Agricultural Marketing Notes | EduRev

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Agricultural Marketing
Agricultural marketing comprises all operations involved in the movement of farm produce from the producer to the ultimate consumer. Thus, agricultural marketing includes the operations like collecting, grading, processing, preserving, transportation and financing

In India, there are several central government organisations, who are involved in agricultural marketing like, Commission of Agricultural Costs and Prices, Food Corporation of India, Cotton Corporation of India, Jute Corporation of India, etc. There are also specialised marketing bodies for rubber, tea, coffee, tobacco, spices and vegetables.
Under the Agricultural Produce (grading and marketing) Act of 1937, more than forty primary commodities are compulsorily graded for export and voluntarily graded for internal consumption.

Prevalent Methods of Agricultural Marketing in India:
(i) Sale in Villages: farmers in India sell away their surplus produce to the village moneylenders and traders at a very low price, The moneylender and traders may buy independently or work as an agent of a bigger merchant of the nearly mandi.n India more than 50 per cent of the agricultural produce are sold in these village markets in the absence of organised markets.
(ii) Sale in Markets: farmers sell their produce surplus in the weekly village markets popularly known as ‘hat’ or in annual fairs.
(iii) Sale in Mandis: there are nearly 1700 mandis which are spread all over the country. As these mandis are located in a distant place, the farmers will have to carry their produce to the mandi and sell those produce to the wholesalers with the help of brokers or ‘dalals’.
(iv) Co-Operative Marketing: marketing societies are formed by farmers to sell the output collectively to take the advantage of collective bargaining for obtaining a better price.
(v) Regulated Markets: whose basic objective is to ensure reasonable prices to both farmers and consumers by creating a conducive market environment for fair play of supply and demand.
(vi) Contract Farming: agricultural production (including livestock and poultry) can be carried out based on a pre-harvest agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations).

Following are some of the main defects of the agricultural marketing in India:
(vii) Lack of Storage Facilities: Every year 15 to 30 per cent of the agricultural produce are damaged either by rats or rains due to the absence of proper storage facilities. Thus, the farmers are forced to sell their surplus produce just after harvests at a very low and un remunerative price.
(viii) Distress Sale: Indian farmers are very poor and thus have no capacity to wait for better price of his produce in the absence of proper credit facilities.
(ix) Lack of Transportation: Indian farmers cannot reach nearby mandis to sell their produce at a fair price. Thus, they prefer to sell their produce at the village markets itself.
(x) Unfavourable Mandis: In the mandis, the farmers have to wait for disposing their produce for which there is no storage facilities. Thus, the farmers will have to take help of the middleman or dalal who take away a major share of the profit, and finalizes the deal either in his favour or in favour of wholesalers.
(xi) Intermediaries: middlemen and dalals claim a good amount of margin and thus reduce the returns of the cultivators.
(xii) Unregulated Markets: Prevalence of false weights and measures and lack of grading and standardization of products in village markets in India are always going against the interest of ignorant, small and poor farmers.
(xiii) Lack of Market Intelligence: Indian farmers are not aware of the ruling prices of their produce prevailing in big markets.
(xiv) Lack of Organisation: lack of collective organisation on the part of Indian farmers.
(xv) Lack of Grading: leading to failure in fetching a good price for their quality product.

APMC Act
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 APMC Act empowers state governments to notify the commodities, and designate markets and market areas where the regulated trade takes place.
The whole geographical area in the State is divided and each one is declared as a market area which is managed by the Market Committee (APMC) constituted by the State Government.
States also constitute a Market Board which supervises these market committees.
APMCs generally consist of representatives of farmers, traders, warehousing entities, registrar of cooperative societies etc. Market Boards generally consists of chairmen of all APMCs, representatives from the relevant Government Departments etc.
Once a particular area is declared as a market area and falls under the jurisdiction of a Market Committee, no person or agency is allowed to freely carry on wholesale marketing activities.
APMC Acts provide that first sale in the notified agricultural commodities produced in the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., can be conducted only under the aegis of the APMC, through its licensed commission agents, and subject to payment of various taxes and fee.

APMCs are intended to be responsible for

  • ensuring transparency in pricing system and transactions taking place in market area;
  • providing market-led extension services to farmers;
  • ensuring payment for agricultural produce sold by farmers on the same day;
  • promoting agricultural processing including activities for value addition in agricultural produce;
  • Publicizing data on arrivals and rates of agricultural produce brought into the market area for sale;
  • Setup and promote public private partnership in the management of agricultural markets

Functioning of APMCs: Issues involved

  • Red Tape/Licensing: APMC Acts restrict the farmer from entering into direct contract with any processor/ manufacturer/ bulk processor as the produce is required to be routed through these regulated markets. Over a period of time, these markets have acquired the status of restrictive and Monopolistic markets, harming the farmers rather than helping them to realise remunerative prices.
  • Market Fragmentation: The fees/charges and cess levied by APMCs have becomen an impediment in the creation of a national common market due to variations across states.
  • Multiplicity of Charges Levied: APMCs charge a market fee from buyers, and a licensing fee from the commissioning agents who mediate between buyers and farmers. They also charge small licensing fees from a whole range of functionaries (warehousing agents, loading agents etc.). In addition, commissioning agents charge commission fees on transactions between buyers and farmers. This hurts both producers and concumers.
  • Market Distortions and Entry Barriers: are also a product of the multiplicity of charges that APMCs levy.
  • Opacity and Cartelisation: APMC operations are hidden from scrutiny as the fee collected, which are at times exorbitant, is not under State legislature’s approval.  Agents in an APMC may get together to form a cartel. This creates a monoposony situation. Produce is procured at manipulatively discovered price and sold at higher price, defeating the very purpose of APMCs. 
  • Lack of Access: Exporters, processors and retail chain operators cannot procure directly from the farmers as the produce is required to be channelised through regulated markets and licensed traders.
  • Price Discovery: Farmers are not provided required information to make informed decisions so as to receive renumerative prices for produce.
  • Preventing Modernisation: The monopoly of Government regulated wholesale markets has prevented development of a competitive marketing system on a pan-India basis, providing no help to farmers in direct marketing, organizing retailing, a smooth raw material supply to agro-processing industries and adoption of innovative marketing system and technologies. Monopolistic practices and modalities of the state-controlled markets have also prevented private investment in the sector.

Model APMC Act 2003

  • The Preamble of the Act is to provide for development of efficient marketing system, promotion of agri-processing and agricultural exports and to lay down procedures and systems for putting in place an effective infrastructure for the marketing of agricultural produce.
  • Legal persons, growers and local authorities are permitted to apply for the establishment of new markets for agricultural produce in any area. Under the existing law, markets are setup at the initiative of State Governments alone. Consequently, in a market area, more than one market can be established by private persons, farmers and consumers.
  • There will be no compulsion on the growers to sell their produce through existing markets administered by the Agricultural Produce Market Committee (APMC). However, agriculturist who does not bring his produce to the market area for sale will not be eligible for election to the APMC
  • Separate provision is made for notification of ‘Special Markets’ or ‘Special Commodities Markets’ in any market area for specified agricultural commodities to be operated in addition to existing markets.
  • A new Chapter on ‘Contract Farming’ added to provide for compulsory registration of all contract farming sponsors, 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 and to provide for indemnity to producers’ title/ possession over his land from any claim arising out of the agreement.
  • Provision made for direct sale of farm produce to contract farming sponsor from farmers’ field without the necessity of routing it through notified markets.
  • Provision made for imposition of single point levy of market fee on the sale of notified agricultural commodities in any market area and discretion provided to the State Government to fix graded levy of market fee on different types of sales.
  • Licensing of market functionaries is dispensed with and a time bound procedure for registration is laid down. Registration for market functionaries provided to operate in one or more than one market areas.
  • Commission agency in any transaction relating to notified agricultural produce involving an agriculturist is prohibited and there will be no deduction towards commission from the sale proceeds payable to agriculturist seller.
  • Provision made for the purchase of agricultural produce through private yards or directly from agriculturists in one or more than one market area.
  • Provision made for the establishment of consumers’/ farmers’ market to facilitate direct sale of agricultural produce to consumers.
  • Provision made for 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 among others to create facilities like grading, standardization and quality certification; to create infrastructure on its own or through public private partnership for post harvest handling of agricultural produce and development of modern marketing system.

The State Agricultural Marketing Board made specifically responsible for:
(i)setting up of a separate marketing extension cell in the Board to provide market-led extension services to farmers;
(ii) promoting grading, standardization and quality certification of notified agricultural produce and for the purpose to set up a separate Agricultural Produce Marketing Standards Bureau.

Funds of the State Agricultural Marketing Board permitted to be utilized for promoting either on its own or through public private partnership, for the following:
(iii) market survey, research, grading, standardization, quality certification, etc.;
(iv) Development of quality testing and communication infrastructure.
(v) Development of media, cyber and long distance infrastructure relevant to marketing of agricultural and allied commodities.

Model Agriculture Produce and Livestock Contract Farming and Services (Promotion & Facilitation) Act, 2018 
Salient features

  • 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 at 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

eNAM
National Agriculture Market or eNAM is an online trading platform for agricultural commodities in India. The market facilitate farmers, traders and buyers with online trading in commodities.The market is helping in better price discovery and provide facilities for smooth marketing of their produce. The market transactions stood at ₹36,200 crores by January 2018, mostly intra-market. Over 90 commodities including staple food grains, vegetables and fruits are currently listed in its list of commodities available for trade.The eNAM markets are proving popular as the crops are weighed immediately and the stock is lifted on the same day and the payments are cleared online. In February 2018, some attractive features like MIS dashboard, BHIM and other mobile payments, enhanced features on the mobile app such as gate entry and payment through mobile phones and farmers database is helping adoption even more. The present trading is done mostly for intra-market, but in phases, it will be rolled out to trade in inter-market, inter-state, creating a unified national market for agricultural commodities.

Implementing Agency: Small Farmers’ Agribusiness Consortium (SFAC) is the lead promoter of NAM. SFAC is a registered society of the Department of Agriculture, Cooperation & Farmers’ Welfare (DAC&FW) under the Ministry of Agriculture and Farmer Welfare.

Objectives

  • A national e-market platform for transparent sale transactions and price discovery initially in regulated markets. Willing States to accordingly enact suitable provisions in their APMC Act for promotion of e-trading by their State Agricultural Marketing Board/APMC.
  • Liberal licensing of traders/buyers and commission agents by State authorities without any pre-condition of physical presence or possession of shop /premises in the market yard.
  • One license for a trader valid across all markets in the State.
  • Harmonisation of quality standards of agricultural produce and provision for assaying (quality testing) infrastructure in every market to enable informed bidding by buyers. Common tradable parameters have so far been developed for 25 commodities.
  • Single point levy of market fees, i.e. on the first wholesale purchase from the farmer.
  • Provision of Soil Testing Laboratories in/ or near the selected mandi to facilitate visiting farmers to access this facility in the mandi itself. M/s. Nagarjuna Fertilizers and Chemicals Ltd. is the Strategic Partner (SP) who is responsible for the development, operation and maintenance of the platform. The broad role of the Strategic Partner is comprehensive and includes the writing of the software, customizing it to meet the specific requirements of the mandis in the States willing to integrate with NAM and running the platform

Payment and Trading Technology
eNAM Mobile Application is available on android for farmers and traders to bid and complete tansactions on the app (available in 8 languages) along with website https://enam.gov.in/ for online trading.
Payment are supported in RTGS/NEFT, debit card and internet banking through website while UPI facility thriugh BHIM app is available on mobiles.

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