar Santhaigal:  Tamil Nadu - 1999 - Madurai

(iv) Raithara Santhegalu : In Karnataka
(V) Shetkari Bazar: Maharashtra
(Vi) Hadaspar Vegetable Market in Pune
 Why Direct Marketing?

• Make the marketing channel shortest

• Reduces marketing cost and maximises
farmer’s share in consumer rupee
•  Eliminate middle men 
• Direct communication with consumer / buyer
• Requires minimum infrastructure
• Understanding of consumer requirement
• Availability of fresh and quality produce within
the shortest reach of consumer
 Farmers’ Organizations in Marketing

• Mahagrapes: Maharashtra- 1991

• Exporting to European markets with almost nil
rejection for past sixteen years
• HOPCOMS, Banglore- 1959- Horticultural Producers’
Cooperative Marketing and Processing Society Ltd.-
Grape
• Amalsad and Gadat Co-operatives in South Gujarat-
1951- Fruits
• Integration of Supply Chain in Karbi Anglong district
of Assam: tribal farmers
• Self Help Groups in Andhra Pradesh