Agricultural marketing

Agricultural marketing is the study of all the activities, agencies and policies involved in the procurement of farm inputs by the farmers and the movement of agricultural products from the farms to the consumers. The agricultural marketing system is a link between the farm and the non-farm sectors. It includes the organization of agricultural raw materials supply to processing industries, the assessment of demand for farm inputs and raw materials, and the policy relating to the marketing of farm products and inputs.

It is a process which starts with a decision to produce a saleable farm commodity, and it involves all the aspects of market structure or system, both functional and institutional, based on technical and economic considerations, and includes pre- and post-harvest operations, assembling, grading, storage, transportation and distribution.

Grading, standardization, packaging, labelling, storage, transportation, market intelligence, wholesaling, retailing and modern tools of marketing such as contract farming, terminal markets, futures markets etc. are the various focus fields of Agricultural Marketing.

Major Constraints of Present Agricultural Marketing System are as follows-

  • Indian Agricultural Markets highly fragmented
  • Insufficient Number of Agricultural  Markets
  • Inadequate Marketing Infrastructure
  • High Incidence of Market Fee/ Charges
  • High Post—Harvest Wastages
  • Restrictions in Licensing
  • Less Remuneration to the Farmers and High Intermediation Cost
  • Market Information Asymmetry
  • Inadequate Credit Facilities

Agricultural Marketing, rather than production, is the key driver of the agriculture sector today, thanks to the new market realities posed by the increasing accent on globalization, liberalization and privatization of the economy. Market-driven production is an idea whose time has come. With the gradual shifting of agricultural system from subsistence to commercial one, there is increasing focus on Agripreneurship and Agri-marketing. It is the need of the time to tune up the Agricultural Marketing System of the country to enable the farmers to face the new challenges and reap the opportunities as well. This summons us to revisit our traditional statistic policies and laws and bring about the requisite reforms in the sector.

Agricultural Produce Market Committee act 2003

Agricultural Produce Market Committee (APMC) is a statutory market committee constituted by a State Government in respect of trade in certain notified agricultural or horticultural or livestock products, under the Agricultural Produce Market Committee Act issued by that state government.

Under Constitution of India, agricultural marketing is a state (provincial) subject. While intra-state trades fall under the jurisdiction of state governments, inter-state trading comes under Central or Federal Government (including intra-state trading in a few commodities like raw jute, cotton, etc.). Thus, agricultural markets are established and regulated mostly under the various State APMC Acts.  Most of the state governments and Union Territories have since enacted legislations (Agriculture Produce Marketing Committee Act) to provide for development of agricultural produce markets and to achieve an efficient system of buying and selling of agricultural commodities. Except the States of Jammu and Kashmir, Kerala, Manipur and small Union Territories such as Dadra and Nagar Haveli, Andaman and Nicobar Islands, Lakshadweep, etc. all other States and UTs in the country have enacted such State Marketing Legislations. The purpose of these Acts is basically the same i.e. regulation of trading practices, increased market efficiency through reduction in market charges, elimination of superfluous intermediaries and protecting the interest of producer-seller.

Problems with APMC’s and Model APMC act

The APMC system was introduced to prevent distress sale by farmers to their creditors, to protect farmers from the exploitation of intermediaries and traders and to ensure better prices and timely payment for their produce through the auctions in the APMC area. However, 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.

The APMC Act treats APMC as an arm of the state and the market fee as the tax levied by the state, rather than as a fee charged for providing services, which acts as a major impediment in creating a national common market.

Various taxes, fees/charges and cess levied on the trades conducted in the markets or Mandis are also notified under the APMC Act.  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. The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc. all add up to hefty amounts, create market distortions with cascading effects and  strong entry barriers. Further, multiple licences are necessary to trade in different market areas in the same State. All this has led to a highly fragmented and high-cost agricultural economy, which prevents economies of scale and seamless movement of agri goods across district and State borders.

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 (a market situation where there is only one buyer who then exercises control over the price at which he buys) situation. Produce is procured at manipulatively discovered price and sold at higher price, defeating the very purpose of APMCs.

In order to deal with the challenges of APMC’s Central government introduced Model APMC act in 2003. Salient features of the act are as follows:

  • 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.

Agriculture marketing and e-NAM

Union Budget 2014-15 and Union Budget 2015-16 had suggested the creation of a National Agricultural Market (NAM) as a priority issue. In July 2015, Union Cabinet unveiled its plan to go ahead with the project amidst the constitutional constrains as mentioned above.

The National Agriculture Market is envisaged as a pan-India electronic trading portal which seeks to network the existing APMCs and other market yards to create a unified national market for agricultural commodities. NAM is a “virtual” market but it has a physical market (mandi) at the back end. NAM is proposed to be achieved through the setting up of a common e-platform to which initially 585 APMCs selected by the states will be linked. The Central Government will provide the software free of cost to the states and in addition a grant of up to Rs. 30 lakhs per mandi will be given as a onetime measure for related equipment and infrastructure requirements. In order to promote genuine price discovery, it is proposed to provide the private mandis also with access to the software but they would not have any monetary support from Government.




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