Agricultural Marketing Beckons Reforms Feb 2015

The Indian scene of marketing is highly regulated. The current system of organised marketing of agricultural commodities has been promoted through a network of regulated markets. Most state governments and UT administrations have enacted legislations to provide for the regulation of agricultural produce markets. The purpose of state regulation of agricultural markets was to protect farmers from the exploitation of intermediaries and traders and also to ensure better prices and timely payment for their produce.

Over a period of time, these established markets became restrictive and monopolistic markets, providing no help in direct and free marketing, organised retailing and smooth raw material supplies to agro-industries.Monopolistic practices and modalities of the statecontrolled markets have prevented private investment in the sector. The marketing channels for agricultural produce remain long and fragmented, and lack economies of scale. On an average, four to six transactions take place before the produce reaches consumers from the point of sale by producers increasing the price spread between consumers and producers. A free, fair and efficient primary agricultural market, with adequate infrastructure, will boost profitability of Indian farming and promote faster growth of India’s agricultural derivatives market. The finance minister has given a welcome policy impetus to this strategic transformation by stressing on the need for a national agricultural market, and the use of warehousing for scientific storage and post-harvest credit.

Creating a national market for agriculture across India’s 7,000-odd APMC market yards will help remove market distortions, improve price discovery, create a level field for stakeholders and promote efficiency. It will widen the supply pipeline, reduce artificial shortages, and allow processors and consumers to procure from across the country, thus helping farmers realise increased returns.

A barrier-free market - coupled with removal of controls, licensing system, intermediaries and state-imposed levies on farm commodities - will benefit both sellers and buyers. It will lead to the smooth flow of food items from surplus to deficit areas, easing supply-side constraints and softening food inflation.

Direct marketing, also has its own merits as has been demonstrated in many parts of India. ApniMandi in Punjab and Haryana, Hadaspur vegetable market in Pune, Rythu Bazaars in Andhra Pradesh and Uzhavar Mandies in Tamil Nadu are examples of direct marketing that can be emulated the rest of the nation.

Contract farming also has a number of success stories like NDDB, PEPSI Co., etc. The contract farming needs to be further developed after identifying areas, commodities and markets for market oriented and demand driven production planning. However, while providing for this system of alternate marketing under the APMC Act it is necessary to draft any appropriate legislation separately for ensuring definition of terms and conditions of the agreement keeping in view the objectives. Cooperative and farmer producer organisations are also adding newer dimension to the organised marketing and farm business.

When agriculture markets are expanding, India needs to create facilities and infrastructure to sustain the growth.In the era of globalization, Indian agriculture should revaluate its strategies and opt for a more technology driven approach keeping in mind the practical realities of India. Investments should be poured into creating infrastructure to store, save and transport agri commodities. Indian markets should open up to smoothen the marketing procedure and shorten the supply chains. Farmer producer organizations should be promoted to extend the benefits to smaller farmers and improve the economies of scale. .

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