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MARKETING
INFRASTRUCTURE & AGRICULTURAL |
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MARKETING
INFRASTRUCTURE & AGRICULTURAL |
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EXPERT
COMMITTEE REPORT
1.
2.
As the earlier marketing
system was developed in the context of a planned economy afresh approach
to marketing is necessary in the atmosphere of liberalization and
globalization. The National Agricultural Policy indicates the need for new
demand driven marketing set up. The Expert Committee was therefore
appointed to suggest ways and means to meet this new challenge through
strengthening and developing agricultural marketing system in the country. 3.
The National Agriculture
Policy (NAP) envisages promotion of demand driven agriculture growth
catering to domestic as well as export markets.
As the efficient agricultural marketing system lies at the core of
agriculture growth, the Government of India constituted an Expert
Committee under my chairmanship to review the present system and suggest
ways and means to strengthen and develop it.
The order of the Government of India regarding constitution of the
Committee and its Terms of Reference is at Annexure-I & IA. 4.
The Committee worked
through 4 Working Groups which dealt with TOR I and II; III, IV; and V,
VI, VII respectively. TOR VIII was common to all
The Working Groups were headed by Dr. B.D.Pawar, Shri
G.Ramachandran, Prof. S.S.Acharya and Shri T.R.Verma respectively. It held
three meetings of each of the Working Groups and four meetings of the full
Committee. The present report is based on deliberations during these
meetings. The Committee wishes to place on record appreciation for efforts
of the conveners of the Working Groups for their contribution and support.
The Committee expresses its thanks to all of its Members for their
support and guidance. Particular
thanks are due to Dr. S.L.Bapna of IIM Ahmedabad and Sh. A.D. Rane of
R.B.I. Munbai for their fruitful participation in deliberations. Shri
M.K.Mandal, AMA to the Government of India was associated as Member
Secretary of the Committee till 5.
The Committee submitted
its Interium report on 10th April 2001as desired by the
Honourable Union Minister of Agriculture. The Committee is grateful to
Hon’ble Union Minister of Agriculture Sh. Nitish Kumar, Minister of
State for Agriculture Sh. S.Y. Naik and Sh. J. N.L. Srivastava, Secretary
to GOI (DAC) for their guidance and contribution from time to time. 6.
The Committee expresses
its thanks to Hapur Chamber of Commerce and Shri D.S.Kolamkar, Director,
Forward Market Commission, Mumbai for fruitful discussions on the subject
of forward and futures markets in Agricultural products.
The officials of NIAM and DMI extended wholehearted cooperation and
support to the Working Groups and Expert Committee during the
deliberations. The
committee recognises sincere and hard work put in by Sh. G.H. Dhankar,
Deputy AMA, Dr. Kamal Mathur, Dr. M.S.Jairath and Dr. Hema Yadav. 7. I hope that the report will be useful to agricultural marketing policy planners and practitioners in the Centre and the States in initiating measures to strengthen and develop agricultural marketing in the country to meet the challenges of new economic order. Dated
29th June
(Shankerlal
Guru) Chairman
SUMMARY
& RECOMMENDATIONS
1. Government is promoting organized
marketing of agricultural commodities in the country through a network of
regulated markets. Most of the
state Governments and 2. Regulated markets have helped in
mitigating the market handicaps of producers/sellers at the wholesale
assembling level. But, the rural periodic markets in general, and the
tribal markets in particular, remained out of its developmental ambit.
It was envisaged that physical markets with facilities and services
would attract the farmers and the buyers creating competitive trade
environment thereby offering best of the prices to the producers/sellers. 3. The Institution of regulated market
has, however, achieved a limited success. These markets were supposed to
ensure smooth and orderly development of agri-marketing by ensuring fair
play of trade practices and market forces. Over a period of time these
markets have, however, acquired the status of restrictive and regulated
markets, providing no help in direct and free marketing, organized
retailing, smooth raw material supplies to agro – processing,
competitive trading, information exchange and adoption of innovative
marketing systems and technologies. Monopolistic practices and modalities
have prevented development of free and competitive trade in agri-
marketing, future markets, use of latest technologies in post harvest
technology and handling exports, agro based industries, warehousing etc.
Now these markets have failed in containing the scenarios of plenty’s
and scarcities. 4. An efficient agricultural marketing is
essential for the development of the agricultural sector.
In as much as it provides outlets and incentives for increased
production, the marketing system contributes greatly to the
commercialization of subsistence farmers. World-wide, Governments have
recognized the importance of liberalizing agricultural markets.
Government policy has to effectively address issues of marketing
liberalization and help to overcome the constraints faced by various
organizations including private sector involved in agri-marketing. The
ever increasing production, spread of latest technologies, changing socio
– economic environment, increasing demand for downsizing the
distribution chain and reducing the margin between farmers and ultimate
consumers, challenges emerging out of liberalization and globalization in
the post WTO period requires a vibrant, dynamic and
assimilative marketing structure and system. 5.
In promoting vibrant competitive
marketing systems, Government need to examine all existing policies, rules
and regulations with a view to remove all legal provisions inhibiting free
marketing system. Today, State Governments alone are empowered to initiate
the process of setting up of a market for certain commodities, which are
regulated and for certain areas, in which the Regulation is enforced.
These provisions will have to be replaced by providing an omnibus
provision that anybody can set up a market, provided minimum standards,
specifications, formalities and procedures which may be let down by the
Government of India are complied with. The Government of Karnataka has set
the ball rolling by amending its Act to allow the National Dairy
Development Board to set up wholesale fruit and vegetables market at 6.
The institution of regulated markets,
set up to strengthen and develop agricultural marketing in the country has
achieved a limited success. The
restrictive legal provisions did not augur well with competitive market
structure. Promoting competition in the trade and facilitating farmers
with supporting services like grading, standardization, storage with
pledge finance and facilities in the markets have become secondary
activities. Funds from the Agricultural Marketing Boards have been
siphoned off in many states to Public Ledger Account by the State
Authorities. Consequently, the
modernization/infrastructure development conducive to operational
efficiency of the markets has suffered heavily.
The Committee recommends that by an appropriate amendment in the
Act the utilization of funds by the market committees and the Marketing
Boards for these activities may be made mandatory.
7.
The spot markets, have not been linked with the
forward and future markets to receive price signals. The futures trading
in agricultural commodities is also regulated by the Government. The
linkage between the spot and futures markets seems to be poor due to
domination of the speculators. Government
has, to continue its efforts to strengthen and institutionalize commodity
exchanges to instill confidence and awareness among market players. 8.
There is an imperative need to make
Government administered marketing organizations administratively viable
and managerially competent in keeping with liberalized trade atmosphere.
The marketing activities are many-folded and need liaison and
collaboration with related organizations.
Market committees including sub-yards, should be headed by
professionals. Existing
Secretaries need to be trained in professional management of the markets.
The functions of APMC and Marketing Boards may have to be remodeled
for this purpose.
9. The nature of legal framework within
which agricultural markets operate has a fundamental effect on the
functioning of the agricultural marketing system. Legal reforms can play
an important role in making the marketing system more effective and
efficient by removing unnecessary conditions and by establishing a sound
framework to reduce uncertainty of the market. A review is, therefore
required in respect of all laws which regulate participation in market
such as registration/licensing, commodities traded, controls on packaging
and labeling, laws affecting market place, laws affecting supply including
controls on movement of produc and volume of commodities traded, laws
relating to access to credit and capital dispute resolution mechanism.
10.
The Essential Commodities Act, 1955 which has resulted
in restrictions on storage and free movement of stocks, initiative by the
trade in innovation and investment, should be repealed to make way for
play of free market forces in real sense.
The Committee recommends that a Task Force be set up under the
Ministry of Agriculture, Department of Agriculture & Cooperation to
undertake a review of all marketing legislations, policies and programmes
and suggest various reforms in the statutory arrangements relating to
agricultural marketing as well as policies and programmes for development
and strengthening of agricultural marketing with specific reference to
needed investment, package of incentives and easy and adequate marketing
credit. 11.
Direct marketing enables farmers to
meet the specific requirements of wholesalers from the farmers' inventory
of graded produce and of retail consumers based on consumers' preferences,
thus enabling farmers to dynamically take advantage of favourable prices
and improve their net margin. It encourages farmers to undertake grading
of farm produce at the farm gate and obviates the necessity of farmers to
haul produce to regulated markets that are not necessarily spaced on the
principles of efficiency. Direct marketing thus enables farmers and buyers
to economize on transportation costs and to improve price realization
considerably. 12.
The Committee suggests promotion of
direct marketing as one of the alternative marketing structure that
sustains incentives for quality and enhanced productivity, reduce
distribution losses, improving farmer incomes with improved technology
support and methods. The market will operate outside the purview of the
Agricultural produce Marketing Act and will be owned by professional
agencies in private sector, wholesalers, trade associations and other
investors. The government’s
role should be that of a facilitator rather than that of having control
over the management of the markets.
13.
Direct marketing by farmers to the
consumers was experimented through Apni Mandis in 14.
The similar logic holds good for
consumer organizations also who can procure directly from producers and
distribute to the consumers commensurate with their purchasing powers.
The Government should support these organizations with schemes like
providing back ended incentives for refrigerated as well general
transport, setting up of grading and packing houses, credit at low
interest etc., till they become financially self-sufficient on commercial
lines. 15.
Direct marketing through SHGs or informal groups,
NGOs, cooperatives, Farmers Associations, Companies, partnership, joint
ventures may be encouraged by government to various policy back up and
programmes. These organizations may be encouraged to create and manage
markets physical as well as futures. The cooperatives however, will have
to be freed from the shackles of politician and bureaucrats. 16.
As another form of direct marketing,
the unemployed youth could be involved in procurement of orders and supply
of graded and packed products to different city dwellers.
The youth could be trained in marketing practices of procuring
products and supplying them. The
financial assistance from the public sector to such ventures would
generate entrepreneurship and provide profitable employment to the younger
generation. They could
be given assistance in the form of working capital to start the enterprise
along with the necessary agri-business training.
17.
The use of information technology in
agri-marketing has become indispensable. Therefore encouragement may be
provided to generate and host useful portals, websites, databases,
information packages and other soft wares, generic as well as customize on
agricultural marketing. Info
kiosks may be encouraged to be set up in the markets, spot as well as
futures, farmers organizations, Associations of traders and other
functionaries for exploiting the opportunities of information revolution,
especially for online demand of different products; product specifications
with regard to quality, pack size, packaging material, quantity and the
time frame of supply; the transport cost involved and the marketing
charges likely to be incurred in the market where the goods are to be
delivered; facilities available to the farmer in the buying market;
Re-handling of the produce, if necessary, in the supplying market to suit
to the requirement of the buyer market; the rules and regulations of the
destination market, if it is located outside the state at distant place,
and other specific information as may be conducive for the seller to
transact the business with the purchasers; and the legal provisions
related to storage, transportation, phyto-sanitary requirements etc.
18.
Forward
contract may well be regarded as direct and alternative marketing
facilitator. With the initiation of the liberalization process in India,
interest in futures markets has been revived for their price risk
management and price discovery roles, as well as handling the situation of
plenty’s and scarcities. In
the country currently, futures contracts are traded in nine commodities in
20 commodity exchanges. It is suggested that more and more commodities be
added to facilitate competitive and free marketing system.
19.
A
recent study conducted by the IIM, Ahmedabad has indicated that the
performance of the Indian commodity futures markets is varied across the
commodities, exchanges and contracts.
They are deficient in several aspects such as infrastructure,
logistic, management, linkages with financial institutions, reliability,
integrity and an efficient information system which do not encourage a
large group of the market players in the commodity sector to trade in this
market. Government has,
therefore, to continue its efforts to strengthen the exchanges and to
instill confidence and awareness among market players.
20.
Poor
credit flows have had an adverse effect on the development of agricultural
marketing systems in the country. Certified
warehouses and a system of negotiable warehouse receipts could lead to
improved credit delivery, better loan recovery and convenience in asset
management. The existing Government warehousing corporations should play a
leading role in the development of warehousing.
However, they can only cover part of the field, which should be
opened up to private operators, particularly those who already provide
storage services. The institutionalization of the warehouse receipts
system through the commodity exchanges is most likely to yield the best
results in the context of promoting and propagating warehouse receipts, in
particular electronic warehouse receipts, and a national system of
warehouse receipts. 21. Pledge
financing enables the usage of inventories of graded produce as collateral
for accessing credit from the organized credit market at cheaper rates of
interest that reflect the lower credit and collateral risk, thus enabling
farmers to dynamically take advantage of favourable prices and improve
their net margin. It enables farmers to hold inventory of graded produce
under favourable storage conditions and standardized preservation under
supervisory conditions; promotes rural godowns and warehousing. It also
advances grading of farm produce to the farm gate, thus enabling farmers
to improve price realization considerably; identifying preserved storage
closer to farms. 22.
Produce
market loan for a period up to six months to farmers availing crop loans
up to Rs. One lakh are reckoned as priority sector advance. Banks are
financing Artiya’s for provision of inputs to farmers. Finance to
wholesaler / traders is not treated as agricultural finance. Loans for
construction/ running storage facilities are already included under
priority lending. It is suggested that the existing limit of priority
sector advance should be revised upward suitably taking in to
consideration innovation in agricultural sector in the post WTO regime.
The credit flow to the agricultural marketing is very meager. The banking
environment and lending policies and programmes for financing is not found
conducive for the increased capital needs of agricultural marketing.
Therefore government is requested to design full fledged agricultural
marketing credit policy considering the requirement of increased
production, market innovations, technologies and socio-economic changes
with specific reference to post WTO regime. 23. Market infrastructure is important not only for the performance of various marketing functions and expansion of the size of the market but also for transfer of appropriate price signals leading to improved marketing efficiency. High investment with entrepreneurial skills are required for creation and managing these infrastructures. Therefore private investment in the market infrastructure development may be encouraged by modifying various procedure backed up by package of incentives. Nevertheless, for providing infrastructure in remote and difficult areas, the public sector would need to continue to play an important role. 24.
Projections
of production and marketed surplus of various farm products show that even
at the existing marketed surplus-output ratios, the quantities which the
marketing system will be required to handle in future, are quite large.
The marketing system backed by strong, adequate infrastructure is the core
content of agri-marketing. Development of infrastructure with in spot
markets and others places is a huge task. Committee based on the estimates
of the State Master Plan for Development of Regulated Markets found that
there is a need of total investment of Rs 6026 crores 25.
Apart
from general purpose markets, there is need for developing specialized
markets for fruits and vegetables. It
has been assessed that there are at least 241 such places in the country
where fruit and vegetables markets should be developed.
The investment requirement for fruit and vegetables markets in the
country is around Rs.970 crores. 26.
Rural
periodic market is the first contact point for producer – sellers for
encashing his agricultural produce and buying other goods needed by them.
There are in all 27294 rural periodic markets including those for
livestock, in the country. There
is urgent need to develop these rural periodic markets in a phased manner
with necessary infrastructural amenities to have a strong base level link
in the marketing chain. The investment requirement for developing these
primary rural market places is estimated at Rs.2146 crores. 27.
Encouragement
by way of policy back up as well as financial support is recommended for
special type of markets like floriculture, cattles etc. For export
promotion and inter state marketing setting up of 50 mega markets in the
country with government financial support in private, public, cooperative
or joint venture is suggested. Encouragement may be considered for
promoting marketing of organically grown produce, fruits & vegetables,
medicinal plants, herbs etc. 28.
Storage
infrastructure is found necessary for carrying the agricultural produce
from production to consuming periods.
Country needs much more storage
facility than what is available now.
This is specially more important for hill and remote areas in
several states. For an
additional 20 million storage capacity the investment required is
estimated at Rs.5400 Crores. The private sector needs to be encouraged to
enter the storage and warehousing activity and make investment of this
magnitude. Village Panchayats, cooperatives, SHGs and farmers
organizations may be encouraged for undertaking warehousing. 29. Committee
deliberated various alternative, competitive and affordable preservation
and temperature management technologies for perishables. The Expert
Committee recommends increased use of alternate use of technologies like,
Irradiation, Nitrogen fill packaging, Vacuum packaging, shrimp wrapping
and others. However, the Committee recognize the relevance and utility of
cool chains and therefore supports the government programme of end used
subsidies for cold storages. Cold storages are most important
infrastructural need for perishable and semi perishable commodities which
need an immediate attention. The
present storage capacity available is sufficient only for 10 per cent of
total production of fruits and vegetables. In the next 10 years, 15000
cold storage units would need an investment of the order of Rs.27,000
Crores. The investment should basically be made
by the private sector. In
future, there would be a need for multi-chamber type of cold storage units
for various perishable and other products in the country.
For encouraging private entrepreneurs there is a need to provide
incentives to make the units viable for some initial years. 30. The country require reefer containers/vans for transport of perishable items for domestic and export marketing. At present their availability in the country is negligible in comparison to the present production of perishable commodities. For handling the expected higher production in the next 10 years, at least 3000 reefer containers/vans with a capacity up to 8 tonnes each would be required. This would require an investment of Rs.600 crores, which shall be created by private, cooperative and joint sector sector. There is a need to encourage the investors in the area by providing suitable incentives. 31.
There
is a need to create facilities for cleaning, grading and packaging not
only in spot markets but also in the villages from where produce is
brought to the market for sale. There
is need to promote proper packaging after grading so that further chances
of adulteration may not be there. Besides
this there is a strong need to educate the farmers for proper packaging
and grading before they bring the produce to the market.
Scientific packaging should be encouraged at the farmer level
through various incentives. The Expert Committee feels that this is an
important activity, and an investment of Rs.2000 crores should be
earmarked for this purpose during the next 10 years. 32.
With a
view to taking advantage of new international trade environment, there is
a need to encourage export of high value non-traditional products grown in
various parts of the country. The
Government of India (Ministry of Commerce) has announced a scheme of
creating Export Oriented Agri-Zone (EOAZ). It should be promoted by
providing institutional and physical infrastructure in each of these as
per the needs of the specific commodity.
In some of EOAZs, there is also a need to establish what is called
Food Parks. In these parks,
some common facilities like electricity and warehouse should be created
with central government assistance which will help in attracting
investment by the private sector and the state government.
While most of the investment should be made by the private
entrepreneurs, as a way of incentive, government should invest in common
facilities, and quality certification.
The estimated public investment is Rs.200 crores and private
investment of around 400 crores on fifty such EOAZs.
In identification of EOAZs and 33.
Considering
the rising demand for value added and processed products, there is a need
for enhancing the capacity of agro-processing sector. For attracting
private initiative and investment in food processing, the Government of 34.
At
present, value addition is estimated at only seven per cent and processing
only two percent of the total production.
Within next ten year,
there is a need to increase value addition to 35 percent and processing at
least 10 percent. Quality
control and standardization will be extremely important in this endeavour.
The Central government should
encourage a network of food analysis laboratories in the country.
This will also be necessary to face competition from imported
processed products. 35.
Presently
the alcoholic beverages based on fruit & vegetables are clubbed with
other alcoholic beverages. Whereas
world over items like wines and beer which are based on fruit &
vegetables and have low content of alcohol (ranging below 11-12%) are
considered as items of food and are promoted as health drinks. This sector
has not developed in 36.
The
Word “Plantation Crops” as mentioned in some labour laws and Land
Ceiling Act has a rather limited meaning pertaining mainly to coffee, tea,
rubber, etc. If plantation is
used as generic term for an advanced form agriculture where various types
of management from the selection of land, selection of species to be
grown, the financial support, the management of labour, the processing
& marketing are all done at a higher level than what is done for
ordinary agricultural crops, the horticulture is bound to get a fillip.
The existing legal frame work will open new avenues for development
of entire horticulture sector if production of fruit & vegetables,
medicinal & aromatic plants, spices, is also brought under the
definition of plantation. 37.
NIAM
should become ‘Centre of Excellence’ for Asian Region and be headed by
Technocrat, Marketing Practitioner, Academician of national/international
repute. Training in agricultural marketing should be strengthened and NIAM
should take active stance in the programme. Training modules of different
duration should be designed for farmers, NGOs, co-operatives, extension
workers, development functionaries, PRI representatives, development
administrators, people’s representatives and policy makers. 38.
In 39.
Considering
the limited reach of public extension service, it is felt that
privatization of extension services with appropriate financial backup from
the public sector is considered more appropriate and practical.
The NGOs, Cooperatives, Trade Associations, Private Limited
companies, and corporate bodies should be allowed and encouraged to
undertake marketing extension. To
facilitate private agencies to undertake extension programmes on regular
basis for the country as a whole, a 24 hours TV Kisan Channel on
Doordarshan is necessary. The Kisan Channel would be best visual media to
educate farmers by public as well as private agencies for both
agricultural as well as marketing extension service. 40.
The
agricultural marketing research which is becoming increasingly important
has received inadequate attention in the past. There has been a need to
set up a liaison, linkages amongst the research activities findings and
the field position. The SAUs and the Regional & Other Centres of ICAR
should be given a mandate for applied research in agricultural marketing
and functioning of these units. Marketing organizations may be forced to
set apart some funds for marketing research. 41.
The
probable areas for training, research and information technology for
producers as well as different market functionaries could cover agri-business
management; WTO and its implementation; post-harvest management; grading,
standardization and quality assurance; information technology. 42. The
sensitization programmes for state level, district level, farmers and
stake holders would also be conducted. The programme on post-harvest
management for agricultural, horticultural crops, livestock, marine
products, etc. may be conducted on regular basis.
Quality assurance specially for perishables awareness on
standardization and grading & quality control are the other areas for
government support.
43.
Agricultural
Produce Marketing requires connectivity between the market and
Exporter/Growers/Traders, through wide area network (WAN) of National and
International linkages in order to provide day-to-day information with
regard to commodity arrivals and prevailing rates etc., to provide links
for online International Market Information; to provide export-related
documentation, to inform about the latest research in agricultural
marketing, packaging/storage etc. related information and to provide
linkage/Connectivity with the World Trade Centre (WTC), APEDA,
NIAM, NHB, DMI, IIP, State Agricultural Marketing Boards, and
universities. 44.
Other
areas of importance are a) Setting up of value added networks services,
Information Kiosks in rural areas; b) promotional E- Catalogue for
Commodity Profiles; c) Farmer advisory services in the fields of
agricultural marketing, d) National Atlas of Agricultural Markets. 45. Till today, agricultural marketing in the planning process has not received the required priority, therefore the Committee recommends that highest priority may be given to the needs of agricultural marketing in the planning process. The investment requirement for strengthening agricultural marketing infrastructure comes to Rs. 268742 crores. Most of these would need to come from private sector. This may require a conducive and favourable environment consisting of (a) making complementary investment by the state and Central Government (b) subsidizing a few activities to enable private sector initiatives to attain viability (c) active stance by the Central Government in some initiatives (d) reducing the regulatory control and simplifying the procedure and (e) ensuring adequate credit flow to agricultural marketing activities. 46.
Government is promoting organized
marketing of agricultural commodities in the country through a network of
regulated markets. Most of the
state Governments and 47.
Regulated markets have helped in
mitigating the market handicaps of producers/sellers at the wholesale
assembling level. But, the rural periodic markets in general, and the
tribal markets in particular, remained out of its developmental ambit.
It was envisaged that physical markets with facilities and services
would attract the farmers and the buyers creating competitive trade
environment thereby offering best of the prices to the producers/sellers. 48.
The Institution of regulated market
has, however, achieved a limited success. These markets were supposed to
ensure smooth and orderly development of agri-marketing by ensuring fair
play of trade practices and market forces. Over a period of time these
markets have, however, acquired the status of restrictive and regulated
markets, providing no help in direct and free marketing, organized
retailing, smooth raw material supplies to agro – processing,
competitive trading, information exchange and adoption of innovative
marketing systems and technologies. Monopolistic practices and modalities
have prevented development of free and competitive trade in agri-
marketing, future markets, use of latest technologies in post harvest
technology and handling exports, agro based industries, warehousing etc.
Now these markets have failed in containing the scenarios of plenty’s
and scarcities. 49.
An efficient agricultural marketing is
essential for the development of the agricultural sector.
In as much as it provides outlets and incentives for increased
production, the marketing system contributes greatly to the
commercialization of subsistence farmers. World-wide, Governments have
recognized the importance of liberalizing agricultural markets.
Government policy has to effectively address issues of marketing
liberalization and help to overcome the constraints faced by various
organizations including private sector involved in agri-marketing. The
ever increasing production, spread of latest technologies, changing socio
– economic environment, increasing demand for downsizing the
distribution chain and reducing the margin between farmers and ultimate
consumers, challenges emerging out of liberalization and globalization in
the post WTO period requires a vibrant, dynamic and
assimilative marketing structure and system. 50.
In promoting vibrant competitive
marketing systems, Government need to examine all existing policies, rules
and regulations with a view to remove all legal provisions inhibiting free
marketing system. Today, State Governments alone are empowered to initiate
the process of setting up of a market for certain commodities, which are
regulated and for certain areas, in which the Regulation is enforced.
These provisions will have to be replaced by providing an omnibus
provision that anybody can set up a market, provided minimum standards,
specifications, formalities and procedures which may be let down by the
Government of India are complied with. The Government of Karnataka has set
the ball rolling by amending its Act to allow the National Dairy
Development Board to set up wholesale fruit and vegetables market at 51.
The institution of regulated markets,
set up to strengthen and develop agricultural marketing in the country has
achieved a limited success. The
restrictive legal provisions did not augur well with competitive market
structure. Promoting competition in the trade and facilitating farmers
with supporting services like grading, standardization, storage with
pledge finance and facilities in the markets have become secondary
activities. Funds from the Agricultural Marketing Boards have been
siphoned off in many states to Public Ledger Account by the State
Authorities. Consequently, the
modernization/infrastructure development conducive to operational
efficiency of the markets has suffered heavily.
The Committee recommends that by an appropriate amendment in the
Act the utilization of funds by the market committees and the Marketing
Boards for these activities may be made mandatory.
52.
The spot markets, have not been linked with the
forward and future markets to receive price signals. The futures trading
in agricultural commodities is also regulated by the Government. The
linkage between the spot and futures markets seems to be poor due to
domination of the speculators. Government
has, to continue its efforts to strengthen and institutionalize commodity
exchanges to instill confidence and awareness among market players. 53.
There is an imperative need to make
Government administered marketing organizations administratively viable
and managerially competent in keeping with liberalized trade atmosphere.
The marketing activities are many-folded and need liaison and
collaboration with related organizations.
Market committees including sub-yards, should be headed by
professionals. Existing
Secretaries need to be trained in professional management of the markets.
The functions of APMC and Marketing Boards may have to be remodeled
for this purpose.
54.
The nature of legal framework within
which agricultural markets operate has a fundamental effect on the
functioning of the agricultural marketing system. Legal reforms can play
an important role in making the marketing system more effective and
efficient by removing unnecessary conditions and by establishing a sound
framework to reduce uncertainty of the market. A review is, therefore
required in respect of all laws which regulate participation in market
such as registration/licensing, commodities traded, controls on packaging
and labeling, laws affecting market place, laws affecting supply including
controls on movement of produc and volume of commodities traded, laws
relating to access to credit and capital dispute resolution mechanism.
55.
The Essential Commodities Act, 1955 which has resulted
in restrictions on storage and free movement of stocks, initiative by the
trade in innovation and investment, should be repealed to make way for
play of free market forces in real sense.
The Committee recommends that a Task Force be set up under the
Ministry of Agriculture, Department of Agriculture & Cooperation to
undertake a review of all marketing legislations, policies and programmes
and suggest various reforms in the statutory arrangements relating to
agricultural marketing as well as policies and programmes for development
and strengthening of agricultural marketing with specific reference to
needed investment, package of incentives and easy and adequate marketing
credit. 56.
Direct marketing enables farmers to
meet the specific requirements of wholesalers from the farmers' inventory
of graded produce and of retail consumers based on consumers' preferences,
thus enabling farmers to dynamically take advantage of favourable prices
and improve their net margin. It encourages farmers to undertake grading
of farm produce at the farm gate and obviates the necessity of farmers to
haul produce to regulated markets that are not necessarily spaced on the
principles of efficiency. Direct marketing thus enables farmers and buyers
to economize on transportation costs and to improve price realization
considerably. 57.
The Committee suggests promotion of
direct marketing as one of the alternative marketing structure that
sustains incentives for quality and enhanced productivity, reduce
distribution losses, improving farmer incomes with improved technology
support and methods. The market will operate outside the purview of the
Agricultural produce Marketing Act and will be owned by professional
agencies in private sector, wholesalers, trade associations and other
investors. The government’s
role should be that of a facilitator rather than that of having control
over the management of the markets.
58.
Direct marketing by farmers to the
consumers was experimented through Apni Mandis in 59.
The similar logic holds good for
consumer organizations also who can procure directly from producers and
distribute to the consumers commensurate with their purchasing powers.
The Government should support these organizations with schemes like
providing back ended incentives for refrigerated as well general
transport, setting up of grading and packing houses, credit at low
interest etc., till they become financially self-sufficient on commercial
lines. 60.
Direct marketing through SHGs or informal groups,
NGOs, cooperatives, Farmers Associations, Companies, partnership, joint
ventures may be encouraged by government to various policy back up and
programmes. These organizations may be encouraged to create and manage
markets physical as well as futures. The cooperatives however, will have
to be freed from the shackles of politician and bureaucrats. 61.
As another form of direct marketing,
the unemployed youth could be involved in procurement of orders and supply
of graded and packed products to different city dwellers.
The youth could be trained in marketing practices of procuring
products and supplying them. The
financial assistance from the public sector to such ventures would
generate entrepreneurship and provide profitable employment to the younger
generation. They could
be given assistance in the form of working capital to start the enterprise
along with the necessary agri-business training.
62.
The use of information technology in
agri-marketing has become indispensable. Therefore encouragement may be
provided to generate and host useful portals, websites, databases,
information packages and other soft wares, generic as well as customize on
agricultural marketing. Info
kiosks may be encouraged to be set up in the markets, spot as well as
futures, farmers organizations, Associations of traders and other
functionaries for exploiting the opportunities of information revolution,
especially for online demand of different products; product specifications
with regard to quality, pack size, packaging material, quantity and the
time frame of supply; the transport cost involved and the marketing
charges likely to be incurred in the market where the goods are to be
delivered; facilities available to the farmer in the buying market;
Re-handling of the produce, if necessary, in the supplying market to suit
to the requirement of the buyer market; the rules and regulations of the
destination market, if it is located outside the state at distant place,
and other specific information as may be conducive for the seller to
transact the business with the purchasers; and the legal provisions
related to storage, transportation, phyto-sanitary requirements etc.
63.
Forward
contract may well be regarded as direct and alternative marketing
facilitator. With the initiation of the liberalization process in India,
interest in futures markets has been revived for their price risk
management and price discovery roles, as well as handling the situation of
plenty’s and scarcities. In
the country currently, futures contracts are traded in nine commodities in
20 commodity exchanges. It is suggested that more and more commodities be
added to facilitate competitive and free marketing system.
64.
A
recent study conducted by the IIM, Ahmedabad has indicated that the
performance of the Indian commodity futures markets is varied across the
commodities, exchanges and contracts.
They are deficient in several aspects such as infrastructure,
logistic, management, linkages with financial institutions, reliability,
integrity and an efficient information system which do not encourage a
large group of the market players in the commodity sector to trade in this
market. Government has,
therefore, to continue its efforts to strengthen the exchanges and to
instill confidence and awareness among market players.
65.
Poor
credit flows have had an adverse effect on the development of agricultural
marketing systems in the country. Certified
warehouses and a system of negotiable warehouse receipts could lead to
improved credit delivery, better loan recovery and convenience in asset
management. The existing Government warehousing corporations should play a
leading role in the development of warehousing.
However, they can only cover part of the field, which should be
opened up to private operators, particularly those who already provide
storage services. The institutionalization of the warehouse receipts
system through the commodity exchanges is most likely to yield the best
results in the context of promoting and propagating warehouse receipts, in
particular electronic warehouse receipts, and a national system of
warehouse receipts. 66.
Pledge
financing enables the usage of inventories of graded produce as collateral
for accessing credit from the organized credit market at cheaper rates of
interest that reflect the lower credit and collateral risk, thus enabling
farmers to dynamically take advantage of favourable prices and improve
their net margin. It enables farmers to hold inventory of graded produce
under favourable storage conditions and standardized preservation under
supervisory conditions; promotes rural godowns and warehousing. It also
advances grading of farm produce to the farm gate, thus enabling farmers
to improve price realization considerably; identifying preserved storage
closer to farms. 67.
Produce
market loan for a period up to six months to farmers availing crop loans
up to Rs. One lakh are reckoned as priority sector advance. Banks are
financing Artiya’s for provision of inputs to farmers. Finance to
wholesaler / traders is not treated as agricultural finance. Loans for
construction/ running storage facilities are already included under
priority lending. It is suggested that the existing limit of priority
sector advance should be revised upward suitably taking in to
consideration innovation in agricultural sector in the post WTO regime.
The credit flow to the agricultural marketing is very meager. The banking
environment and lending policies and programmes for financing is not found
conducive for the increased capital needs of agricultural marketing.
Therefore government is requested to design full fledged agricultural
marketing credit policy considering the requirement of increased
production, market innovations, technologies and socio-economic changes
with specific reference to post WTO regime. 68.
Market
infrastructure is important not only for the performance of various
marketing functions and expansion of the size of the market but also for
transfer of appropriate price signals leading to improved marketing
efficiency. High investment with entrepreneurial skills are required for
creation and managing these infrastructures. Therefore private investment
in the market infrastructure development may be encouraged by modifying
various procedure backed up by package of incentives. Nevertheless, for
providing infrastructure in remote and difficult areas, the public sector
would need to continue to play an important role. 69.
Projections
of production and marketed surplus of various farm products show that even
at the existing marketed surplus-output ratios, the quantities which the
marketing system will be required to handle in future, are quite large.
The marketing system backed by strong, adequate infrastructure is the core
content of agri-marketing. Development of infrastructure with in spot
markets and others places is a huge task. Committee based on the estimates
of the State Master Plan for Development of Regulated Markets found that
there is a need of total investment of Rs 6026 crores. 70.
Apart
from general purpose markets, there is need for developing specialized
markets for fruits and vegetables. It
has been assessed that there are at least 241 such places in the country
where fruit and vegetables markets should be developed.
The investment requirement for fruit and vegetables markets in the
country is around Rs.970 crores. 71.
Rural
periodic market is the first contact point for producer – sellers for
encashing his agricultural produce and buying other goods needed by them.
There are in all 27294 rural periodic markets including those for
livestock, in the country. There
is urgent need to develop these rural periodic markets in a phased manner
with necessary infrastructural amenities to have a strong base level link
in the marketing chain. The investment requirement for developing these
primary rural market places is estimated at Rs.2146 crores. 72.
Encouragement
by way of policy back up as well as financial support is recommended for
special type of markets like floriculture, cattles etc. For export
promotion and inter state marketing setting up of 50 mega markets in the
country with government financial support in private, public, cooperative
or joint venture is suggested. Encouragement may be considered for
promoting marketing of organically grown produce, fruits & vegetables,
medicinal plants, herbs etc. 73.
Storage
infrastructure is found necessary for carrying the agricultural produce
from production to consuming periods.
Country needs much more storage
facility than what is available now.
This is specially more important for hill and remote areas in
several states. For an
additional 20 million storage capacity the investment required is
estimated at Rs.5400 Crores. The private sector needs to be encouraged to
enter the storage and warehousing activity and make investment of this
magnitude. Village Panchayats, cooperatives, SHGs and farmers
organizations may be encouraged for undertaking warehousing. 74.
Committee
deliberated various alternative, competitive and affordable preservation
and temperature management technologies for perishables. The Expert
Committee recommends increased use of alternate use of technologies like,
Irradiation, Nitrogen fill packaging, Vacuum packaging, shrimp wrapping
and others. However, the Committee recognize the relevance and utility of
cool chains and therefore supports the government programme of end used
subsidies for cold storages. Cold storages are most important
infrastructural need for perishable and semi perishable commodities which
need an immediate attention. The
present storage capacity available is sufficient only for 10 per cent of
total production of fruits and vegetables. In the next 10 years, 15000
cold storage units would need an investment of the order of Rs.27,000
Crores. The investment should basically be made
by the private sector. In
future, there would be a need for multi-chamber type of cold storage units
for various perishable and other products in the country.
For encouraging private entrepreneurs there is a need to provide
incentives to make the units viable for some initial years. 75.
The
country require reefer containers/vans for transport of perishable items
for domestic and export marketing. At
present their availability in the country is negligible in
comparison to the present production of perishable commodities.
For handling the expected higher production in the next 10 years,
at least 3000 reefer containers/vans with a capacity up to 8 tonnes each
would be required. This would
require an investment of Rs.600 crores, which shall be created by private,
cooperative and joint sector sector. There
is a need to encourage the investors in the area by providing suitable
incentives. 76.
There
is a need to create facilities for cleaning, grading and packaging not
only in spot markets but also in the villages from where produce is
brought to the market for sale. There
is need to promote proper packaging after grading so that further chances
of adulteration may not be there. Besides
this there is a strong need to educate the farmers for proper packaging
and grading before they bring the produce to the market.
Scientific packaging should be encouraged at the farmer level
through various incentives. The Expert Committee feels that this is an
important activity, and an investment of Rs.2000 crores should be
earmarked for this purpose during the next 10 years. 77.
With a
view to taking advantage of new international trade environment, there is
a need to encourage export of high value non-traditional products grown in
various parts of the country. The
Government of India (Ministry of Commerce) has announced a scheme of
creating Export Oriented Agri-Zone (EOAZ). It should be promoted by
providing institutional and physical infrastructure in each of these as
per the needs of the specific commodity.
In some of EOAZs, there is also a need to establish what is called
Food Parks. In these parks,
some common facilities like electricity and warehouse should be created
with central government assistance which will help in attracting
investment by the private sector and the state government.
While most of the investment should be made by the private
entrepreneurs, as a way of incentive, government should invest in common
facilities, and quality certification.
The estimated public investment is Rs.200 crores and private
investment of around 400 crores on fifty such EOAZs.
In identification of EOAZs and 78.
Considering
the rising demand for value added and processed products, there is a need
for enhancing the capacity of agro-processing sector. For attracting
private initiative and investment in food processing, the Government of 79.
At
present, value addition is estimated at only seven per cent and processing
only two percent of the total production.
Within next ten year,
there is a need to increase value addition to 35 percent and processing at
least 10 percent. Quality
control and standardization will be extremely important in this endeavour.
The Central government should
encourage a network of food analysis laboratories in the country.
This will also be necessary to face competition from imported
processed products. 80.
Presently
the alcoholic beverages based on fruit & vegetables are clubbed with
other alcoholic beverages. Whereas
world over items like wines and beer which are based on fruit &
vegetables and have low content of alcohol (ranging below 11-12%) are
considered as items of food and are promoted as health drinks. This sector
has not developed in 81.
The
Word “Plantation Crops” as mentioned in some labour laws and Land
Ceiling Act has a rather limited meaning pertaining mainly to coffee, tea,
rubber, etc. If plantation is
used as generic term for an advanced form agriculture where various types
of management from the selection of land, selection of species to be
grown, the financial support, the management of labour, the processing
& marketing are all done at a higher level than what is done for
ordinary agricultural crops, the horticulture is bound to get a fillip.
The existing legal frame work will open new avenues for development
of entire horticulture sector if production of fruit & vegetables,
medicinal & aromatic plants, spices, is also brought under the
definition of plantation. 82.
NIAM
should become ‘Centre of Excellence’ for Asian Region and be headed by
Technocrat, Marketing Practitioner, Academician of national/international
repute. Training in agricultural marketing should be strengthened and NIAM
should take active stance in the programme. Training modules of different
duration should be designed for farmers, NGOs, co-operatives, extension
workers, development functionaries, PRI representatives, development
administrators, people’s representatives and policy makers. 83.
In 84.
Considering
the limited reach of public extension service, it is felt that
privatization of extension services with appropriate financial backup from
the public sector is considered more appropriate and practical.
The NGOs, Cooperatives, Trade Associations, Private Limited
companies, and corporate bodies should be allowed and encouraged to
undertake marketing extension. To
facilitate private agencies to undertake extension programmes on regular
basis for the country as a whole, a 24 hours TV Kisan Channel on
Doordarshan is necessary. The Kisan Channel would be best visual media to
educate farmers by public as well as private agencies for both
agricultural as well as marketing extension service. 85.
The
agricultural marketing research which is becoming increasingly important
has received inadequate attention in the past. There has been a need to
set up a liaison, linkages amongst the research activities findings and
the field position. The SAUs and the Regional & Other Centres of ICAR
should be given a mandate for applied research in agricultural marketing
and functioning of these units. Marketing organizations may be forced to
set apart some funds for marketing research. 86.
The
probable areas for training, research and information technology for
producers as well as different market functionaries could cover agri-business
management; WTO and its implementation; post-harvest management; grading,
standardization and quality assurance; information technology. 87.
The
sensitization programmes for state level, district level, farmers and
stake holders would also be conducted. The programme on post-harvest
management for agricultural, horticultural crops, livestock, marine
products, etc. may be conducted on regular basis.
Quality assurance specially for perishables awareness on
standardization and grading & quality control are the other areas for
government support.
88.
Agricultural
Produce Marketing requires connectivity between the market and
Exporter/Growers/Traders, through wide area network (WAN) of National and
International linkages in order to provide day-to-day information with
regard to commodity arrivals and prevailing rates etc., to provide links
for online International Market Information; to provide export-related
documentation, to inform about the latest research in agricultural
marketing, packaging/storage etc. related information and to provide
linkage/Connectivity with the World Trade Centre (WTC), APEDA,
NIAM, NHB, DMI, IIP, State Agricultural Marketing Boards, and
universities. 89.
Other
areas of importance are a) Setting up of value added networks services,
Information Kiosks in rural areas; b) promotional E- Catalogue for
Commodity Profiles; c) Farmer advisory services in the fields of
agricultural marketing, d) National Atlas of Agricultural Markets. 90.
Till
today, agricultural marketing in the planning process has not received the
required priority, therefore the Committee recommends that highest
priority may be given to the needs of agricultural marketing in the
planning process. The investment requirement for strengthening
agricultural marketing infrastructure comes to Rs. 268742 crores. Most of
these would need to come from private sector. This may
require a conducive and favourable environment consisting of (a)
making complementary investment by the state and Central Government (b)
subsidizing a few activities to enable private sector initiatives to
attain viability (c) active stance by the Central Government in some
initiatives (d) reducing the regulatory control and simplifying the
procedure and (e) ensuring adequate credit flow to agricultural marketing
activities.
1.
INTRODUCTION
1.1
Agricultural Marketing includes the movement of agricultural
produce from farm where it is produced to the consumers or manufacturers.
This covers physical handling and transport, initial processing and
packing to simplify handling and reduce wastage, grading and quality
control to simplify sales transactions and meet different consumers’
requirements, and holding over time to match concentrated harvest seasons
with the continuing demands of consumers throughout the year.
For the farmer, the strategic function of the marketing system is
to offer him a convenient outlet for his produce at a remunerative price.
To the consumers and the manufacturers of agricultural raw
materials, assurance of a steady supply at a reasonable price is the vital
service. Prices are determined through free market process by negotiations
at rural purchasing, wholesale and retail stages, and represent a balance
between the consumers’ ability to pay and the farmers’ need for
incentive to produce. An
effective marketing system will be geared toward expanding the range and
types of consumer service, and will thus offer producers expanding
outlets. 1.2
Agricultural marketing also includes the marketing of production
inputs and services to the farmers. Some of these include fertilizers,
pesticides and other agricultural chemicals; livestock feed; and farm
machinery, tools and equipment. As
the mass of small farmers in the developing world becomes aware of the
value of these supplies, the organization of distribution systems adapted
to their needs becomes vital. Through all the stages of marketing,
financing and easy access to credit is vital if goods are to move freely
and bargains be concluded without duress.
1.3 An efficient marketing system is vital to a) provide an incentive to farmer to produce more; b) convey the changing production needs of the economy to producers to enable production planning; and c) foster true competition among the traders and eliminate the exploitation of farmers particularly the small and marginal ones, who predominate agrarian sector in our country. The present Expert Committee has examining the issues related to only output marketing to make suggestions to strengthen and develop agricultural marketing in the country.
**** 2.
PRESENT
AGRICULTURAL MARKETING SYSTEM 2.1
Agriculture continues to be main stay of life for majority of the
Indian population. It
contributes around 25% of the GDP and employs 65% of the workforce in the
country. Significant strides
have been made in agriculture production during the last 50 years of
independence. The agriculture
production of food grains increased from 51 million tones in 1950-51 i.e.
before beginning of the 1st Five Year Plan to 209 million tones
in 1999-00. The output of oilseeds went up to 22 million tones. Similarly,
the production of fruit and vegetables also increased to more than 134
million tones owing to the production efforts through all these years. The
subject of agriculture and agricultural marketing is dealt with both by
the States as well as the Central government in the country.
Balanced regional development has been essential component of the
development strategy and different Five Year Plans aimed at achieving
socio-economic development of the country. 2.2
Predominant Public
Sector:
Starting from 1951, the different Five Year Plans laid stress on
development of physical markets, on farm and off farm storage structures,
facilities for standardization and grading, packaging, transportation
etc.. Development of
horticulture marketing attracted attention of policy makers during the 3rd
Five Year Plan. The year 1965
witnessed coming into existence of Central Warehousing Corporation, Food
Corporation of 2.3
Free Market Forces: Most agricultural commodity markets generally
operate under the normal forces of demand and supply.
However, with a view to protecting farmers’ interest and to
encourage them to increase production, the Government also fixes minimum
support/statutory prices for some crops and makes arrangements for their
purchase on state account whenever their price falls below the support
level. The role of Government
normally is limited to protecting the interests of producers and
consumers, only in respect of wage goods, mass consumption goods and
essential goods. It is
promoting organized marketing of agricultural commodities in the country
through a network of regulated markets.
To achieve an efficient system of buying and selling of
agricultural commodities, most of the state Governments and 2.4
With a view to coping up with the need to handle increasing
agricultural production, the number of regulated markets have also been
increasing in the country. While
by the end of 1950, there were 286 regulated markets in the country.
Today the number stands at 7161(31.3.2001). The Central Government
advised all the State Governments to enact Marketing Legislation to
provide competitive and transparent transactional methods to protect the
interests of the farmers. Barring
a few, most of the States and 2.5
The projections of production and
marketable surplus of
agricultural products (2006 to 2007) are presented in Table –1.
Table
-1
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Commodity |
Marketed
Surplus Ratio (%) |
Production
|
Marketed
Surplus
|
||
|
1999-2000 (Estimated) |
2006-07 (Projected) |
1999-2000 (Estimated) |
2006-07 (Projected) |
||
|
Rice |
43.0 |
87.5 |
103.5 |
37.63 |
44.50 |
|
Wheat |
51.5 |
68.7 |
84.3 |
35.38 |
43.41 |
|
Coarse
Cereals |
43.1 |
39.2 |
34.4 |
16.89 |
14.83 |
|
Total
Cereals |
- |
195.4 |
222.2 |
89.90 |
102.74 |
|
Pulses |
72.4 |
13.5 |
21.0 |
9.77 |
15.20 |
|
Total
Food grains |
- |
208.9 |
243.2 |
99.67 |
117.94 |
|
Oilseeds
|
79.6 |
21.6 |
33.8 |
17.19 |
26.90 |
|
Groundnut |
68.3 |
5.9 |
11.5 |
4.03 |
7.85 |
|
Mustard
& Rape |
84.3 |
6.1 |
8.9 |
5.14 |
7.50 |
|
Other
oilseeds |
86.3 |
9.6 |
13.4 |
8.28 |
11.56 |
|
Sugarcane |
92.9 |
315.1 |
352.8 |
292.72 |
327.75 |
|
Cotton |
100.0 |
2.1 |
3.2 |
2.10 |
3.20 |
|
Vegetables |
83.0 |
85.0 |
110.7 |
70.55 |
91.88 |
|
Fruits |
97.0 |
49.5 |
70.5 |
48.02 |
68.38 |
Source:
1.
Market Surplus Ratio – Sub-Group on Estimation of
Marketed Surplus Ratio, Constituted by GOI.
2.
Production Projection – Kumar P. and
V.C.Mathur, “Agriculture in Future: Demand – Supply Perspective for
the Ninth Five Year Plan”, Economic and Political Weekly,
2.6
In
2.7
APMC and Boards: Agricultural Produce Marketing
Committees (APMC) are corporate bodies established under the respective
State Agricultural Produce Marketing Regulations Acts.
They are either elected or nominated by the Government from amongst
representatives of agriculturists, traders and other functionaries and
local representatives. All the
State Acts provide for constitution of separate market committees for
individual market except in Tamil Nadu where it is constituted at the
district level to administer all the regulated markets in the district.
The market committees are either controlled by the Director of
Agricultural Marketing or the State Agricultural Marketing Board.
States like
2.9
The State Agricultural Marketing Boards are represented by both
official and non-official members. There is an imperative need to make the
Boards administratively viable and managerially competent in keeping with
liberalized trade atmosphere. The
marketing activities are many-fold and need liaison and collaboration with
related organizations such as Railway Board, Forward Markets Commissions,
Department of Posts & Telegraphs, Doordarshan, All India Radio, State
Planning Commission/Board, consumers and farmers organisations, ports etc.
It is desirable that the State Agricultural Marketing Board is
given appropriate official recognition in these organizations so as to
facilitate presentation of marketing activities and programmes of the
State in their meetings and accelerate the pace of implementation of these
programmes.
2.10
Although, market committees are, by and large, constituted
democratically, they lack in professional management.
The marketing manpower is controlled by three agencies, namely,
Market Committee, State Marketing Department and State Marketing Board.
Market Secretaries are yet to become market managers. The Committee
strongly feels that all the market committees including sub-yards should
be headed by professionals. Existing
Secretaries need to be trained in professional management of the markets
to facilitate liberalized, competitive and free marketing system.
2.11
Restrictive Regulated Markets:
The institution of regulated markets, set up to strengthen and
develop agricultural marketing in the country has achieved a limited
success in providing transparent transactional methods/marketing
practices, need based amenities and services conducive to efficient
marketing. The restrictive
legal provisions such as “all agricultural produce brought into or
processed within market area shall pass through the principal market yard
or sub market yard and shall not be bought or sold at any other place
within the market area2”
or “no such person shall carry on business as trader in agriculture
produce into market area except in accordance with the license issued in
this behalf by the Market committee3”
did not augur well with competitive market structure.
The power of the market committees to suspend and cancel the
license granted to traders has become an impediment to the free structure.
The licensed traders also have not favored new entrants in the arena to
maintain their grip over trade in market yard. The Agricultural Produce
Market Committees have often yielded to unethical practices, which they
were supposed to control and have instead become monopoly trading grounds.
Promoting competition in trade and facilitating farmers with supporting
services like grading, standardization, storage with pledge finance and
facilities in the market yards have become secondary activities. Even
basic function of regulation, proper method of sale, correct weighment and
prompt payment have eluded the market authorities. State-wise distribution
of wholesale and rural periodic markets in the country have been given at
Annexure-II.
2.13
The
state Governments are empowered to initiate the process of setting up of a
market for certain commodities, which are regulated and for certain areas,
in which the Regulation is enforced. As a result of this very process of
initiation of a market, the service providers for agricultural marketing
do not have any role. Nobody
can take initiatives in assessing the viability and feasibility for
setting up the markets equipped with the best facilities at competitive
cost. Therefore, these
provisions will have to be replaced by providing an omnibus provision that
anybody can set up a market, provided minimum standards, specifications,
formalities and procedures are complied with. The purchaser should not be
prevented from buying directly from the farmers. Products which are not
locally grown and which have no substantial marketed surplus need not be
included in notified commodities. Purchasers as well as sellers should be
free to transact anywhere without attracting any of the provisions of APMC
rules and byelaws. The
Government of Karnataka has set the ball rolling by amending its Act to
allow the National Dairy Development Board to set up wholesale fruit and
vegetables market at
2.14
Although,
technically the farmer/seller is free to sell his produce in any mandi he
likes, practically he has no liberty to sell his produce in his village or
to the retail chain/processor/bulk
buyer directly. He has to take
his produce to regulated market where the sales and deliveries are
effected. This has hampered
development of retail supply chain and direct supply to the processing,
consuming factories or other bulk purchasers.
Wherever there is a principal market, in the city or in the
metropolitan, the sub-market or the collection center is not permitted,
though in recent times “Rythu Bazar” or “Apni Mandis” or
“Farmers’ Mandis” are coming up on the peripheries of the
metropolis, cities and towns. Therefore,
the very basic concept of a single market, as a “principal market” for
one agglomeration, has created monopoly in many respects, resulting a huge
power center with plenty of exploitation practices.
2.15
The
experience of the farmers, the consumers and the trade functionaries
indicates that, under the existing legal provisions, there is no scope for
–
a)
direct marketing by the farmers or their groups to the
retailers;
b)
the retailers can not directly approach the farmers or
their groups
in their farms or villages;
c)
the processors find it difficult to procure material
at the production source and hence have to go the Mandis for procurement
of the material;
d)
electronic trading as the marketing includes trade by
“electronic media”, which is subject to the Regulation.
Therefore, the electronic media traders have been shifting to the
places, where there is no regulation, or where the regulation is not
enforced. These markets
resultantly have not seen any linkage with “futures” or “commodity
exchanges” so far.
2.16
Licensing: Functionaries
of the market yard such as commission agent, trader, processor, weighman,
surveyor, broker, hamal, warehouse owner, transporters etc. to function in
the area, as well as in the market or
sub-market, are required to obtain a license. Instead of license,
registration with APMC should be enough for any body to trade/operate in
the market. Licensed
functionaries in the markets such as traders, weighman, mathadis (Hamals),
procurers, surveyor etc. have over a period acquired a monopoly status.
New entrants are normally not permitted at the behest of respective
associations and unions. The
monopolies in marketing and handling have added to marketing costs
detrimental to both producers and consumers.
The typical example is that of transport charge from the principal
market (Gultekdi Market yard) in Pune to various centers in the city.
The transporters in principal market yard, Pune have unwritten
agreement that no outsider would be allowed to enter into transport
activity. As a result,
transport charges from Pune Principal Market for a distance of about 3 or
5 kms. are more than transport from upcountry areas like Solapur,
2.17
The
Rules and Bye-laws stipulate lot of procedures and documentation for
licensing. The documentation
mainly consists of Solvency Certificate, Certificate of good behavior,
cash security, Bank Guarantee or third party guarantee, etc. The License
is granted for the area, but they have to operate in the market or the
sub-market. Moreover, the
license is granted for only one year, which has to be renewed.
Renewal takes time and business is hampered.
Therefore, only registration with APMC should be there as has been
suggested earlier. As the Rule provides that no one shall market any
declared agricultural produce in the market area, other than the principal
yard or sub-yard. The very
fact of licensing has converted the entire scenario into handing over the
monopoly to those, who have already got the license.
The new-comers are normally kept aside on the ground that there is
no potential of additional business. This
monopolistic circumstance has caused lot of hardships to the producers and
the consumers. They disallow
latest systems of handling, like cleaning, grading, packaging, weighing,
transporting, etc. Their
organizations, associations and unions have become so strong that they can
dictate their terms to anybody, including the Government.
Thus, the element of cost efficiency and competitiveness is lost
because of licensing.
2.18
Neglected Rural Haats:
The present haats or weekly bazaars which constitute first contact point
with commercial circuits for the producers have not been provided with
amenities and facilities required for operational, technical and pricing
efficiency. Improvement in the efficiency of the rural markets has direct
impact on farmers’ level of income.
These markets need improved services for users to facilitate
marketing of the local produce, creating an element of market security for
the growers. The rural market
can also be used for effective credit, input marketing and procurement
activities. Haats need to be provided with mobile banks on haat days by
Gramin Banks.
2.19
Even
though the 73rd Amendment to Constitution bestowed management
of rural markets to village panchayats, different authorities still
continue to own and operate these markets.
Moreover, where these markets are brought under regulation as sub
yards, and have turned to a case of multiple collection of ground rent,
market fee and other charges etc. by different agencies disregarding their
developmental responsibilities. The fees or other charges collected in
these markets are also disproportionate to the amenities and facilities
rendered. The rural periodic markets, besides transacting agricultural and
allied commodities, also perform the function of distribution of items of
daily needs of the rural population. Farmer is a seller, consumer and even
trader in these grass root level markets. 80% of the household income of
the rural masses is estimated to be spent at these markets. Their
development, therefore, with proper operational, pricing and technical
efficiency constitute foundation of integrated market system for
distribution of agricultural and allied produce.
Owing to their financial non-viability, these markets did not
receive adequate attention either from the State or Central Government for
their developmental requirements. Their development should be looked as
socio-economic development as multipurpose growth centers so that these
places could be used for other developmental activities related to health,
education, animal husbandry on days other than haat day and a scheme to
this effect in the sector is, therefore, necessary.
2.20
Multiple Legal Instruments:
Apart from the Agricultural Produce Markets Acts, activities of market
functionaries are regulated by several other legal instruments promulgated
by the Central government and the States.
The important ones are:
2.22
The provisions under the legal instruments, are used particularly
during the periods of short supply as reflected through high prices to
regulate the activities of traders and processors pertaining to trading,
stocking, maintenance of quality, grading, packing, processing, blending
and movements. These
instruments are administered by different Ministries and Departments of
the Central government and the
States. Considering the fact that shortages have now been replaced by
surpluses, these restrictive provisions have to be put to an end for
uninhibited free marketing system. The
Essential Commodities Act, 1955 needs to be repealed in the new context.
2.23
Linking Spot Markets with Futures Markets:
The regulated markets, which are spot markets, have not been able
to link themselves with the forward and future markets to receive price
signals. The futures trading in agricultural commodities is also regulated
by the Government. Till
recently, it was permitted in jaggery, blackpepper, turmeric and hessian.
The Kabra Committee appointed by the Government of India in 1993
recommended for permitting futures trading in 17 major agricultural
commodities. The Government
has now notified the introduction of futures trading in cotton, kapas, raw
jute and jute goods, all major oilseeds and their oils and cakes; rice
bran oil and coffee. The recent addition to this list is sugar.
The Committee is of the view that more and more commodities should
be added to the list of commodities allowed for futures trading to
facilitate integration of domestic market with international market.
2.24
Domestic Market Reforms:
Reforms in the domestic markets for farm products have to precede
trade liberalization. Certain
provisions, which come in the way of efficient functioning of the domestic
market for agricultural commodities and adversely affect both the growers
and the consumers, should be done away with in phases.
These are levy on rice millers, statutory rationing
of rice and wheat in
2.25
The food grains marketing system has been a subject of considerable debate
in recent years. In this
connection, it needs to be noted that the intervention by the government
in food grains markets, specially of rice and wheat, in the form of price
support, buffer stocking and P.D.S., has helped the country in achieving
near self-sufficiency in staple food and in improving physical and
economic access of masses to food. The Committee recommends that the food
security and food management system built up over the years should be
retained as an essential component of national security policy.
For this purpose, a multi agency approach along with Food
Corporation of
2.26
Government Marketing
Support Programme:
Because of heavy dependence on nature, the production of
agricultural commodities
is uncertain. Sometimes good harvest causes scenario of plenty’s,
while the poor harvest creates scarcity or short supplies. Both these
situations adversely affect
the farmers. Government’s minimum price support scheme in this context
has remained very useful to
the farmers. The minimum price support policy is applicable to 24
agricultural commodities. Under this scheme government agencies are asked
to start purchase of the
commodities when market prices fall below the minimum support price so as
to save farmers from the distress sales. Though scheme has proved very
useful to the farmers, its implementation has remained faulty and
inefficient. The agencies involved in such purchases do not start
operations in time. They do not make payments in time. They
do not have sufficient arrangement for weighing, bagging, storage,
documentation and payment of purchases. Sales of purchased commodities is
normally not done in time and with marketing efficiencies. Therefore heavy
losses do occur. However it is generally viewed that government
intervention in food grains specially rice and wheat, in this form of
price support, buffer stocking and PDS has helped the country in achieving
self sufficiency in staple food and in improving economic access of masses
to food while protection the interests of the producers. The committee
therefore recommends the continuation of the food security and food
management system built up over the years as essential component of
National Food Security. However the agencies involved in this management
should be encouraged for optimum efficiency and diligence.
2.27
Market Intervention
is another marketing support policy of the government. Over and above the
commodities under minimum support price, the prices of some commodities
especially of horticultural crops tend to fall drastically forcing the
farmers for distress sales. Under these circumstances with the help of
state government , GOI launches Market Intervention Scheme for that
particular crop in that season so as to avoid distress sales by the
farmers. Prices based on the cost of production and other factors for that
season are decided for Market Intervention. Government
agencies are assign the job of intervention. The losses are shared
equally by Government of India and State Government.
2.28
This
policy of Market Intervention also has proved a boon to the farmers in
distress. The operational efficiency of purchasing agencies need to be
toned up in the context of cost efficient purchases vis –a –vis
competitive sales so as to avoid or reduce losses. Therefore the Committee
not only recommends continuation of Market Intervention Scheme but also
suggests expanding the coverage of this scheme to more commodities. The
Expert Committee also recommends that the Government of India may
encourage the state government to initiated market intervention operations
well in advance for saving the farmers in distress.
2.29
The experience shows that while in most of the surplus producing
regions, the state governments and their agencies remain active for
effective implementation of the policy of assuring minimum support prices,
in those areas where the need for price support arises only once in two or
three years, the public agencies have not been able to provide effective
support to the farmers as they could not tie up with central nodal agency
for making necessary purchase arrangements in time.
Such failures on the part of the state agencies lead to a set back
to the production programmes. Most
of the upcoming regions like Eastern Uttar Pradesh, Madhya Pradesh,
2.30
The
minimum price support policy
is currently applicable to 24 agricultural commodities which should be
continued. However, there are
several other commodities which are of considerable economic significance
in various agro-climatic regions of the country.
The fluctuations in their prices are considerably more.
For protecting both the producers and consumers against wide
fluctuations in the prices, there is a need for initiating a comprehensive
price stabilization scheme applicable to selected important crops of each
agro-climatic region. The
scope and contents of market invention scheme of Ministry of Agriculture
be expanded and state governments should be encouraged to formulate and
implement market intervention programmes for establishing the prices of
crops not covered by MSP policy.
2.40
There is a considerable variation in the structure of taxes and fee
on the agricultural produce in various states which also distorts the
operation of the domestic market, gives wrong signals to the producers and
leads to considerable fallacy in the efficiency of the operation of
private trade vis-à-vis farmers cooperatives and public agencies.
There is a need for bringing uniformity in the state level tax
structure for agricultural commodities for improving the marketing
efficiency.
2.41
2.42
The
objectives and forms of intervention in the marketing system have
undergone a substantial change from mid sixties when the country opted for
a package of interventions for protecting and reconciling the interests of
consumers/producers as well as the industry.
One of the important instruments used by the Government to
intervene in produce markets consists of fixation and announcement of
administered prices and arrangements for their implementation. The
administered price regime currently in vogue includes (a) minimum support
prices (MSP) for 23 commodities (7 cereals, 4 pulses, 8 oilseeds, copra,
raw cotton, raw jute and VFC tobacco); (b) statutory minimum prices for
sugarcane; (c) levy prices for rice; and (d) central issue prices for
rice, wheat and coarse cereals for sale under public distribution system.
Direct entry of public agencies in the marketing have influence on its
structure, conduct and performance. Maintenance
of stock of rice and wheat; distribution of cereals and sugar at prices
lower than market prices; and open market operations by public agencies
cast their influences on market.
2.43
Poor Credit Flow:
Poor credit flow to agriculture
and wholesale trade has been one of the major bottlenecks in the
country’s agricultural marketing system.
Most of the lending to the agriculture sector is short term, and is
in the form of crop loans. Farmers
are expected to buy all the required inputs to raise a crop with the
credit made available to them and then return all loans soon after
harvest. Post-harvest credit
from banks is usually not available. Given
the importance of a good credit history, most farmers, especially small
farmers, take the produce to market soon after harvest.
Most farmers face the same objective function and produce is
brought to market simultaneously by several farmers.
As a result of the temporal supply conditions, prices fall.
Often such fall in prices leave little surplus for the next crop.
2.44
The wholesale trade combines several functions.
Financing is one of these functions rendered by the Commission
agents and traders known as adatiyas
in many parts of the country. Kuccha adatiyas are provided finance by pucca adatiyas to make payment to the farmers.
Where produce can be carried in inventory with associated
incentives, farmers often access credit from the wholesale trade.
Pucca adatiyas often carry inventory consisting of produce sold by
farmers. The informal sector
provides significant credit to agriculture and wholesale trade, but the
cost of credit is high compared to the rate at which it may be provided by
banks. Lending against stocks or inventory of produce is a significant
activity of banks. For
example, banks lend to cotton spinning mills against stocks of cotton.
However, bank credit to farmers against agriculture produce is
quite uncommon. These
lacunne should be corrected.
2.45
Post-Harvest Losses:
Although, India produces a wide variety of fruits and vegetables,
in the absence of adequate post harvest and marketing infrastructure viz.
irradiation facilities, storage/cold storage and cold chain facilities,
the horticulture produce suffer heavy post harvest losses. The problem is
further complicated due to the fact that there are no storage facilities
at the farm level and the farmers are forced to dispose off the entire
produce immediately on harvesting.
This creates a glut situation in the market.
The margins of the wholesalers and retailers are therefore much
higher in our country. The entire burden of the distress sale in the form
of low prices falls on farmers.
2.46
The horticulture marketing practices lack systems approach. Trading
and marketing structure is traditional consisting of a long chain of
intermediaries. As many as 75%
of the farmers sell their produce at the farm level. They cannot afford to
go to distant mandis on account of lack of facilities, expensive
transportation and malpractices in the assembling markets. The long
marketing channel is detrimental to quality and safety of those perishable
products. It is essential to shorten the channels.
As has been suggested earlier these commodities can be taken out of
the exclusive purview of State Agricultural Marketing legislation to
facilitate direct sales and other competitive outlet after proper grading,
packing, transportation such as through refer vans to the final
destination. The
multiple handling add costs and increase post-harvest losses, adversely
affecting the income of farmers and making produce comparatively costlier
to the consumers. To
minimize these losses, improvements are required at various levels, viz.:
harvesting; grading; transport; storage; processing, packing and
marketing.
2.47
Need for Legal Reforms:
The nature of legal framework within which agricultural markets
operate has a fundamental effect on the functioning of the agricultural
marketing system. Legal
reforms can play an important role in making the marketing system more
effective and efficient by removing unnecessary restrictions and by
establishing a sound framework to reduce uncertainty of the market. The
volatility of commodity prices has been one of the main justifications for
State intervention to control or direct the functioning of agricultural
markets. Today most developing
countries have adopted national policy committed to the liberalization of
their domestic agricultural marketing systems and to encourage an
efficient and competitive private sector.
In
2.48
In promoting private sector marketing systems, Government need to
examine existing policies, rules and regulations with a view to minimizing
conflict in successful private sector operations.
A review is required in respect of all laws which regulate
participation in market such as registration/licensing, commodities
traded, controls on packaging and labeling, laws affecting market place,
laws affecting supply including controls on movement of produce and volume
of commodities traded. The Expert Committee recommends that a Task Force
be set up under the Ministry of Agriculture, Department of Agriculture
& Cooperation to undertake a review of all marketing legislations and
suggest introduction of necessary legal reforms to promote free and fair
marketing system for agricultural and allied products.
---
3.1
Wholesale Markets:
In almost all the states, wholesale markets are established and
regulated under their respective Agricultural Produce Marketing Regulation
Acts. Under these Acts, the
whole geographical area in the State is divided and declared as market
area where in the markets are managed by the Market committees constituted
by the state governments. Within
an area declared to be a market area, marketing of agricultural produce
specified in the notification is regulated in accordance with the
provisions of this Act. Once a
particular area is declared a market area under Agricultural Produce
Marketing Act and falls under jurisdiction of a particular Market
Committee, no other person or association/agency is allowed to carry on
any wholesale marketing activity. The
monopoly of wholesale markets due to regulation has created an oligopoly
set-up and made the traders a dominant market force.
Most of the agricultural produce marketing committees and board
members are nominated. Therefore,
they lack direct accountability to the users of market, a problem
accentuated by the monopoly role of regulated markets.
In actual operation of the market, farmers lack effective voice and
hence marketing power. Large
number of the small farmers are unable to effectively bargain in the
market. Intermediary and
system inefficiency consume a disproportionate share of consumer price,
thereby eliminating incentive for improved productivity and quality.
Due to farmer’s dependency on credit from trader, farmers receive
small and irregular payment, perpetuating dependence on trader credit.
Farmers loose freedom to find the best buyer.
Services to farmer are ineffective and inadequate, leaving them
without proper price information and technical advice.
3.2
Alternative
Marketing Systems: Role of government in
managing markets is on the decline worldwide. The present system being not
amenable to easy transformation, the only way to modernize marketing is to
set up an ‘alternative marketing system’ that may operate parallel to,
and in addition to present Mandies. The
purpose of the proposed alternate marketing structure is to establish
modern efficient trade practice as a catalyst for changes in the market
towards improved transparency and efficiency.
Experience throughout the world has shown that markets depend in
part on growers having a say in the marketing of their produce.
Growers Cooperatives and Marketing Boards own and operate markets.
In
3.3.
Government as Facilitator:
In most countries in the world, market operation is conducted by
the corporate sector. In
countries similar to
3.4
The Committee suggests establishment of an alternative marketing
structure that sustains incentives for quality and enhanced productivity,
improving farmer incomes with improved technology support and methods.
Central to the new structure are professionally managed
‘alternate markets’ that set prices based on open auction in which all
buyers participate. Transparency
and fair competition, standardization and quality control, efficiency and
hygiene should be the defining characteristics of alternate market
operations. The market will
operate outside the purview of the Agricultural Produce Marketing Act and
be owned by professional
agencies in private sector, wholesalers, retail trade
associations/corporates, joint ventures and other investors.
The markets be professionally managed and financed by
transaction-based charges to sellers and buyers and fees for use of
facilities. Volume and price
information be disseminated widely to farmers’ associations as well as
to retailers and consumers. Key
functions include efficient, professional management of the market,
coordinating retailer payments to producers and resolution of disputes
between users.
3.5
Forms of Alternative
Marketing:
The different
forms of alternative marketing could be:
a.
Direct
marketing by producers;
b.
Marketing
through Farmers Interest Groups;
c.
Setting
up of Terminal markets by the private sector;
d.
Forward
markets and futures exchanges;
e.
Electronic
trading – e-commerce;
f.
Setting
up mega markets covering all marketing functions for
domestic as well as export trade; and
g.
Introduction of negotiable warehouse receipt system.
3.6
Direct marketing enables farmers to meet the specific requirements
of wholesalers from the farmers' inventory of graded produce and of retail
consumers based on consumers' preferences, thus enabling farmers to
dynamically take advantage of favourable prices and improve their net
margin. It encourages farmers to undertake grading of farm produce at the
farm gate, thus enabling farmers to improve price realisation
considerably. Direct marketing obviates the necessity of farmers to haul
produce to regulated markets that are not necessarily spaced on the
principles of efficiency derived through cost analysis based on operations
research. Direct marketing enables farmers and buyers to economise on
transportation costs and to improve price realisation considerably. It
will also act as a break to monopoly of regulated market.
3.7
Direct marketing to wholesalers and agro-industrial processors
presupposes prior knowledge of buyers' needs among farmers and presupposes
prior knowledge of the capability of farmers among wholesalers and
agro-industrial processors. Such prior knowledge cuts costs related to the
gathering and assimilation of needs and capabilities. Such knowledge also
has a favourable impact on the exchange of goods and payments thereof.
More importantly, such knowledge enables farmers on the one hand and
wholesalers or agro-industrial processors on the other hand to transact
through purchase orders for long-term deliveries and payments. Such orders
constitute the cornerstone for a range of contracts that include forward
contracts at the personal, bilateral level.
3.8
Direct marketing (retailing) by farmers to the consumers was
experimented through Apni Mandis in
3.9
Direct marketing by farmers’ organizations needs to be promoted
in the light of the continued criticism that both farmers and consumers
suffer economic losses in the existing agricultural marketing
system/structure. The similar
logic holds good for consumer organizations also who can procure directly
from producers and distribute to the consumers commensurate with their
purchasing powers. The
Government should support these organizations with schemes like providing
back ended subsidy for refrigerated as well as general transport, setting
up of grading and packing houses, credit at low interest etc., till they
become financially self-sufficient on commercial lines, development of
communication links.
3.10
Marketing through informal groups by hiring common facilities of
post harvest management and hiring joint transport have also been
successful in Asian countries like Philippines, Malaysia etc. The group
action strengthens bargaining power of the farmers and the marketing
expenses get distributed resulting into better share in the net returns.
Whether self-help groups or NGOs, everybody should be encouraged to
market in the interest of farmers.
3.11
In a liberalized marketing environment, for protecting the interest
of growers, apart from the effective implementation of price support
policy, it would be important for the farmers to organize into strong
cooperatives or self-help groups (SHGs).
A market friendly economy, producer or member friendly cooperatives
or SHGs would be critically important in competitive trade environment but
to enable them to compete effectively with private trade it would be
necessary to allow them to function freely.
The experience shows that unless the cooperatives are freed from
the shackles of politicians and bureaucracy these may not become effective
alternative to private or corporate sector.
There is a need to drastically change the cooperative laws.
3.12
As another form of direct marketing, the unemployed youth could be
involved in procurement of orders and supply of graded and packed products
to different city dwellers. The
youth could be trained in marketing practices of procuring products and
supplying them. They will move
into different localities to obtain door to door orders and procure
supplies of needed quality and packs directly from the producers for
onward transmission to the consumers.
The financial assistance from the public sector to such ventures
would generate entrepreneurship and provide profitable employment to the
younger generation. They
could be given assistance in the form of working capital to start the
enterprise alongwith the necessary agri-business training.
3.13
The
international demand for organic products is increasing fast.
3.14
Risk Management:
Forward and futures contracts enable price discovery. The price
discovery function allows important economic decisions to be made as to
which commodities to produce; how to produce the commodities ; how much of
each commodity to be produced; how much to sell and at what prices; how
much to store and for how long; what commodities to consume and how much
to consume and at what prices. The above questions and answers typically
constitute the marketing function of an economy. Of course, storing is an
economic decision that is driven by the opportunity costs and the
availability of credit.
3.15
The move towards direct marketing and the move towards hedging and
delivery through forward and futures contracts do not obviate the need for
market yards for conducting spot transactions in general between farmers
and buyers. The Expert Committee holds the view that direct marketing
between farmers on the one hand and (1) wholesalers and (2)
agro-industrial processors on the other hand is effective only if farmers
have an opportunity to access reliable reference prices for a range of
grades, qualities and time of
deliveries. Effectiveness would narrow the spread between producer and
consumer prices and enhance incomes to farmers. Marketplaces of high
fidelity best generate such reference prices.
3.16
Forward
contract may well be regarded as direct and alternative marketing
facilitator. It is an
agreement between two parties to buy and sell a commodity at a
predetermined future date at a price that is agreed when the contract is
entered into between buyer and the sellers.
The three principal elements of the forward contract are:
a)
the
commodity and its characteristics are known to the buyers and the sellers
but may not be known to other potential buyers and sellers;
b)
the
date on which the commodity will be bought and sold is determined in
advance by the buyer and seller;
c)
the
price to be paid by the buyer to the seller at the future date is
determined on the day the contract is entered into between the buyer and
the seller, but is not made known to other potential buyers and sellers.
3.17
Forward
contracts facilitate the lock in of prospective purchase and sale prices.
Future markets by devetailing its functioning with spot markets can work
as a tool to handle the situation arising out of good harvest as well as
poor harvest for stabilization of supplies along with prices. The
estimated poor harvest in the beginning of crop sowing/ planting would
enable the buyers to enter in to future contracts at higher rates. The
spot market operaters if given incentives for holding adeuate stocks to
regulate the flow in spot markets will facilitate the honouring of forward
contracts. They may also after knowing the stock position can request to
imports of such quantities matching the requirements of future as well as
of spot markets. Thus the scenrio of good harvest will enable the future
to contract as lower prices so as to signal the farmers to reduce the area
of respective crops and encourage the farmers for easy and timely
diversion of cropping pattern. This itself will plan for reduced/ adequate
supplies for the markets in the time of good harvest. The storage shall be
regulated as per the futures requirement at one end and the avilability of
produce at the other. There by the sudden flow of produce at the time of
season gets rationalized. A
digramatic view can be seen at page …..
3.18
Commodity futures markets in the country are regulated through
Forward Contracts (Regulation) Act, 1952 and are under the jurisdiction of
the Department of Consumer Affairs, the Ministry of Civil Supplies and
Consumer Affairs, Government of India.
The Forward Markets Commission (FMC) performs the functions of
advisory, monitoring, supervision and regulation in futures and forward
trading. Forward/futures
trading is done in exchanges owned by the private associations registered
under the Act. These exchanges
operate independently under the guidelines of their byelaws approved by
the FMC. In the country
currently, futures contracts are traded for nine commodities in 20
commodity exchanges; pepper, castor seed, castor oil, potato, gur,
turmeric, hessian, sacking, cotton, and coffee.
Futures contracts of only potato, gur and castor seeds are traded
in the multi-exchanges. International
futures trading has been initiated for pepper in
3.19
Commodity futures contracts overcome many of the inadequacies of commodity
forward markets. In the main,
futures contracts are designed to overcome the two deficiencies of forward
contracts; futures contracts retain all other favourable properties and
characteristics of forward contracts.
3.20
A recent study conducted by the IIM, Ahmedabad has indicated that
the performance of the Indian commodity futures markets is varied across
the commodities, exchanges and contractors.
However, they reveal the potential of performing the functions of
price discovery and risk management. Nevertheless,
they are still not congenial markets for the hedgers and other economic
agents. They are deficient in
several aspects such as infrastructure, logistic, management, linkages
with financial institutions, reliability, integrity and an efficient
information system which do not encourage a large group of the market
players in the commodity sector to trade in this market.
The linkage between the spot and futures markets seems to be poor
due to domination of the speculators.
Government has, therefore, to continue its efforts to strengthen
and institutionalize the exchanges and to instill confidence and awareness
among market players. Efforts
have also to be made to extend role of exchanges in other services like
warehousing, financing, investment and market intelligence, which would
improve existing working of future markets.
3.21
Liberalization of Trade: With the initiation of the liberalization
process in
3.22
In
the process of the economic liberalization and signing of the WTO
Agreement, government has given a thrust to enhance international trade in
raw agricultural commodities and their value added products.
This would expose the domestic market to international price risk.
Since exporters generally operate their business on a thin margin,
an efficient price risk management mechanism would be essential in the new
environment. Withdrawal of
Government’s intervention from commodity sector ensures only demand and
supply forces will determine market price in the new economic environment.
It is also argued that an efficient price management mechanism for
agricultural commodities encourages commercial banks to finance the
commodity sector and attract direct foreign investment in the agricultural
sector. Therefore, in the new
economic environment, futures markets are expected to play a vital role in
the agricultural commodity sector.
3.23
Certified
Warehouses and Warehouse Receipts:
Poor credit flows have had an adverse effect on the agriculture produce
economies of the States. Certified
warehouses and a system of warehouse receipts could lead to better credit
delivery, better loan recovery and convenience in asset management.
The banking sector might be more willing to extend post-harvest
credit facility to the agriculture sector for wholesale trade and a system
of warehouse receipts. The presence of certified warehouses would enable
the development of market instruments that may reduce the pressure on
State Governments to carry large inventories of agriculture produce.
3.24 Warehouse
receipt when backed by a suitable legal frame work, is an instrument that
shows proof of ownership of agricultural commodities. It states the
quality and quantity that is owned by the receipt holder and the warehouse
in which the commodity is stored. It is issued by warehouses approved by
an independent body. The warehouse receipt is issued after the produce is
certified for quality and quantity. The process involves rigorous but
rapid testing and grading often based on official standards. It can be
successfully negotiated by endorsement without returning it to the
warehouse operator. These receipt may be used in commodity linked loans.
Warehouse receipts are being operated in three commodity exchnages –
Coffe Futures Exchange Indian Ltd. (COFEI), SOPA Board of Trade (SBOT) and
BOOE. These boards have setup institutional framework for warehouse
receipts. There is tremendous scope for massive expansion of use of
warehouse receipts.
3.25 Warehouse
receipts can play an important part in making indian agriculture more
responsive to market opportunities and more competitive in relation to
world markets. They can also be made an important instrument to make it
more attractive for banks to lend to the agricultural sector, to reduce
the cost of public support for agricultural marketing, to reduce
transaction costs and to improve price risk management. They enable to
ensure increased liquidity in rural areas, lower cost of financing,
shorter and more efficient supply chain, enhanced rewards for grading and
quality, development of other productivity enhancing agricultural services
and better price risk management.
3.26
The
Expert Committee proposes following strategy for the Government of India:
a.
To
promote development of a national warehousing receipt system for
agricultural commodities, as apart of its policy of ensuring that indian
agriculture is globally competitive while enhancing rural welfare and food
security;
b.
To
declare CWC and SWC as Acredition Agencies for certified warehouses for
warehouse receipt.
c.
Laydown
various standards, specification for certified warehouses, so also rules
and regulation for managing them including fidality aspects.
d.
All
licensed warehouse to confirm to the minimum professional standards in
order to provide confidance to lenders and the public in general. They
will be encouraged to develop their own code of coduct for self
regulation.
e.
Existing
warehousing laws may be suitably amended. A formal regulatory authority
may be consittuted to enforce standards and protect the interest of those
holding warehouse receipt against negligence malpractices or fraud. The
regulatory authority has to be strctured to ensure its complete autonomy
and freedom from political interfrence.
f.
To
promote latest information system for warehouse receipt to help in
identifying ownership of produce, transferors of lien, holder of lien,
hypothycation of receipt for loan and trading of the produce in the
context of spot delivery.
g.
On
the negotiability of the instrument i.e. warehouse receipt there may be
incidence of various taxes and levies which should be exempted for five
years to begin with, to make these receipts popular.
h.
The
negotiabity of warehouse receipt require amendments to various Acts of
Central ad State Government which may have to be looked into.
3.27
Warehouse
receipts and a warehouse system where the objects of legislative efforts
nearly three decades ago. A warehouse receipt Bill was drafted in 1978
with the principle, if not sole, objective of endowing upon warehouse
receipts the status of negotiability under the negotiable instrument Act
1881. The warehouse receipt
Bill was initiated by the Banking Laws Committee and did not proceed
beyond the stage of discussion of the draft. The constitution of a Task
Force comprising representative of the Commodity Exchanges, The FMC, The
Ministry of Consumer Affairs and Public Distribution, the Ministry of
Agriculture, The Ministry of Information Technology, NABARD and the RBI is
recommended.
3.28
Warehousing Corporations:
Outside of the ports, the Central and the State Governments
dominate the warehousing industry, both as client and as service provider.
Warehousing facilities owned by the central and the state
Governments account for 65.9 million tons of warehousing capacity. About
46 million tons of capacity is owned or leased by the Food Corporation of
3.30
The existing Government warehousing corporations should play a
leading role in the development of warehousing.
However, they can only cover a part of the field, which should be
opened up to private operators, particularly those who already provide
storage services including loan facilities. Moreover, divestment should be
pursued with a view to increasing their private sector orientation and
autonomy. The existing usage of warehouse receipts by commodity exchanges
are extremely limited. However,
the institutionalization of the warehouse receipt system through the
commodity exchanges is most likely to yield the best results in the
context of promoting and propagating warehouse receipts, in particular
electronic warehouse receipts, and a national system of warehouse
receipts.
3.31 Pledge Financing: Pledge financing enables the usage of inventories of graded produce as collateral for accessing credit from the organized credit market, thus enabling farmers to take advantage of favorable prices; to hold inventory of graded produce under favorable storage conditions; promotes rural godowns and warehousing, thus enabling farmers to hold inventory without having to dispose of produce at adverse prices in the regulated markets; advances grading of farm produce to the farm gate, and enables identity preserved storage closer to farms, thus enabling farmers to improve price realization considerably.
---
4.
AGRICULTURAL
MARKETING INFRASTRUCTURE
4.1
The
Rationale: Infrastructure consists of a
combination of national assets which sustain the addition of place, time
and form utilities to the products and services.
These include apart from the Government institutions and
organizations, roads, railways, warehouses, market yards, cold stores,
processing units, research and training institutions, means of
communication and transportation including air cargo, sea cargo etc.
The basic rationale of any infrastructure is the sustenance it
provides to production activity, income generation and social service
supplies. It has also positive
effect on income distribution because low per capita infrastructure limits
the access of small and marginal farmers to the market.
4.2
The relationship between agricultural development and investment in
infrastructure has been long recognized.
Roads stimulate agricultural change and modernization not only
through their immediate effects on relative prices and marketing
opportunities but also through backward linkages.
The roads open up opportunities for commercial agriculture and
encourage shifts to production of higher value, transport – sensitive
products (fruits, vegetables, dairy, poultry and marine products).
Roads also improve access of the people to extension agents, banks,
markets and health services. Market
infrastructure is important not only for the performance of various
marketing functions and expansion of the size of the market but also for
transfer of appropriate price signals leading to improved marketing
efficiency. Infrastructure facilities lead to reduction in marketing costs
which is crucial for increasing the realization of growers and reducing
the costs to the consumer.
4.3
The infrastructural facilities can be classified as physical and
institutional. The roads,
railways, transport facilities, electrification and storage structures are
physical infrastructure whereas cooperatives, local self-government,
banking institutions, extension agencies, marketing organizations and
market intelligence net work are institutional infrastructure. For over
four decades after independence, the public sector in
4.4
Market Surplus: In order
to assess the adequacy of agricultural marketing infrastructure in the
country, it is imperative to estimate the availability of agricultural
production and marketed surplus. Generally,
there is positive association between production and marketed surplus.
Several studies carried out by individual researchers and national
and international organizations provide the projections of both demand and
supply of agricultural commodities at different points of time.
Projections for too distant a period involve several assumptions
which may not hold good. The
Committee has, therefore, used the projections of production of various
farm products as given by Kumar and Mathur for the period 2006-07 (para
2.4-Table).
4.5
Projections of production and marketed surplus of various farm
products for the year 2006-07 as given in Table 1(para 2.4) show that even
at the existing marketed surplus-output ratios, the quantities which the
marketing system will be required to handle in future are quite large.
For example rice output is projected at 103.5 million tonnes ,
meaning thereby that paddy output available for milling with rice milling
sector would be around 155 million tonnes.
The marketed surplus of all cereals taken together would be 102.74
million tonnes. As regards
pulses, the marketed surplus is projected at 15.20 million tonnes which
will require considerable increase in the pulse milling capacity.
Reduction of proporation of population on agriculture would enable rise in
market surpluses.
4.7
As regards livestock products, it is projected that by 2006-07, the
marketed surplus of milk would be 71.7 million tonnes, meat and eggs 6.0
million tonnes and of marine products 9.80 million tonnes.
Considering all the perishables together (fruits, vegetables and
livestock products), the marketed surplus is anticipated to go up by 43.4
percent during the next seven years from 172.69 million tonnes during
1999-2000 to 247.76 million tonnes during 2006-07.
The capacity to clean, grade, pack, process and transport these
perishables would have to expand to handle the additional marketed
quantities.
4.8
From the view point of complete supply chain, from farm to the
market, the infrastructure for all types of perishable horticulture
produce is required at following levels:
(b)
Collection Centers near to the farms;
(c)
Medium to small cold storages having multi-product,
multi-chamber facilities are the most popular segment where horticulture
produce is stored as transit godowns;
(d)
Specialized cold storage with facility of built in
pre-cooling; high humidity and Controlled/Modified Atmosphere are required
for storage of the produce for a longer period.
These specialized storages are essential for extended shelf life of
the produce and without these storages the requirement of storing the
produce to meet the demand in the off season is not feasible;
(e)
Other components like ripening chambers close to the
markets and display cabinets at retail outlets;
(f)
Linkages for conversion of fresh produce in other
marketable forms;
(g)
Integrated Pack Houses to serve farms in respective
regions having an area of around 5000-10000 hectare.
Farms associated with each of the centers would collect farm
produce and bring them to common cold storage centers, where these
products could be given treatments, such as washing, sorting, grading and
packing. These products will
then be preserved in the appropriate cold storage facility.
The services of these centers will not only increase the value of
the farm product, but will also remove most of the unwanted bio-degradable
bio-mass from the horticulture products, which can be utilized as farm
manure or even as cattle feed.
4.9
The electronic trading would be more appropriate form of
direct marketing between different buyers and sellers.
Every market committee should be provided with facility of
electronic trading by setting up a special kiosk for the purpose. The
young entrepreneur who can set up portals on their own to provide such
facilities could be supported financially through a plan scheme.
Their responsibilities would include to inform the buyers and
sellers about online demand of different products; product specifications
with regard to quality, pack size, packaging material, quantity and the
time frame of supply; the transport cost involved and the marketing
charges likely to be incurred in the market where the goods are to be
delivered; facilities available to the farmer in the buying market;
Re-handling of the produce, if necessary, in the supplying market to suit
to the requirement of the buyer market; the rules and regulations of the
destination market, if it is located outside the state at distant place,
and other specific information as may be conducive for the seller to
transact the business with the purchasers; and the legal provisions
related to storage, transportation, phyto-sanitary requirements etc.
4.10
Telephone
is the most convenient way of communication which can reduce cost of
marketing besides meeting other needs in the villages.
However, upto March 2001, only 59 per cent of 6,70,000 villages
were connected by telephone. The
tele-density i.e. number of telephones per hundred population was only 3.5
per cent compared to an average of 16 in the world and 60 in the developed
world. Though, it has been
targeted to increase this to 7 per cent by 2005 and 15 by 2010, the
progress seems to be slow. There
is a need to speed up the investment in this regard.
Telephone connection technology by telephone lines seems to be slow
and requires heavy investment for laying telephone lines.
Therefore, the option of wireless technology (WCL), should be
examined. The Committee recommends that all the remaining villages should
be connected within five years. Also,
at the same time e-communication should be encouraged either through
village panchayat or private entrepreneurs.
Such communication or Cyber Café or village kiosks can become
information centers.
4.11
Rural Connectivity: Rural roads constitute one of the
most important marketing infrastructure which reduce the cost of
production and marketing by providing external economies to farmers,
traders and public at large. It is well known that investment in
infrastructure of this type has very high returns to the society.
The status of rural roads in
Table – Details of Road Connectivity in
|
Group of villages with population |
Villages connected with road |
% age of
villages connected |
Villages not connected with roads |
% age of villages not connected |
Total |
|
<1000 |
172062 |
37.45 |
280733 |
63.55 |
452795 |
|
1000-1500 |
44031 |
75.88 |
13904 |
24.12 |
57935 |
|
>1500 |
65698 |
91.73 |
5713 |
8.73 |
71411 |
|
Total |
281791 |
|
300350 |
|
582142 |
Source : Govt. of
Therefore,
there is an urgent need for investment in providing connectivity to
remaining villages. Considering
average road length as 4 km., to connect each village with the main road,
public yard or sub-yard, the total length of rural roads required to
connect to remaining 3.7 lakh villages comes to around 14.8
lakh kms. If average
cost is taken as Rs.5 lakhs per km, the investment requirement is
Rs.74,000 crores. Though the
Government of India has made special provision for link roads in rural
areas under Prime Minister’s programme there is a need for additional
investment.
4.12
Physical Facilities in Markets:
Agricultural produce markets established under market regulation programme
have been playing an important role in providing market places to the
farmers to dispose off their produce. These have also provided physical
facilities and an institutional environment to the traders, processors and
other market functionaries for conduct of their trading activities. The
studies revealed that farmers, on an average, get a reasonably higher
price by selling their produce in the regulated market yards compared to
rural, village and unregulated wholesale markets.
Most of the regulated market yards in the country at present lack
facilities for handling the produce arriving there.
The space for auction platform is less and the number of shops and
godowns in the premises is small. It
reduces the effective participation of traders.
Absence of storage godowns at market level further perpetuates the
problems of traders in general and continuous movement of goods in
particular. The number of fruit and vegetables markets brought under
regulation is small. Further
the markets, which have been exclusively developed for handling of fruits
and vegetable, do not have sufficient facilities for handling the produce
available in the area.
4.13
The Directorate of Marketing and Inspection and several state governments
have assessed the requirements of investment for development of market
yards in respective states. Though
several questions relating to the desirability of continuing with
government sponsored market yards are being raised, the Expert Committee
is of the view that creation of physical infrastructure at primary market
places is absolutely essential irrespective of the institutional
arrangements for managing these yards.
As shown in Annexure-III, the investment requirement for
development of market yards/sub-yards during the next ten years is
estimated at Rs.6026 crores.
4.14
Specialised Markets:
Apart from general purpose markets, there is need for developing
specialized markets for fruit and vegetables.
It has been assessed that there are at least 241 such places in the
country where fruit and vegetables markets should be developed.
The infrastructure required for such markets depends on the volume
of arrivals which in turn depends on the size of population to which these
markets cater. The investment
requirement for fruit and vegetables markets in the country is around
Rs.970 crores. The details are
tabled below:
Investment
Requirements for Development ofFruits and Vegetables arkets
(Rs.
In crores)
|
Size
of Population |
No.
of Markets |
Investment
Required |
|
1
to 2 lakhs |
126 |
252 |
|
2
to 5 lakhs |
72 |
288 |
|
Above
5 lakhs |
43 |
430 |
|
Total |
241 |
970 |
4.15
Farmers’ Markets:
Several State Governments have initiated a process of direct
marketing by producers to the consumers.
The states of
4.16
Rural periodic market
is the first contact point for producer – sellers for encashing their
agricultural produce and buying other goods needed by them. There are in
all 27294 rural periodic markets including those for livestock, in the
country. But even
minimum necessary infrastructural facilities do not exist in most of these
rural periodic markets. There
is urgent need to develop these rural periodic markets in a phased manner
with necessary infrastructure amenities to have a strong base level link
in the marketing chain. Once developed, these places, where periodic
markets function, can also serve as farmers/consumers markets.
The investment requirement for developing these primary rural
market places is estimated at Rs.2146 crores (Annexure-III).
4.17
Storage/Warehousing:
Storage infrastructure is necessary for carrying over the
agricultural produce from production periods to consuming periods.
Lack of adequate scientific storage facilities cause heavy losses
to farmers in terms of huge wastage in quantity and quality of products in
general and of fruit and vegetables in particular.
Seasonal fluctuations in prices are aggravated in the absence of
proper scientific storage facilities. Central and State Warehousing
Corporations have constructed warehouses in the different States. Food
Corporation of
4.18
The Finance Minister in the 2001-2002 Budget has announced creation
of Rural Godowns for non-perishables on the lines of construction of cold
storages under the back-ended subsidy scheme implemented by the National
Horticulture Board. In this
connection, in the light of past experience, the Expert Committee
recommends that definition of rural godown should include a house,
warehouse located in a rural area where a rural periodic market/market
yard/sub-yard/collection centers for different agricultural commodities
already exists. It may
also include D class municipalities or harvesting centers.
Any private entrepreneur, cooperative, APMCs, SWC/CWC, registered
NGOs, Farmers Registered Organisations, Accredited microcredit
organisations and shelf-help groups should be eligible to construct and
operate rural godown under the scheme.
4.19
The Godowns should be of viable capacity and rat proof with
scientific storage following the specification drawn by CWC/SWC.
The growers/process’s, State procurement agencies, wholesalers,
other agencies involved in PDS etc. should be included as potential users.
The subsidy to the construction of godowns may be limited to 25% of the
total cost. The godowns should be declared as deemed warehouses under the
State Warehousing. APMC market
fee, sales tax, purchase tax, octroi etc. should not be leviable on the
goods stored. Similarly,
provisions of Essential Commodity Act, Labour Act, Mathadi Act, Shop
Establishment Act, Industrial Disputes Act etc. should not be applicable
to these Warehouses. The
material stored in rural godowns should be backed by warehousing receipts
with common regulatory framework for negotiability.
The godown owners/operators should be permitted to play the role of
on-lender so as to channel credit to potential users.
Considering the importance of rural godowns to farmers,
bankers/financiers should be allowed maximum spread of 2% or less over the
NABARD refinance rate.
4.20
Cold Storage:
Sector-Wise
Distribution of Cold Storage Facilities(as on
|
S.
No. |
Sector |
Number
of cold storages |
Capacity( |
|
1 |
Private |
3739 |
146.13 |
|
2 |
Co-operative |
310 |
6.80 |
|
3 |
Public |
150 |
0.91 |
|
4 |
Total |
4199 |
153.85 |
4.21
The
present storage capacity available is sufficient only for 10 per cent of
total production of fruits and vegetables.
In the next 10 years with the anticipated increase in production of
fruit and vegetables and other perishable commodities, the cold storage
capacity requirement would be much higher. Foreseeing the future
requirements of the fresh/precooked/frozen fruits and vegetables and their
products as well as anticipated change in the food habits in favour of
processed food, the capacity requirement for post harvest management of
perishables is estimated at more than five times the presently available
capacity. In the next 10
years, 15000 additional cold storage units with a capacity of 45 million
tonnes should be created. The
additional capacity requirement would need an investment of the order of
Rs.27,000 Crores. The investment should basically be made by the private
sector only. In future, there
would be a need for multi-chamber type of cold storage units for various
perishable and other products. For
encouraging private entrepreneurs there is a need to provide subsidy to
make the units viable for some initial years. This apart, the regulatory
arrangements should also be reviewed and simplified for attracting private
investment in this venture. There is a need to provide incentives in
reducing current expenses such as tax relief in electricity.
4.22
Reefer Vans/Containers:
The country would
also require reefer container/vans for transport of perishable items for
domestic and export marketing. At
present their availability in the country is negligible in
comparison to the present production of perishable commodities.
For handling the expected higher production in the next 10 years,
at least 3000 reefer containers/vans with a capacity of 8 tons each would
be required. This would
require an investment of Rs.600 crores, which should be encouraged in the
private and cooperative sector. There
is a need to encourage the investors in this area by providing incentives.
4.23
Cleaning, Grading and Packaging:
The importance of these facilities can be hardly over emphasized.
At present, the grading facility is available only in 1321 markets
out of total number of 7127 regulated markets.
The quantity graded at producers level is almost negligible.
There is a need to create facilities for cleaning, grading and
packaging not only at primary level but also in the villages from where
produce is brought to the market for sale.
In the absence of such facility at the village level, the kind of
pollution and congestion created at market yards during the peak arrivals
period is well known. The
APMCs should encourage private entrepreneurs to promote such units in or
around the yard/sub-yards. There
is need to promote proper packaging after grading so that further chances
of adulteration or temptation may not be there.
Besides this there is a strong need to educate the farmers for
proper packaging and grading before they bring the produce to the market.
Scientific packaging should be encouraged at the farm level through
subsidy support. The Expert
Committee feels that this is an important activity, and an investment of
Rs.2000 crores should be earmarked for this purpose during the next 10
years.
4.24
Export Zones and Food Parks:
With a view to taking advantage of new international trade
environment, there is a need to encourage export of high value
traditional/non- traditional products grown in various parts of the
country. Commodities having
export potential are several fruits and vegetables, raw as well as
processed and packed spices like cumin, fennel, coriander and other farm
products like fenugreek and hena for which there is significant demand by
Indian Diaspora and others in several countries.
However, there is a need to educate and train the growers of these
crops in producing, grading and packing for overseas markets and create
necessary infrastructure. A
scheme of creating Export Oriented Agri-Zones (EOAZ) has been announced
by the Govt. of India (Ministry of Commerce) which should be
promoted by providing institutional and physical infrastructure in each of
these as per the needs of the specific commodity.
In some of EOAZs, there is also a need to establish what is called
Food Parks. In these parks,
some common facilities like electricity and warehouse should be created
with central government assistance which will help in attracting
investment by the private sector and the state government.
While most of the investment should be made by the private
entrepreneurs, as a way of incentive, government should invest in common
facilities, and quality certification.
The estimated public investment is Rs.200 crores and private
investment of around 400 crores on fifty such EOAZs.
In identification of EOAZs and
4.25
Processing and Value Addition:
Considering the increase in demand for value added and processed
products, there is a need to enhance the capacity of agro-processing
sector. This will not only
help in stabilizing the prices realized by farmers but also in creating
employment in rural areas. The
food-processing sector alone provides tremendous potential in
this area. For
attracting private initiative and investment in food processing, the
Government of
4.26
At present, value addition is estimated at only seven per cent and
processing only two percent of the total production.
Within next ten years,
there is a need to increase value addition to 35 percent and processing to
atleast 10 percent. Quality
control and standardization will be extremely important in this endeavour.
The Central government should
establish or encourage a network of food analysis laboratories in the
country. This will also be
necessary to face competition from imported processed products.
4.27
The investment potential in value addition and food processing is
quite large. According to our
esimates, the potential is Rs.150,000 crores.
If conducive policy environment and incentive frame work is
created, private sector can be attracted to make investment of this
magnitude. The state-wise
details of investment potential in food processing are given in
Annexure-IV.
4.28 Sources
of Investment:
The investment potential in agricultural marketing system is quite
considerable. The investment in agricultural marketing system will go a
long way in making agricultural sector vibrant and enable it to face the
competition of liberalized international trade environment without
adversely affecting the livelihoods of those who depend on farming.
However, for realizing the potential of investment, a major part of which
need to come from the private sector, a conducive and favourable
environment would have to be created. For attracting the private sector
investment at a level visualized by the Expert Committee, there is a need
for (a) making complementary investment by the State and Central
government; (b) subsidizing a few activities to enable the private sector
initiatives to attain viability; (c) active stance by the Central
government in some initiatives; (d) reducing the regulatory controls and
simplifying the procedures; and (e) ensuring adequate credit flows to
agricultural marketing activities. It is in this context, that the Expert
Committee recommends that agricultural marketing and trade activities like
construction of storage structure; rural godowns; cold storages, reefer
vans; cleaning, grading & packing houses; export oriented agri-zones;
and agro – processing and value addition should be included under the
definition of priority sector for the purpose of lending by financial
institutions. The sector-wise investment potential as visualized by the
Expert Committee is shown in Appendix- V.
4.29
For a long term sustainable and integrated development of
horticulture a fresh look is also required to be taken at some of the
legal provisions as laid down under various acts and rules framed there
under. The following are
important:-
a)
Excise Laws:
Presently the alcoholic beverages based on fruit & vegetables
are clubbed with other alcoholic beverages.
Whereas world over items like wines and beer which are based on
fruit & vegetables and have low content of alcohol (ranging below
11-12%) are considered as items of food and are promoted as health drinks.
With removal of quantitative restrictions there is a possibility
that larger quantity of such beverages will be imported into the country.
This sector has not developed in
b)
i)
Wild pomegranate
ii)
Kaphal (Myrica nagi Thunb)
iii)
Wild fig
iv)
Lassora (Cordia oblique Wild)
Similarly,
there are vast varieties of forest produce falling into the sub-categories
of horticulture e.g. herbs, medicinal plants, vegetables, spices, flowers,
honey, mushrooms, staple food supplements like buckwheat in the hills,
etc.
c)
Narcotic Drugs and
Psychotropic Substances Act, 1985 :
The present legal frame work is restrictive to the extent that it
discourages the commercial production of the narcotic items which can be
converted into pharmaceutical products.
Therefore, provisions may be created for a balanced development for
cultivation and processing of such items.
d)
Plantations – A New Definition :
The word “Plantation Crops” as mentioned in some labour laws
and Land Ceiling Act has a rather limited meaning pertaining mainly to
coffee, tea, rubber, etc. To
cover a large number of crops under plantations with a more rationale and
more scientific approach is need of the day.
If plantation is used as generic term for an advanced form of
agriculture where various types of management from the selection of land,
selection of species to be grown, the financial support, the management of
labour, the processing and marketing are all done at a higher level than
what is done for ordinary agricultural crops, the horticulture is bound to
get a fillip. The existing
legal framework will open new avenues for development of entire
horticulture sector if production of fruit & vegetables, medicinal
& aromatic plants, spices, is also brought under the definition of
plantation.
---
5.MARKETING EXTENSION, TRAINING AND
RESEARCH
5.1
Multilevel Approach:
In order to strengthen and develop agricultural marketing system in the
country, efforts in the area of training and extension
have to be made at three levels. At policy level, it is necessary
to formulate an effective policy on agricultural marketing under which
various components of marketing programmes and activities can be
integrated and coordinated. At managerial level, the managerial and
technical capabilities of those technical institutions involved in the
implementation of the marketing policy needs to be improved to enable to
work to be carried out more efficiently and economically. At farm level,
marketing policies and programmes should assist farmers in marketing their
produce, purchase their inputs and raise their incomes. At farm level,
however, the effectiveness of Government policies and programmes often
looses its impact, especially for those farmers whose marketable surplus
is too small and not oriented to marketing requirements.
5.2
In
5.3
As the days of the mass production and mass marketing are now being
replaced by customer based or
market driven strategies , an effective marketing extension service is
need of the hour. This has added significance in the light of post WTO
scenario. If the Indian farmers have to withstand the possible onslaught
of international competitors both in domestic as well as overseas markets
the marketing extension would be an effective instrument to safeguard
farmers interest through proper education and guidance on regular basis .
The marketing extension service to assist small and marginal farmers in
solving the problems faced in marketing their produce is therefore, a
sine-qua-non in the free trade environment.
5.4
The marketing extension envisages:
i)
Advise on product planning- Even for small farmers, the concept of
product planning i.e. the careful selection of the crops and varieties to
be grown with market ability in mind, is an important starting point.
Providing this basic advice to the farmers is very essential to enable
them to withstand the competition in the market.
ii)
Marketing Information - The farmers need information on two aspects
of marketing viz. current price and market arrival information and
forecasting of market trends. This information has also to t)e
supplemented with other information about reaching a particular market to
get the particular price, arrangements available in the market related to
storage, transactional methods, quality requirements, post-harvest
handling requirements etc. Along with the information of spot market, the
forward and futures market prices are also required to be disseminated to
the farmers. They have also to be educated or trained in taking
appropriate signals from the forward and futures prices. In order that the
information should be area specific, crop specific buyer specific etc.
there is a need that every agricultural market should have an extension
cell equipped with internet and other audio-video facilities necessary to
educate farmers in various aspects of marketing functions and services.
The information required by other market functionaries should also be
collected and disseminated to its users.
iii)
Securing markets for farmers - The extension agency can advise
farmers 'in several ways.
For grains to be sold to the government procurement agencies the
extension workers can advise on how, when and at what price to sell the
designated food grains to the Government agencies. For cash crops, farmers
need assistance in making contract marketing arrangements with processors,
wholesale traders or other bulk buyers.
iv)
Advise on alternate marketing - In order to avoid
'gluts' in the small local markets, farmers can be advised to take benefit
of warehousing with pledge finance schemes, entering into forward
contracts or go in for futures trading. A planned marketing strategy will
benefit the producers in terms of i7eal income and help stabilize local
market prices and market supplies 'in terms of raising farmers income .
V)
Advise on improved marketing practices - Farmers need education on
improved harvesting methods, standardization and grading, improved packing
and handling practices, appropriate storing methods etc. for profitable
marketing of his produce.
5.5
Need for Wider Reach in Private Sector:
Considering the limited reach
of public extension service, it is felt that privatization of extension
services with appropriate financial backup from the public sector is
considered more appropriate and practical. Privatization of extension
activities would facilitate tailor made extension services beneficial to
both farmers as well as entrepreneurs. The NGOS, Cooperatives, Trade
Associations, Private Limited companies, and corporate bodies should be
allowed and encouraged to undertake marketing extension. To facilitate
private agencies to undertake extension programmes on regular basis for
the country as a whole, a 24 hours TV Kinas Channel on Doordarshan is
necessary. There are 75
channels operated by Doordarshan, out of this one channel should be
devoted exclusively to the farmers service. The Kisan Channel would be
best visual media to educate farmers by public as well as private agencies
for both agricultural as well as marketing extension service.
5.6
A
micro level study for every district is required to be undertaken with
regard to research, training and extension requirements of crops grown and
the markets served by various agricultural products grown. The rural
periodic markets and wholesale assembling markets where farmers visit
frequently need to be provided with extension units to undertake regular
activity to educate farmers in various agricultural marketing issues.
5.7
Training in Agricultural
Marketing:
A substantial training effort wills he needed to upgrade technical,
managerial and organizational skills and knowledge of field and marketing
personnel. The major thrust of
the training in the changing scenario should be :-
a)
Agri-business management
b)
WTO and its implementations
c)
Post-harvest management
d)
Grading, Standardization and Quality assurance
e)
Information technology
f)
Emerging areas in agricultural marketing
g)
Organic Food Marketing ( OFM)
h)
Market led extension
i)
Post-graduation courses in State Agricultural
Universities
j)
Entrepreneurship programmes for rural Agri - clinics.
k)
Training of Trainers ( TOT)
5.8
In view of the changes in agriculture in general and agricultural
marketing in particular, there is need to orient the faculty of the
national level nodal institutes. Until and unless the faculty is exposed
to the complex international problems and ground realities of Indian
fields, it is not fair to expect solution of all problems from them. At
the same time, they should be trained involving practical problems of
farmers in the fields. The
skill should be developed in management, planning and leadership.
5.9
Research
in Agricultural
Marketing: Research in
agricultural Marketing assumes
the most important role in the agricultural marketing. Hence we should
undertake need based research and play
proactive role in the area of research marketing effectively. In
its endeavor to impart training the research
in agricultural marketing would establish strong relationship with
client organization and strive
to serve farmers, consumers and select organization.
Following area have been identified for potential research
marketing:
a)
Marketing technology
adaptable to Indian
conditions like labour intensive technology without compromising quality;
b)
Dynamic studies of comparative
advantage of commodities of
c)
Provide Outlook information for prices and production
for log, medium and short term decisions.
d)
Structure conduct and Performance of Agricultural
markets
e)
Study on cost and margins of agricultural crops
5.10
IT Application in Agricultural
Marketing: Agricultural produce
marketing requires connectivity between the market and
exporter/growers/traders, industry consumers, through wide area network
(WAN) of National and International linkages in order to provide
day-to-day information with regard to commodity arrivals and prevailing
rates etc., to provide links for online International Market Information;
to provide export-related documentation, to inform about the latest
research in agricultural marketing, packaging/storage etc. related
information and to provide linkage/connectivity with the World Trade
Center (WTC), APEDA, NIAM, NBB, DNH, IIP, State Agricultural Marketing
Boards, and universities.
5.11
Agricultural Marketing Information service ( AMIS) needs to be set up at
the national level. This
service will be a integrated service , incorporating the farmer
advisory service with Decision support System( DSS) . Such a system
will help farmers in taking a
intelligent decision related
to storing , pricing ,
marketing etc. One of the
major problems in designing AMIS is that the information needs of the
individual target groups are diversified. For evolving an information
system, assessment of information needs of the diverse target group is
very important so that the information management is holistic and
integrated. For this, forums should be formed to assess the quest of
information among the beneficiaries.
5.12
The system should be broad based to cover information related to storage,
transport, weather forecast, export potential
etc. At the state level,
the Marketing Boards or the Directorates should provide the consolidated
information to all the market users. The coordinating agency will take
stock of information availability and its generation process and
distribute it to the need based target groups.
5.13
E-Catalogue for Commodity
Profiles: In the present time of export
competitiveness, each and every product needs to the publicized
highlighting its characteristics on nutrition values, chemistry, quality
standards, seasonally, quantity for supply and prices etc. A brief
commercial profile of the commodity would help the buyer in making
comparative analysis on account of cost and margins. Therefore, it is
necessary that each commodity have specific commercial profiles giving the
details as mentioned above. AR profiles should be transmitted to
international markets through "Web Pages". Main objective of the
scheme will be a) to prepare commercial profiles of exportable commodities
and b) to give exposure of commodities to the international markets.
5.14 The farmer advisory service should be leveraged to the platform
of Information Technology. This IT has the scope being a vehicle for
transfer of knowledge. The successful experiment for transferring
"lab to land: needs to replicated in dissemination of knowledge of
post harvest management aspects marketing and management aspects. A
development of Expert System would provide all the information from
production to marketing of the commodity.
5.15
National Atlas of Markets
: The mapping of the agricultural markets of the country is a pre
requisite for carrying any planning/developmental activity.
All the regulated markets along with their classification on the
national maps will give synoptic view of the distribution of the markets.
The infrastructure facilities, the quantum transacted, the area and
population served, the outflow and the inflow of the commodities are the
various aspects which should be mapped out. This would be useful for
research and policy making The
National Atlas of Agricultural Markets will be based on the application of
GIS tools, such mapping activity then can also be put on the internet for
it's greater usage.
***
No.11016/3/2000-M.II
SUBJECT:
CONSTITUTION OF THE EXPERT
COMMITTEE ON STRENGTHENING AND DEVELOPING OF AGRICULTURAL MARKETING.
