Challengesand Initiative to Agricultural Marketing in India


Ajit Kumar AJIT KUMARWISDOM IAS, New Delhi.

Challenges to Agricultural Marketing
Fragmented supply chain with inadequate marketing infrastructure, long intermediation and lack of accurate and timely market information/ intelligence system have posed challenges to the agricultural marketing system in the country, which needs to be strengthened and revitalized. Some of the basic challenges in present agricultural marketing system are:
(i) Limited Access of Agricultural Produce Markets: There is a huge variation in the density of regulated markets in different parts of the country, which varies from 118 sq km. in Punjab to 11,214 sq km. in Meghalaya, while ideally a regulated market should be available to farmers within a radius of 5 Km.
 (ii) Licensing Barriers: The compulsory requirement of owning a shop/godown for licensing of commission agents/traders in the regulated markets has led to the monopoly of these licensed traders acting as a major entry barrier in existing APMCs for new entrepreneurs thus, preventing competition. Many market yards established long back do not have adequate space for construction of shops, godowns, etc., thus, the issue of new license for traders is discouraged/banned in such cases. The traders, commission agents and other functionaries organize themselves into associations, which generally do not allow easy entry of new persons, stifling the very spirit of competitive functioning. The system of licensing is quite restrictive and has outlived its utility. There is a need for a transparent and simple system of registration of market functionaries to simplify and revitalize the present marketing system.
(iii) Lack of Market Infrastructure in Agricultural Markets: Studies indicate that covered and open auction platforms exist only in two-thirds of the regulated markets, while only one-fourth of the markets have common drying yards. Cold storage units exist in less than one tenth of the markets and grading facilities in less than one-third of the markets. Electronic weigh-bridges are available only in a few markets.
 (iv) High Incidence of Market Charges: APMCs are authorized to collect market fee ranging between 0.50 % to 2.0 % of the sale value of the produce. In addition, commission charges vary from 1 % to 2.5 % in foodgrains and 4 % to 8 % in fruits and vegetables. Further, other charges, such as, purchase tax, weighment charges and hamal charges are also required to be paid. In some States, this works out to total charges of about 15 % which is excessive.
(v) High Wastages in Supply Chain: Study conducted by ICAR (2010) shows that the post-harvest losses of various commodities range from 3.9-6.0 % for cereals, 4.3-6.1 % for pulses, 5.8-18.0 % for fruits and 6.8-12.4 % for vegetables. The total post-harvest losses of agriculture commodities have been estimated at about Rs 44,000 crores at 2009 wholesale prices.
(vi) Long Gestation Period of Infrastructure Projects and Seasonality of Agri. Produce: Agriculture marketing infrastructure projects have a long gestation period. The seasonality and aggregation of small surpluses of agricultural produce further affect the economic viability of the projects, which deters investments.  There is a strong need of Viability Gap Funding/subsidy and easy availability of finance to attract investment for such projects and also easy availability of concessional funding to attract investment for marketing infrastructure projects.
(vii) Lack of National Integrated Market: Under the present system, the marketable surplus of one area moves out to consumption centers through a network of middlemen and traders, multiple market areas and institutional agencies. Although, there exists a national level physical market, there is no national level regulation for the same and the existing regulation does not provide for a barrier free market in the country. Therefore, there is a need to develop a national level single market for agricultural commodities by removing all the existing barriers of licensing, movement and storage.
(viii) Less Farmers’ Price Realization: The share of farmer in consumer’s price is very low particularly in perishables due to a number of intermediaries, lack of infrastructure and poor holding capacity. In order to provide remunerative prices to the farmers, there is a need to reduce intermediation by providing alternative marketing channels like direct marketing, contract farming, etc. for which reforms in agricultural marketing system are necessary.
(ix) Large Number of Marketing Channels with Long Supply Chain: Traditionally, the normal agricultural marketing chain in the country is fairly long with a large number of intermediaries between the producers and the consumers, adding up more of costs without adding significant value.
(x) High Marketing Cost Affects Small and Marginal Farmers: High marketing costs have direct bearing on the efficiency of marketing of agricultural produce. This affects the actual price realization particularly by the Small and Marginal farmers in the country owing to their lower marketable surplus, higher transaction costs and least bargaining capacity vis-à-vis organized traders and big buyers.
Market Reform Initiatives
The issue of reforms in agriculture marketing has been under continuous scrutiny since last decade. On the basis of the report of Expert Committee during 2001 and further on the recommendations of Inter-Ministerial Task Force in 2002, the Govt. of India in consultation with State Governments, trade and industry formulated a Model APMC Act during 2003 and circulated it for their adoption. Ministry of Agriculture als o framed Model APMC Rules and circulated to States/U.Ts in 2007 to facilitate amendment of the existing Rules. So far, only sixteen States have amended their Act and only six states have notified the amended Rules. There are some States which do not have APMC Act and some have partially amended their Act.
Though various States/ UTs have taken initiatives to bring reforms in their existing APMC Acts, the pace of reforms has been slow and uneven resulting in lukewarm response from private sector for making investment in development of marketing infrastructure. In order to pursue and expedite the pace of reforms in the country, Ministry of Agriculture set up a Committee of State Agricultural Marketing Ministers under the Chairmanship of  Harshvardhan Patil, Minister for Cooperation and Parliamentary Affairs, Govt. of Maharashtra, which has deliberated on different issues related to marketing reforms, investment in development of post-harvest infrastructure and barrier free supply chains, etc. The Committee has deliberated on different items of agenda on market reforms by holding nine meetings with Hon’ble Ministers of State Agricultural Marketing, farmers, and other stakeholders, representatives of trade industry, experts and practitioners in the field. The present report is the outcome of deliberations held in the aforesaid meetings of the Committee.
 


Thursday, 30th Apr 2015, 10:29:08 AM

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