Marketing is an integral part of agriculture, it encourages the farmers to invest more and increase production. The simplest form of agricultural marketing is the buying and selling of the farm produce. However, in modem sense, the agricultural produce undergoes a series of exchanges from one hand to another before it finally reaches the consumer.

According to the National Commission on Agriculture - Agricultural marketing is a process which starts with a decision to produce a saleable farm commodity; involves all aspects of market system, both functional and institutional, based on technical and economic considerations and includes pre and post- harvest operations viz. assembling, grading, storage, transportation and distribution.

What Should Be The Objectives Of An Efficient Marketing System?

• To enable farmers to get the best possible returns,
• To provide facilities for selling the produce at an incentive price,
• To reduce the price difference between the primary producer and ultimate consumer.
• To make available all products of farm origin to consumers at reasonable price and within reasonable time.
• Adequate and cheap transport facilities so that he is able to reach Mandi rather than disposing it off at his village only.
• Clear and timely information about the market prices so that he is not cheated.
• As small as possible number of intermediaries..i.e. minimum role of middleman
• Organized and regulated markets so that he is not ripped off by Dalals and Adhtiyas.

Present System of Agricultural Marketing

There are four major systems of agricultural marketing in India at present. They are as follows.

Direct Sale To Moneylenders And Traders

Lot of the produce is sold by the farmers to the village traders and money lenders. The moneylenders then work as agent of the wholesalers.

Village Haats

A Haat is village market that covers an area of 5-10 miles. They are held weekly and       here, the agents of wholesalers and different brokers visit to buy the produce.

The Haats are poorly equipped and lack storage, drainage and other facilities. Smaller    and marginal farmers generally sell in these haats.

Mandi

A Mandi is a wholesale market, which serves a number of villages and is generally located in a city.The business here is carried out by the Adhtiyas. Adhtiyas buy from farmers via middlemen and then sell it to wholesalers who sell it to retailers.

The system is different in case of sugar, paddy and cotton though.

Co-Operative Marketing

Such societies are formed by farmers to take advantage of collective bargaining. A marketing society collects surplus from it members and sell it in the Mandi collectively.

This improves the bargaining power of the members and they are able to obtain a better price for the produce. In addition to the sale of produce, these societies also serve the members in a number of other ways.

Problems with Current Marketing System

Lack Of Warehousing And Storage Facilities

• No proper warehousing facilities in villages. The farmers are forced to store the produce in mud-vessels or katcha storehouses. Result of this unscientific storage is either wastage or hastily disposing off the produce.
• Remedy is establishment of Rural Godowns and warehouses. To some extent, setting up of Central Warehousing Corporation and State Warehousing Corporation has improved the situation.
• The Private Entrepreneur Guarantee Scheme is also set to address the storage shortage.

Lack Of Grading And Standardization

• There is no proper grading and standardization of farm produce. This leads to Dhara (heap) sales in which all qualities of produce are sold in one common lot.
• Farmer is unable to get better price for better produce and this implies that there are no incentives to use better farm inputs and produce better varieties.
• Thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties.

Inadequate Transport Facilities

• There are highly inadequate transport facilities because only a small number of villages are joined by railways and pucca roads to mandies.
• The result is that farmers carry their produce to Mandi on either bullock carts or other such means. The produce, which is perishable, has to be dumped to nearby market at considerably low market prices.

Large Chain Of Middlemen

• There is a large chain of middlemen in the agricultural marketing which drastically reduces the share of cultivator. This chain includes village traders, Kutcha Adhtiyas, Pukka Adhtiyas, Brokers, wholesalers, retailers etc.

Market Wrongdoings

• The market of the farm produce is largely unregulated where the trading scene is dominated by the brokers and Adhtiyas. Many charges such as Adhat (pledging charge) and Tulai (weighting charge) have to be paid by the peasants. Even now the number of unregulated markets in the country is substantially large.

Inadequate Market Information

• If the proper market information is not available to the farmers, they accept, whatever price the traders offer to them.However, in recent times, this situation has changed drastically under the influence of information technology revolution.

Inadequate Farm Credit

• The farmer needs to sell off the produce immediately after the crop is harvested though prices at that time are very low. He can be saved from this "forced sales" if credit facilities are available from the banks.

Lack Of Standard Weights And Measures – Produce May Be Underweighed

The Long Supply Chain Leading To Inflation

• In our country, the production of food products has been increasing in step with the rise in urban / rural population and export of food products is too insignificant to have any impact on prices. One of the real reasons for the runaway rise in food prices is the Inefficient Market mechanisms, manifested in the long supply chain.
• The location of market acts as a major determinant of the decision on selling location. The markets are generally quite far from most of the villages and therefore, the small and medium farmers find it economic to sell their produce to the local intermediaries. Thus, intermediaries are the integral part of the supply chain of the agricultural produce.
•  One of the major reasons of such a long supply chain is the poor infrastructural scenario. The unreasonably long supply chain results in steep escalation in the total cost owing to procurement, transit and other taxes and services charges levied at various layers.

Background

In India, agriculture is a "state subject".Thus; the wholesaling of agricultural produce is governed by the Agricultural Produce Marketing Acts of various State governments. The specific objective of market regulation is to ensure that farmers are offered fair prices in a transparent manner. The APMC Act empowers state governments to notify the commodities, and designate markets and market areas where the regulated trade takes place. The Act also provides for the formation of agricultural produce market committees (APMC) that are responsible for the operation of the markets. The entire State is divided and declared as a market area wherein the markets are managed by the Market Committees constituted by the State Governments. Currently there are around 8,500 regulated markets in the country.

Once an area is declared a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed freely to carry on wholesale marketing activities.

The issues with the monopolistic behaviour of these regulated wholesale markets result in:

• No development in the competitive marketing system
• No help to farmers in direct marketing and organizing retailing
• No smooth raw material supply to agro-processing industries
• No adoption of innovative marketing system and technologies.

To tackle various issues, a report by a Government Task force led by Shankar Guru suggested the following:

• New and competitive Agricultural Market in private and cooperative sectors should be promoted.
• Direct marketing and contract farming programmes should be promoted
• The industries and large trading companies should be facilitated to undertake procurement of agricultural commodities directly from the farmer’s fields
• Effective linkages between the farm production and retail chains should be established.Thus, it was suggested that there is a necessity to integrate farm production with national and international markets to enable farmers to undertake market driven production plan and adoption of modern marketing practices.
• To make such changes effective, the current framework of APMC Acts in various states have to be amended.

Model APMC Act 2017

The model Agriculture Produce and Livestock Marketing (Promotion and Facilitation) Act, 2017 was presented in April 2017 and seeks to replace APMC act 2003.It is seen as a major agriculture marketing reform to help farmers directly connect with the different buyers and enable them to discover optimum price for their commodities.

Need and Rationale

Traditionally the agricultural produce was sold by the farmers in the village or nearby places. However, the system was characterized by malpractices by middlemen, inadequate price to the farmers etc. So the State’s enacted their APMC acts to set up regulated agricultural markets so as to ensure that farmers get a fair price for their produce. But even this arrangement led to a lot of problems.

Features and Problems

On the basis of geography, the state is divided into different sub markets and it falls under the jurisdiction of a Market Committee formed by the state government. The members of market committee are either elected or nominated by the government. In such markets no person is freely allowed to carry out their wholesale marketing activities. Only the authorized trader and commission agents were allowed to carry out procurement and distribution of agricultural produce brought by the farmers. The agents had to procure license to get their shops in these agricultural markets. But the system resulted into following problems:

• It led to the monopoly of the APMC.As the farmers were supposed to sell only to the authorized agents on the basis of auction so the agents used to form cartels and deliberately specify a lower price above which they will not procure. Similarly when wholesalers and retailers came to purchase from them they use the same technique of cartelization. Thus, the farmers used to get lower price for their produce and consumers had to pay more.
• Procuring a license was a difficult task as it was based not on any transparent system but was procured on money power thus breeding corruption. It also led to the monopoly of some licensed traders causing entry barrier to new traders.
• Various types of fees were levied. For instance-market fees on buyers, licensing fees on commission agents, other charges on warehousing agents, loading agents etc. Also the fees differ from state to state. Consequently it created market distortions and increase in the price of the commodities.
• The agriculture markets were usually located far away from the villages. Therefore most of the times to avoid the transportation cost, small farmers sold their produce to the village middlemen who are usually the farmers money lender also. Consequently he forces farmers to sell the produce at lower prices. The practice is in a way reverting back to the old traditional system thereby defeating the purpose of the APMC.
• The dual role of market as well as regulator is assigned to the APMC. But as the members of the committee are elected out of the agents operating in the market so their vested interests has undermined its role as a regulator.
• Further the traders use to delay payments to farmers for months. Even if they pay at the time of sale then the trader arbitrarily deducted some amount.

Objectives of the Model Law

The purpose is to create a single agriculture market with a single license wherein agriculture produce as well as livestock could be traded. Some of the important provisions:

• The new model law seeks to establish a regulated wholesale agri-market at a distance of every 80 km. To enable this, it has proposed to issue licenses to new private players and traders who wish to set up a wholesale market. Even private market yards, warehouses and cold storages will be allowed to act as regulated markets.
• Unlike the current system, now only by paying unified single fees, farmer/trader will be able to transact in all such regulated agri-markets within the state. There will be no separate fees for individual markets.
• It caps market fee (including developmental and other charges) at not more than 1 per cent for fruit and vegetables, and two per cent for food grain. It caps commission agents’ fee at not more than two per cent for non-perishables and four per cent for perishables.
• Besides, it stipulates a single license for trading within the state and at the national level.
• All regulatory powers will lie with the office of the director of agricultural marketing in the state, who will also issue licenses to traders and new private players. As of now this power lies with the mandis managed by the Board of directors.
• It also has the provision for promoting online or spot (e-national agriculture market) agriculture market platforms.

What are the expected benefits?

• Allowing warehouses and cold storages to act as regulated markets will increase avenues for the farmer to sell their produce which will make the system competitive and end the monopoly of APMCs. Consequently it help farmers as well as consumers in terms of price discovery. Also it will help in taking the farmers out of the clutches of the middlemen as more and more markets will be available within few kilometers location.
• Cascading effects of multiple fees will be eliminated.
• Electronic trading platforms will make transactions, especially price determination, totally transparent. It will also give access of markets to the famers at the national level.
• Overall it will reduce wastage of farm produce and help achieving the aim of doubling farmer’s income by 2022.
• It also seeks to promote direct interaction between farmers and end-users of farm commodities, including retail chains, exporters and agro-processing industries.

Way Forward

Since the success of the fresh move will depend largely on the states’ cooperation, the Centre will need devise ways and means to motivate them to actually carry out the suggested changes.

contract farming

Contract Farming may be defined as an agreement between farmer and processing/marketing firms for production of a specific commodity in terms of quality & quantity as determined by the purchaser, Production support through inputs and other technical support and purchase at predetermined prices by purchaser

Contract farming is becoming popular in recent years and there are number of success stories. The Contract farming needs to be further developed. Under the Model APMC act, a new chapter on ‘Contract Farming’ has been added to promote contract farming. The provisions include:

• Compulsory registration of all contract farming sponsors (such as companies)
• Recording of contract farming agreements
• Resolution of disputes, if any, arising out of such agreement
• Exemption from levy of market fee on produce covered by contract farming agreements

The provisions under this chapter enable direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets.

Model contract farming act 2018

With a view to integrate farmers with bulk purchasers including exporters, agro- industries etc. for better price realization through mitigation of market and price risks to the farmers and ensuring smooth agro raw material supply to the agro industries, a “Model Contract Farming Act” has been prepared by the Ministry of Agriculture & Farmers Welfare for  circulation to the States for its adoption.

Farmer’s producer organizations (FPO’s) have a major role in promoting Contract Farming and Services Contract. On behalf of farmers they can enter into agreement with the sponsor.

Salient features of Model Contract Farming Act, 2018 include;

• The Act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract.
• In addition to contract farming, services contracts all along the value chain including pre-production, production and post-production have been included.
• "Registering and Agreement Recording Committee" or an "Officer" for the purpose at district/block/ taluka level for online registration of sponsor and recording of agreement provided.
• Contracted produce is to be covered under crop / livestock insurance in operation.
• Contract framing to be outside the ambit of APMC Act.
• No permanent structure can be developed on farmers’ land/premises
• No right, title of interest of the land shall vest in the sponsor.
• Promotion of Farmer Producer Organization (FPOs) / Farmer Producer Companies (FPCs) to mobilize small and marginal farmers has been provided.
• FPO/FPC can be a contracting party if so authorized by the farmers.
• No rights, title ownership or possession to be transferred or alienated or vested in the contract farming sponsor etc.
• Ensuring buying of entire pre-agreed quantity of one or more of agricultural produce, livestock or its product of contract farming producer as per contract.
• Contract Farming Facilitation Group (CFFG) for promoting contract farming and services at village / panchayat level provided.
• Accessible and simple dispute settlement mechanism at the lowest level possible provided for quick disposal of disputes.
• It is a promotional and facilitative Act and not regulatory in its structure.

Direct Marketing

Direct marketing helps the farmers to Reach and fulfil specific demands of the wholesalers or traders

• Dynamically take advantage of favorable prices
• Reduce marketing cost

Direct marketing also allows the farmer to undertake sorting, grading and quality marking at the farm gate itself. It helps him to obviate the regulated markets which are not necessarily equipped with all required services and facilities affecting the marketing efficiency adversely.

The impact of direct marketing is that the elongated chain of intermediaries is eliminated. There is a reduction of consumer prices

Producers receive better prices.

In India, the direct marketing model has been experimented in Punjab and Haryana via the Apni Mandis, in Andhra Pradesh via the Rythu Bazar and in Tamil Nadu via the UzhavarSanthaigal.

The Model APMC Act 2003 makes provisions for establishment of consumers’/ farmers’ market to facilitate direct sale of agricultural produce to consumers.

Private Investments

The ultimate objective of this act is to attract private investment in constructing market yards and creating the post-harvest value chain comprising cold stores, warehouses and logistics infrastructure.

Some of these measures are meant for high-value and perishable produce, such as fruit, vegetables and livestock products, which contribute substantially to food inflation.

Other important Provisions

• Imposition of single point levy of market fee
• Resolving of disputes, if any, arising between private market/consumer market and Market Committee
• State Governments conferred power to exempt any agricultural produce brought for sale in market area, from payment of market fee.
• Market Committees permitted to use its funds to create infrastructure on its own or through public private partnership.